Q&A: VMware's Eschenbach Outlines Channel Opportunities In The Virtual Cloud

VMware earlier this month introduced an initiative to help virtualize their server, storage, network, and application environments to take their computing to the cloud. However, questions remain about solution provider opportunities as well as whether part of the storage business will be supplanted by new cloud features. Carl Eschenbach, executive vice president of worldwide field operations, recently sat down with Joseph F. Kovar, senior editor of Everything Channel, to answer these questions.

We're seeing a lot of the features being built into VMware's cloud infrastructure initiative, the Virtual Data Center OS. Things like thin provisioning, linked clones, deduplication. As VMware adds these types of services into its infrastructure, where does that leave storage vendors and their channel partners who focus on storage? In other words, if VMware's VDC-OS already had dedupe, where does it leave companies like Data Domain and its partners?

What we're doing is, we're building a set of APIs for our storage vendors to [help their products] become much more integrated with our storage solutions. We [haven't yet] announced that we're going to be getting into any deduplication technology. We did announce some thin provisioning. We announced some cloning technology for rapidly deploying virtual machines specific to the desktop. And we've announced a set of APIs that will allow all of our storage ecosystem partners to get access to our Vstorage platform to help us become more integrated as we drive solutions into the market.

So we're not entering into the storage market to compete against the ecosystem of partners, but we're opening a set of APIs so we can work a lot closer (with them) than we have historically.

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Dedupe might not have been announced, but it was mentioned as part of what's going on as this is being developed.

But, again, it's not VMware in that case developing a deduplication technology by ourselves, but for us to work in conjunction with folks like Data Domain, or NetApp, or EMC or 3PAR or any of the other storage partners that are in the storage ecosystem that have deduplication today to make it much more seamless.

So what you're saying is, VMware doesn't want to add features that could supplant some of what its partners are doing in terms of technology.

Yeah, so, first of all, we're never going to supplant everything that the storage vendors are doing. There are specific features like thin provisioning that VMware has announced that will be part of our solution stack around the Virtual Data Center offerings itself. But it doesn't mean that that's not going to work in conjunction with a thin provision technology offering that the storage vendor has as well.

So what it will provide customers is a framework of options of whether they're going to use the deduplication technology that VMware is starting to build into the VDC-OS, or they still want to leverage what they're getting from their storage ecosystem partners that they have implemented today.

We're providing more flexibility and more clarity around our strategy as we go down this data center operating path. [This is more than] about us getting into the storage market.

Where do you see the biggest opportunities for solution providers in the virtualized data center space? I ask because right now it seems to have a big focus on the service provider and how they can get into that market, but that doesn't always sit well with the solution providers who, if they work with a service provider, might find that customer control becomes an issue.

I think there's a couple different answers there.

The first is, we're talking a lot about this vCloud initiative. In the vCloud initiative, we're really talking about what a carrier or a service provider can provide over time for the cloud initiative. But that's a ways away.

I think what you're really going to start to see is the enterprise itself think about things as part of an enterprise cloud. They like capacity on demand, the scalability that they get on a cloud from a service provider. But they might not necessarily be ready to move their data to it because of liability and security and scalability issues.

So what we see is, the first-generation of cloud computing will be done in the enterprise. So they will build an enterprise cloud. And when someone builds an enterprise cloud, it's still in their data center

In our solution, our solution provider partners still gotta help them do it. There's still significant drag on services around virtualization. The reason for that, and it hasn't changed in the last few years, is because as people virtualize their data centers, it means they need to re-architect their networks, their storage, their server environment, and their security environment. And there's not a lot of even enterprise companies that have all of that knowledge and skill sets internally. They look for our solution partners to help do that. Even down to the SMB.

In fact, in the SMB and commercial sectors, our customers need more help than in the enterprise because they don't have the ability to implement a truly virtualized data center unless they go to a solution provider.

So we think that this notion of cloud compute in the enterprise, the enterprise cloud, cannot really be achieved unless you have a solution provider that knows how to implement it.

So we actually believe that our business partners are still seeing anywhere from 5X to 7X drag in services around VMware [sales]. Our solution providers are making margin off selling VMware software. They're making margin off of the drag that they're getting off of the hardware components, the server, storage, and network. And the biggest margin opportunity for them is around solutions and services specific to the virtualized data center as a whole. And if you start to combine that with some of the things that we've announced, like the Alliance Affiliate program, where you're starting to see these big technology companies pay our partners for jointly selling [their] solution in conjunction with VMware, they're going to get additional margin from doing that. And that's not coming out of VMware's pocket.

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It's still amazing some time when I think about how that program works.

This is the first of its kind. But this is where you can see the power of virtualization. It is the transformation technology that is driving what is happening in the data center.

When can solution providers expect to see those kind of opportunities that you're talking about?

Today. We don't have to wait for this whole big cloud initiative to actually take place and become a reality, because we're already seeing this happening in the enterprise today. When we start to talk about moving things from an enterprise cloud to a service provider cloud, that's to come. What exists today for us is this enterprise opportunity that our solution providers are taking advantage of. They don't have to wait for anything to be able to get more margin around VMware and the drag and the coefficiency they're gonna get.

Those are the opportunities that exist for them now around VMware. When can they expect to see the enterprise cloud opportunities?

The enterprise cloud, I would say, is actually here as well.

So somebody could go out and build an enterprise cloud using the VMware technology?

Yeah, absolutely. The enterprise cloud is just a new definition for building a highly-scalable shared business services platform for the enterprise today. So it's nothing new. The enterprise cloud is just something that's a new terminology. But we have many customers today building a shared services model on top of VMware.

We're already taking pools of resources -- storage, server, and network -- today, deploying them together, aggregating them, and serving them up as nothing more than a big shared compute capacity for an on-demand provisioning of applications.

So that exists today. We're just renaming and talking about this enterprise cloud and, if you will, this service provider cloud, and pulling them together to become this federated computing model. If you go talk to business partners, this enterprise cloud terminology we're using is what they're providing today through the use of VMware technology. So it's not completely new. We're already providing the building blocks for what will become a true cloud compute model that's being built and being laid out today with our existing technology.

Getting to the other part of your question, when thinking about this from a service provider perspective, if a service provider is providing an on-demand compute cloud for the enterprise, what does that mean for a solution provider? How are we going to ensure they're going to get a piece of the pie, right?

They're concerned about recurring revenues...


...and loss of customer control.

We think there's a potential. And we're doing some studies right now with some of our larger solution providers, looking at whether there's a possibility that they not only sell VMware SKUs into the enterprise, but if that enterprise customer wants to take advantage of cloud computing from a service provider that our VARs, our resellers, actually sell the service providers' SKUs. So, not only are they selling into the enterprise data center, but now if that customer wants to take advantage of additional capacity that exists outside the four walls of the data center, why couldn't our solution providers, our VIP resellers, resell a SKU that Verizon or Savvis or SunGard or BT is offering into that customer. So they can have the capability of selling into the enterprise cloud and the service provider cloud on two different SKUs and still maintain the relationship with the customer.

They'll look at that. But they will be worried about the service provider taking over the customer account and the fact that the service provider gets all the recurring revenue, if it's not set up the right way.

That could potentially be the case. But it's not a lot different from a solution provider today selling into an account a VMware license that's perpetual. Now, if you're selling a perpetual license and you're moving away from that and [your customer is] buying capacity on demand from the cloud, every time they need to do that, if they have an arrangement through a VAR or a solution provider to get access to that capacity, and they're buying the SKU from them, they're still engaged.

But time will tell. This all has to form over the next 12 to 24 months. And that's why we're starting to do focus group studies with our VARs to ensure that they can get access to both the enterprise cloud and the service provider cloud so they'll be able to make margin and be profitable.

OK, thank you very much, Carl, for spending some time with me.