How Player, Server and ESX Server will change the VMware sales channel

The introduction of free virtualization tools Player and Server aren’t just going to change the virtualization market, but the company itself, starting from its sales channel.

At today VMware has a very articulated partnership network, counting Technology, OEM, Distributing, Reselling and Consulting partners.
Putting aside Technology partners, all others will be influenced and possibly invested by the VMware free virtualization strategy.

Resellers will be the first, real suffering part of the channel.

They are now divided in VIP Professional, authorized to sell VMware Workstation, ACE, VMTN, GSX Server and VirtualCenter products, and VIP Enterprise, authorized to sell all products (which translates in selling ESX Server, VirtualCenter and P2V Assistant).

GSX Server is gone for good, replaced by the free Server, and at today isn’t clear if the new product will be supported by VirtualCenter or not.
At the same time Workstation sales will be partially corroded by spread of free Player, hugely boosted up by the recent VMware Challenge.

What VIP Professional will sell then? Workstation, ACE (which is in absolute the less pushed VMware product since ever) and the VMTN subscription.

But, and I speak after an experience of 1 year and a half heading a VMware VIP Professional reseller company in Italy, isn’t a secret that buying Workstation or VMTN subscription by a reseller is quite unpractical for customers: both products can be bought online with immediate availability of registered serial numbers, while buying them through resellers take a whole month (and sometimes even more).
And considering low discounts a VIP Professional is able to apply, is quite unlikely a customer would give up online purchase just to save 10 dollars.
Finally, it’s quite probable VMware will lower resellers discount margin at the Server market launch, to amortize the huge investment done converting GSX Server in a free solution.

So, whatever Server will have or not VirtualCenter support, VIP Professional are doomed to disappear, unable to sustain profits just selling few copies of ACE and a bunch of Workstation and VMTN.

On the other side Enterprise resellers and partially distributors will have soon to face problems as well: their sales, already compromised by direct bundling of VMware products with OEM datacenter hardware (IBM or HP for example), will lower even more when the so called Virtual Infrastructure 2.0 (ESX Server 3.0 + VirtualCenter 2.0) will be out on 2H 2006.

New features this release will offer and the many will follow with new releases, will oblige a customer, new to virtualization and decided to adopt it through ESX Server, to immediately buy certified servers (by IBM or HP for example) and a Storage Attached Network (by IBM or HP for example).

So the more powerful the VMware infrastructure wil become, the more chances OEMs will have to sell products from themselves, mutilating VIP Enterprise partners and distributors businesses.
At the same time Consulting partners will have every day less space, obliged to resell their skilled professionals directly to OEMs, which will be able (and are already able today) to offer a complete bundle to customers.

At a point, and I’m informed it’s already happening, OEMs will give VMware products for free, just to place their hardware on customers datacenters. How others could ever compete?

At the end of the day we should expect a deep crisis in the sales channel unless VMware does one of these 2 things or both:

  • remodel the channel to adapt it to the ongoing strategy
  • release soon new products to be sold on today’s sales infrastructure

In any case it won’t be easy.