VMware Cloud Credits: Bringing VARs, Cloud Services Providers Together

VMware solution providers applauded this week's introduction of the company's cloud credit program, and they are looking at ways to implement the program to help them do more with cloud services.

The VMware cloud credits purchasing program, introduced at VMware Partner Exchange conference held this week in Las Vegas, is based on the premise that business users will pre-pay for credits they can later take to cloud services providers to get fast access to public or hybrid cloud services.

Dan Smoot, senior vice president of global customer operations at VMware, caused VMware partners to cheer out loud when he officially introduced VMware's cloud credits during his keynote presentation Tuesday.

[Related: VMware's Eschenbach: Take Aim At SDDC, Hybrid Cloud, End-User Computing ]

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Partners will be selling cloud credits for other partners, Smoot said. "We'll make sure if customers need a cloud, they will get it from you," he said.

Customers can buy the cloud credits through their solution providers and then redeem them directly with vCloud-powered or vCloud data center services providers, said Geoff Waters, senior director for VMware's cloud service provider program.

This gives customers control of the cloud spend cycle and helps eliminate the problem caused by what Waters called "rogue IT spending," or the willingness for certain users to use their credit card or otherwise go around IT to get fast access to cloud resources as needed.

"This is giving IT control and allowing them to bring business value," he said during a question-and-answer session during VMware Partner Exchange.

For solution providers, selling cloud credits gives them up-front revenue opportunities, as well as a way to either offer their own cloud services or partner with other cloud services providers, thereby extending their business role and status as a trusted advisor to the cloud, Waters said.

VMware CMO Rick Jackson said that once a solution provider provides its customer with the cloud service provider relationship, there is nothing to prevent the customer from working directly with the cloud service provider, as VMware supports customer choice in providers.

However, Waters said, customers are not locked into using the cloud credits with any particular cloud services provider, which makes it important for the solution provider to work closely with their customers to maintain account control.

NEXT: Making VMware's Cloud Credit Purchasing Program Work

VMware is initially working with 12 cloud services providers, all of which are required to have a channel program for solution provider partners, VMware's Waters said. That number is expected to expand to 40 by year-end, he said.

Some premier solution providers with deep relationships with vCloud services providers could also be listed among those who can redeem cloud credits, Waters said.

That is good news to Keith Norbie, vice president at Nexus, the Minnetonka, Minn., office of Dallas-based solution provider Stratos Management Systems.

The ideal situation is for solution providers to set themselves up as a cloud service provider that's able to redeem the cloud credits they sell to customers, Norbie said.

"It could be a big win for those looking for the advantage with their customers," Norbie said. "The biggest question now is, how to get on VMware's list of cloud service providers."

That may not be a big issue for those solution providers that have strong ties to cloud service providers.

One company already on the list of cloud service providers eligible to redeem cloud credits, Denver-based Peak Colo, is looking forward to turning its entire solution provider community into service providers eligible for the new program.

Unlike most cloud service providers, Peak Colo's entire business goes through solution providers that offer Peak Colo's services to customers under a white-label program, letting the solution provider go to their customers as a service provider.

Luke Norris, founder and CEO of Peak Colo, said that his company's business model is 100-percent channel, and as a result, it worked with VMware to help develop the cloud credits purchasing program.

Customers can purchase the cloud credits for use with on-premise and off-premise clouds, with solution providers getting appropriate discounts from the combined volume of both, Norris said.

And, because the solution providers are white-labeling Peak Colo's services, they have the advantage over other solution providers in that they can tell customers exactly what they get and for how long when they redeem their credits, he said.

"With other cloud services providers, customers don't know the pricing, SLAs, or what services they can get," he said. "VARs working with us can say to customers this credit brings this amount of service."

NEXT: Keeping Cloud Credits Working For Partners

Peak Colo is already working with Arrow on VMware's cloud credits purchasing program, and it is in the process of setting up with three others including Westcon and Comstore, Peak Colo's Norris said.

"The distributors act as a sales channel to enable partners, set them up with financial help and recurring revenue systems, and other products and services to go with the cloud services," he said. "Distributors give VARs scale, letting VARs move to offering the cloud services faster."

Dan Molina, CTO of Nth Generation, a San Diego-based solution provider, said VMware's cloud credits purchasing program makes sense for midrange or enterprise solution providers like Nth.

"We help customers find the right cloud services providers for what they need," Molina said. "And for us, the ideal situation is to get credit on the services business."

Molina said VMware will likely work hard to ensure the program works as advertised. "As long as the cloud service provider has a program to pay channel partners on the recurring business, it will work. Otherwise, solution providers will close the door on this."