Change ahead for VMware partners amid ecosystem revamp
The virtualization company's channel allies can expect new business models, metrics and specializations -- along with a new owner in chipmaker Broadcom.
VMware aims to build a partner ecosystem featuring multiple routes to market, an emphasis on services, and a greater focus on global systems integrators and OEMs.
The company, based in Palo Alto, Calif., plans to roll out a revamped partner program in March 2023. Today's program largely caters to resellers, and indeed, some 90% of VMware partners pursue that business model. The revised VMware Partner Connect program, however, will support multiple partner modes under one roof, and reward companies for influencing sales and providing post-sales services -- rather than focusing solely on software reselling transactions.
The program changes recognize that partners -- MSPs and cloud services providers, for example -- now serve customers in a SaaS and subscription model landscape, noted Kaushik Ram, senior director of partner programs and experience at VMware. Such partners help customers develop use cases, deploy offerings that embed VMware technology and offer ongoing management.
"The value they provide to these customers has significantly expanded -- and that value really sits less in the transaction cycle," Ram said. "It's more in the pre-sales and post-sales, and we need to recognize that in a [partner] program."
While VMware retools its partner approach, it does so against the backdrop of its pending acquisition by chipmaker Broadcom. That deal, slated to close by the end of October, has raised questions among industry watchers regarding how VMware pricing, support and future technology investment will fare under new ownership.
Emerging business models
When VMware takes the wraps off its partner program next year, the company will feature four business models: solution reseller, cloud services provider, solution services and solution builder.
Kaushik RamSenior director of partner programs and experience, VMware
Companies in the solution reseller category will include large solution providers such as CDW, which generates more than $20 billion in sales, as well as smaller VARs that source products through distributors. Resellers have typically focused on scoping customer opportunities and closing the resale transaction, Ram said. But those partners are diversifying.
"We know that resellers are evolving themselves," Ram said, noting that partners are pushing beyond transactions and developing services practices. He cited CDW's 2021 acquisition of Sirius as an example of that direction. CDW, at the time, said its $2.5 billion purchase of Sirius would expand its services in light of digital transformation.
Cloud services providers, meanwhile, act in all phases of the customer lifecycle, covering pre-sales and post-sales services, as well as the transaction phase, hosting and managed services. Ram cited Rackspace, a multi-cloud technology solution provider, and telecommunications companies such as AT&T, Verizon and Telstra as examples.
Solution services partners work with customers to define the problem statement and influence the sale, Ram said, but might not always serve as the transacting partner. He said global systems integrators such as Accenture and Deloitte will play a big part in the solution services category.
Finally, solution builders take VMware's technology and combine it with their offerings. VMware's OEM and independent software vendor partners will participate in this area, Ram said.
Partners won't be typecast into particular roles, however. Ram said the program will help partners build capabilities in adjacent areas, so a solution reseller could develop cloud services, for instance.
Perspective from VMware partners
Some partners, in advance of any program changes, already operate well beyond the transaction level, developing customer offerings on VMware's cloud infrastructure products.
UnitedLayer, a colocation, private cloud and managed services provider based in San Francisco, sees its biggest opportunities with VMware in private clouds. The company offers an on-demand, software-defined private cloud using VMware technology.
Private cloud IaaS is experiencing "strong growth as part of the macro trend of enterprise digital transformation," said Abhijit Phanse, CEO at UnitedLayer.
VMware remains a strong choice for enterprises as the software-defined compute and storage solution for private clouds, he added.
NTT Ltd., an IT infrastructure and services company with headquarters in London -- and a longtime VMware partner -- also pushes beyond the reseller model, moving into co-innovation. The company unveiled today a managed edge and private 5G offering for industries such as manufacturing, mining and transportation: NTT provides its private 5G technologies and vertical market experience to the collaboration, while VMware contributes its Edge Compute Stack. The partnership also involves Intel.
Shahid Ahmed, group executive vice president for new ventures and innovation at NTT, said his company worked with VMware for about six months to launch the offering. "There is a lot of buzz around edge, but no vertical use cases associated with it," Ahmed said. "We felt it was important that edge use cases were grounded in actual outcomes the customers were looking for."
Ahmed is among the VMware partners speaking this week at VMware Explore, the company's flagship annual conference, which runs through Sept. 1. He will discuss NTT's work with Edge Compute Stack.
Points system, specializations to debut
VMware's upcoming channel program will take into account partners' expanding roles through a points-based system. The current system rewards partners strictly on the basis of VMware product sales. The points approach, however, will reward partners for booking new business, pre-sales and post-sales activities, and developing new capabilities, Ram explained. Microsoft's upcoming partner program, set to debut in October, also uses a points-based system to measure partners.
VMware partners will use those points to climb the program's tiers and obtain greater financial benefits and other perks, such as joint business plan development.
Channel companies can also expect to see new specializations with the revised partner program. Specializations, a common feature of channel programs, help partners differentiate themselves. An MSP specialization is scheduled for release in the December 2022/January 2023 time frame, Ram said. Vertical market specializations are also in the works, with VMware focusing on financial services, healthcare, retail and manufacturing. The company has yet to set a date for their availability.
Those specializations will join VMware's Partner-Led Customer Success specialization, which debuted in August. VMware has been encouraging partners to create customer success practices to help customers get the most out of cloud, SaaS and subscription offerings.
VMware boosts SaaS business
VMware, which aims to collaborate with partners in the SaaS and subscription businesses, cited a 22% year-over-year expansion in those areas for the second quarter of the company's 2023 fiscal year.
On Aug. 25, the company reported $943 million in SaaS and subscription revenue in its July-ended quarter -- 28% of its total Q2 revenue. VMware in recent years has been shifting its business mix toward consumption-based subscriptions versus the traditional software licensing.
VMware's Q2 developments also included expanded partnerships with global systems integrators Wipro and HCL Technologies. Both companies are based in India.
Broadcom and the channel
Partners will have about six months to become familiar with the program's new structure. By then, the company will likely be operating as part of Broadcom.
Partners have mixed views on the change in ownership. "We see this as an opportunity for Broadcom to create attractive pricing packages for its broad portfolio of hardware and software solutions," UnitedLayer's Phanse said. The portfolio's inclusion of VMware's private cloud virtualization technology will drive greater adoption of private and hybrid cloud offerings, he added.
But NTT's Ahmed said VMware and Broadcom should take care not to force-fit their respective technologies into offerings the market doesn't need -- an issue that can surface in the aftermath of an acquisition. "I don't believe we will see this anytime soon, but it is something they need to be cautious about," he noted.
When asked about how the Broadcom acquisition would affect VMware's channel outlook, Ram said VMware's plans to pursue SaaS, support partner evolution and pursue emerging routes to market will continue apace. "Those are things that we as VMware want to do, and we'll continue with that irrespective of where the future takes us," he said.