Partners: Go-To-Market Picture For VMware Cloud On AWS Is Hazy Ahead Of Launch

While the technical contours of VMware Cloud on AWS have been coming into focus, the channel strategy around the upcoming hybrid service remains impenetrably opaque.

Partners being courted in both the VMware and AWS ecosystems to sell the forthcoming offering told CRN they still don't know the basics of how they would be compensated for bringing the service to market, making it nearly impossible for them to assess the potential for profits.

"They're trying to recruit us as partners," one AWS integrator told CRN. "It's ripe for questions all over the place of whether there's product, price and position there [to make it worth our while]."

[VMware Cloud On AWS: Vendors And Partners Weigh The Opportunity And Risks]

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VMware plans on sharing its channel compensation model when the service becomes generally available, said Mark Lohmeyer, vice president of product in VMware's Cloud Platform Business Unit.

"Partners who are interested in monetizing VMware Cloud on AWS will be required to meet program requirements demonstrating technical, operational and business competencies. The terms of this new program are currently under development," Lohmeyer told CRN.

When the companies jointly announced VMware Cloud on AWS back in October, the launch time frame was pegged at "mid-2017," but that window has come and gone, and now VMware is promising to launch during the second half of the year.

Top VMware partners told CRN they were not surprised to see the virtualization vendor miss that earlier deadline.

"They are still trying to figure out what the pricing and certification should be to sell VMware Cloud on AWS," said a sales executive for a large VMware enterprise partner. "They are not going to do anything until VMworld [Aug. 27-31]. For GA release it probably won't be until September. It is not baked to where it needs to be."

Even as VMware works to nail down partner program details, solution providers said channel recruitment already is under way.

VMware initially turned to a small group of regional resellers to participate in a pilot program. The vendor then opened discussions with some of its largest systems integrators, including Deloitte, Wipro and Accenture, one partner with knowledge of those early negotiations told CRN.

Following talks with those global giants, VMware again pitched many of the same regional partners, he said. But the uncertainty around the program model is making it difficult to entice the channel.

It's an even more difficult pitch to VMware partners not already working with AWS, according to recent CRN research. Having an existing AWS relationship will play a major factor in determining whether partners want to offer VMware Cloud on AWS, the research showed.

In a survey of 108 VMware solution providers, only 22 percent of those without existing AWS partnerships said they plan to sell the new service, while 63 percent of solution providers working with both companies said they will.

But joint partners aren't the norm.

"A typical VMware partner has been fighting AWS forever except for a handful that have invested on both sides," said an executive at another VMware partner.

Early recruiting meetings with solution providers have left some questions unanswered in the minds of the partners participating in them, said the VMware partner executive, who was familiar with the content of the meetings.

Those discussions with VMware sales leaders left doubt over whether the channel model would include a long-tail of recurring revenue for partners to earn.

That executive said he was left with the impression that "VMware will let the channel sell the licenses, but not the consumption."

But VMware told CRN its partners don't need to worry about lack of opportunity to see recurring revenue from bringing the hybrid service to market.

"We have not announced any details of the program for this conclusion to be drawn," Lohmeyer said. "That said, it’s not true."

One AWS partner not currently working with VMware said VMware has approached his company about bringing the service to market.

That partner said he wasn't interested, fearing the price of the VMware licenses would relegate VMware Cloud on AWS as "basically just a migration tool" used to get existing virtual machines up into the cloud.

On the flip side, the sales executive at the large VMware enterprise partner said he was extremely eager to carry the new service as a means of battling the AWS juggernaut.

"We want to be in the first round of partners to take it to market," he said. "We are not an AWS partner. We refuse to sign their contract. AWS puts all the onus on partners. We are not going to put ourselves through that."

To hear VMware and AWS executives tell it, the days of fighting are over.

As leaders in public and private cloud, respectively, AWS and VMware will no longer will force "a binary decision" on customers, AWS CEO Andy Jassy, speaking at an AWS Summit event in San Francisco last April, told the AWS community.

"We will see most enterprises operate in some form of hybrid mode for the next number of years," Jassy said.

AWS' leader once insisted hybrid cloud lacked relevance—at the first AWS re:Invent conference, back in 2012, Jassy predicted few enterprises would own servers in the future.

But his stance that all workloads should be cloud-native substantially softened since then, especially in the aftermath of the deal his Amazon division, the world's largest public cloud provider, struck with VMware in October of last year.

"Enterprise customers want to run the data center they're not ready to retire yet as seamlessly as they can alongside of AWS," he told the audience.

That accommodating posture frees AWS to experiment, as the pioneering provider likes to do, a CTO of a large AWS partner told CRN.

"We've seen this before," the CTO said. "Amazon's able to test the market and see what works and what doesn't and adapt."

But partners in both ecosystems can't afford to experiment—they need specifics on channel strategy before deciding to invest in aligning their practices with the new hybrid offering, he said.

VMware CEO Pat Gelsinger, in an earnings call on June 1, told investors his company is seeing strong customer interest in the joint offering, and expects delivery to start in the second half of 2017.

"Certainly, by VMworld we'll have a lot more to say about availability," he said.

Participation in the beta program was oversubscribed, Gelsinger added, and pricing discussions have started with those beta customers. Jassy, at the Summit event, named several beta customers: Amadeus, Merck, Western Digital and the state of Louisiana.

"We feel confident we're landing well within the marketplace. … [It] allows customers to move seamlessly into the cloud experience," Gelsinger said.