VMware Licensing: Rock or Hard Place?

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From both a personal and professional standpoint I'm a big fan of VMware as a company and a partner.  My company enjoys a significant partnership with Microsoft as well (which I think most hosting/service providers almost have to have these days, don't they?) but VMware has managed to stay ahead of the curve on the technology side consistently over the last 5 years.

One place where VMware could stand to learn something from Microsoft, however, is on how to relate to the SP channel when all you really want to do is sell licenses.  It was said a number of times at PEX10 that VMware wants to focus on selling licenses, but as a service provider that leaves me a bit out in the cold.

As a company focused on MRR (monthly recurring revenue), I'm doing well when I can limit the amount of capital that needs to be spent to generate that revenue.  On the software side, that means we see a lot of value in the SPLA agreement from Microsoft, whether we are talking about client, server or application licensing because it provides some key features:

  • It's ubiquitous; every hosting company can have access to it with a minimum of fuss
  • It's complete; (almost) every Microsoft product is available
  • It's flexible; there are usually multiple ways to license most products based on the customer use case (per processor, per SAL, per mailbox, anonymous, etc…)
  • It's easy to sell; almost every customer can understand the model and do a simple comparison to a capital-based volume license purchase and see if it works for them.
  • It's cheap, meaning the resources we as a company have to invest in it are low; the upkeep of the account is simple, the reporting rules are straightforward and the support from our SPLA team is great.

In a business where we are selling the advantages of OpEx as an alternative to capital spending, this kind of program is invaluable.  Do we want to offer it ala carte to our customers?  Done.  Do we want to include the licensing cost with the VMs?  We can do that too.  There's no up-front monthly commitment, there's no middle-man to deal with and the programs updates frequently enough to stay in touch with us, the customer.  Now it's not perfect, don't get me wrong, but it's accretive to our business and that's all we can really ask for.

The VSPP plan is…well…not really comparable.  Sure, it lets you provide VMware vSphere licensing as an OpEx cost, but the rigidity of the program offsets any perceived bonus.  First, you can't just sell the right to use the licenses to your customers, like you can with SPLA.  The program is designed to be used in environments where the service provider has management and control responsibilities.  Next, all you can really get right now are the three versions of vSphere.  There's no View (yet), there's no SRM, there's no vCenter applications.  There are no Nexus 1000v bundles.  In being so incomplete, the program dilutes much of its value to the service provider and the customer.  Combined with the lack of support, the extreme lack of coordination and visibility between the Enterprise VIP partner team and the VSPP partner team and the lack of changes in the program since it became available over a year ago, and there's a lot of room for improvement.

Luckily, VMware seems to recognize this.  In meetings with Bob Selph in which we discussed how SRM and vCenter apps being added to the VSPP could drive those products into the SMB space, he essentially said "Get to a 10,000-point agreement and we'll do almost anything you want."  That says to me that the challenge isn't in being flexible or creative in how the program is structured, it's in finding a way to account for the revenue as compared to the traditional retail license model.  Once VMware figures out that they are two different businesses that require different things, I have a feeling that change will come quickly.  The promotion of Don Schleicher to head up the Cloud/SP Channel is a huge step in the right direction, and I'd encourage all of the service providers out there to reach out and let him know you are interested in helping him get things going in the right direction. 

The better and more viable the VSPP program is, the more we can differentiate on value and service and the less we have to worry about racing to the bottom on cost.  Much like with the SPLA program, everyone knows what the cost is going to be, which simplifies the sales process.  Hopefully soon it won't be about whether you can offer VMware licensing as part of the deal, but about what other services and skill sets your company can bring to the table.  If that happens, I'm confident that a company like mine can continue to grow and prosper.  We are positioned well to win the value and strength-of-offering battle, and I'm excited when we can compete on those grounds alone.