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VMware partner profit margins still strong, exec. says

Are VMware partners making money? Company execs at VMworld in San Francisco, Calif.last week said yes,  but not always in the ways you’d expect.

“There are areas of our partner ecosystem where we can quantify that they actually make a lot more money than we do,” according to Brian Byun, VMware’s vice president of global partners and solutions. “Every time we sell a dollar of VMware license revenue you will see some of our partners making several times that because again there is a drag and a refresh effect.”

VMWare itself is shifting its revenue away from its hypervisor technology, which brings in 80% of its revenue today, toward value-added services, company execs said at the conference.

That drag-and-refresh effect has meant that when an infrastructure gets virtualized with VMware technology people buy new servers with up-to-date multicore processors and larger memory configurations.New networks, new processors, new servers and new storage are changing the economics, the technical design and the products customers buy, Byun said.

“Generally partners [earn] $2 to $3 worth of services when they sell one dollar of a VMware license,” Byun said.

According to Byun when a customer selects a virtualization optimized server it’s much more profitable for server partners, who can sell more memory and items like multiple fibre channel interface cards that can cost several thousand dollars.Another trend is that customers have typically moved to a SAN environment, and are increasingly implementing iSCSI storage networks.

“Conservatively, [our] surveys say greater than 60% of VMware business is attached to shared network storage,” Byun said. “VMware estimates that of the amount of storage that has been dragged or attached to VMware deployments are 126,000 Terabytes in 2007,” Byun added.

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