VMware's indirect channel partners to increase in '08, exec says

With new competition from Microsoft Corp., Oracle Corp. and other hardware vendors, VMware Inc. will face its stiffest competition yet during 2008 -- and it plans to expand the ranks of its indirect channel partners to compensate. But, in addition to adding more partners, the company plans to ramp up the requirements for existing partners.

In October, Citrix Systems Inc. announced the completion of its acquisition of XenSource and outlined its plans for application, server and desktop virtualization. Last month, at Oracle Openworld in San Francisco, Oracle as well as Sun Microsystems Inc. jumped into the virtualization market and unveiled their virtualization software. And in the first quarter of next year, Microsoft intends to ship Hyper-V, its hypervisor-based virtualization feature, with Windows Server 2008.

SearchITChannel.com interviewed Steve Houck, VMware's vice president of worldwide channels, about VMware's plans for 2008, which include significantly increasing the number of indirect channel partners, as well as keeping a closer eye on partners' progress.

What is your go-to-market strategy and where do your indirect channel partners fit into this new competitive dynamic? Our goal has been to have as much of our revenue go through distribution and through our partners as possible. Today we are close to 80% and that continues to be the center of our strategy. And that's not just because everyone says our partners are important -- there's an estimated $1.2 trillion in IT spend in 2007 and...

upwards of 80% of that goes through or is influenced by channel partners.

So if you look at the ecosystem and the competitors that are moving into the space, Citrix and Microsoft, they all have a strong channel presence that we had to lock into early and that's what we did. So in the beginning of 2007, we did two things: We continued our channel expansion through the recruitment of partners, adding to our partner base. We will end the year in the neighborhood of 8,600 partners -- that will be a net add of 4,000 channel partners worldwide in 2007 alone.

The other thing that was essential to the go-to-market strategy is as virtualization became popular in the investment communities, large corporations began to see the need for certified professionals to service those partners and customers. So currently we are at 1,500 VMware certified professionals. That's the largest network of certified virtualization professionals of any of our competitors and we will continue to build that out. What are your goals in 2008 for your indirect channel partners?
In 2008 we will continue our channel expansion; we have a target to grow to 11,000 partners worldwide servicing all customer segments, so that's enterprise, commercial and SMB. We will continue to increase the number of our VMware certified professional network and we are looking at a 60% or better certification level within the partner base.

We are obviously looking at partner profitability and performance factors, so we will continue to measure those. Those numbers are internal targets and I can't disclose those numbers.

The important thing is when we are looking at what are the important measures within our partner base, we look at the levels of certification, partner profitability as a percentage of revenue and revenue performance of partners and then partner loyalty measures. So we are looking at attrition levels to make sure the partners we recruit we keep.

We want them to remain loyal and loyalty is measured in terms of: At what level do they engage with us? Do they attend our events? Do they continue to certify beyond the required certifications? To what degree are our partners participating in our co-marketing programs? Those are all measures that we would be using to look at partner loyalty and attrition. What were the levels of attrition for your indirect channel partners in 2007?
We had very low attrition and in 2007 we weren't formally measuring that as a metric, but we are now as we go into 2008. You have an OEM agreement with Dell Inc. to sell your hypervisor on its hardware. Dell has now acquired EqualLogic which is a Technology Alliance Partner of VMware's. In light of the acquisition, how will you be working with Dell moving forward?
EqualLogic is a very strong partner of ours; we do a lot of co-channel development programs and promotions. A lot of EqualLogic partners are our partners and will continue to be so. We are not changing anything in our relationship with EqualLogic or with Dell as an outcome of that acquisition. The interesting thing, though, that I think the industry is watching is how is Dell going to evolve into a traditional channel company. We read the press every day on what that may look like, and it's interesting that you talk to the EqualLogic VARs and they are in a bit of a quagmire as far as where they make their investments. What I've seen in the industry is business as usual, but we'll wait and see how this plays out.

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