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Top 10 Takeaways from VMworld 2016. Can VMware Deliver the Next Wave of Innovation?

August 30, 2016 10:19 pm / Leave a comment

VMworld 2016 General Session kicked off in Las Vegas on Monday morning with a sound of tribal drumbeats and a nice little poem loosely tied to the conference theme, be Tomorrow” The main presenter for the session was VMware CEO Pat Gelsinger – which was a change in style all previous events where former President and COO, Carl Eschenbach, has traditionally had hyper-energized approach to discussing VMware’s business and technology.

The General Sessions on Monday and Tuesday covered a lot of ground – below are the “Top 10 Takeaways from VMworld 2016”

  1. Michael Dell’s Read My Lips moment: “No Changes to VMware Open Ecosystem”

 Dell-Gelsinger

One of the questions customers and VMware followers and partners have about the Dell acquisition of EMC is, “What will the effect be on VMware hardware neutrality?”  VMware typically supports; not just one server vendor, but all server vendors, not just EMC or Dell storage, but all storage, not just one networking vendor/Dell, but all networking vendors.

So what changes will Dell bring?

At the close of the Day 1 General Session Pat Gelsinger welcomed an unannounced visitor to the stage – Michael Dell. After a friendly chat, Dell answered (at least part of) the question people had been wondering.

Gelsinger: What impact will the Dell acquisition have on the VMware ecosystem?

Dell:  “The Open Ecosystem of VMware is critical to success and won’t change” Only an ecosystem of this size and power could really pull off this cross-cloud vision…”

Will this hold true in the face of quarterly sales pressure?  It is too early to tell….

 

  1. The VMware Vision remains the same – (with tweaks to nomenclature, additional pieces defined and new products)

VMware Vision 2016

VMware has been talking about a similar vision for several years. The biggest change this year at VMworld is flushing out of products to support this vision and the new focus on being able to manage any cloud under the  “Cross-Cloud Architecture” (#1 on the list). Some of the products that support this vision are here today, and some are just taking shape. The End User Computing demo on day 2 gave a sense for the type of end user experience VMware is shooting for – but how close are customers to buying this (and how close is the complete solution?)

 

  1. 50% of apps on “cloud” in 2021? Interesting Metrics on Cloud Adoption today – and predictions for the Future

blog item 8 cloudstats

In his opening Keynote, VMware CEO Pat Gelsinger presented some interesting statistics compiled from analysts, public data and VMware data that provided a snapshot of where the “cloud” market has been – and what we may expect in the next 10+ years.

  • 2006: 98% traditional IT, 2% Public Cloud (mostly salesforce.com)
  • 2011: 87% traditional IT, 7% Public Cloud, 6% Private Cloud,
  • 2016: 73% traditional IT, 15% Public Cloud 12% Private Cloud
  • ** 2021: 50% traditional IT, 30% Public Cloud, 20% Private Cloud
  • 2030: 19% traditional IT, 52% Public Cloud, 29% Private Cloud

What does all this mean and why did Gelsinger take such pains to share these numbers? In a market that big there will be “many clouds” – and VMware wants to be the one who extends their on-premise infrastructure to manage these clouds!

  1. VMware increasing focus on $60B Opportunity with Service Providers

Big Shift to SPs buying

As customers move to cloud, service providers are buying more and more of the hardware and software required to run data centers. Gelsinger shared data that this 2016 is the year when the share of data center products purchased by service providers EQUALS the amount purchased by organizations for their IT.

VMware seems to be increasing focus on this opportunity. On the first day of the conference, VMware announced its partnership with IBM on Cross-Cloud Services, and the first opportunity he talked about in his session was what he called the the “Managed Cloud Services” (aka “Hosting”) Market. During the general session, he continually made reference to VMware’s large network of Service Provider partners, the vCloud Air Network.

 

  1. “Hyper-converged Infrastructure, Powered by Virtual SAN”

Powered by Virtual SAN

In previous years, VMware has talked about converged and hyper-converged infrastructure in terms of EVO Rack and EVO Rail and their partnerships with hardware vendors, and talked about Virtual SAN as “storage product”. At VMworld 2016, the two messaging seemed to merge – Virtual SAN is both a storage product and a hyper-converged infrastructure product (Hey, it’s a desert topping AND a floor wax! – see the old SNL fake commercial).

Whatever you call it, VMware says Virtual SAN is “in the tornado” with 400% YtoY growth, 5,000 customers, and 100 new customers every week.

 

  1. Bringing Containers into Virtual Infrastructure

vSphere Integrated Containers       Working with the VMware SDDC Stack

blog item 5 containers

 

During the Day 2 General Session, Kit Colbert, CTO for Cloud Native Apps provided an update on VMware’s approach for supporting the development of cloud native apps, and leveraging containers.

The majority of the session focused on updates to vSphere Integrated Containers including the new “Container Registry” and the new “Container Management Portal” and how the container approach leverages skills, tools and the virtual infrastructure companies already have, to provide security, management and availability to containers.

Kit also highlighted solutions that leverage the Photon platform the solution with Pivotal Cloud Foundry that was announced earlier this year and an offering with kubernetes that is coming soon.

Both VMware container product offerings are published as open source on GitHub

 

4. SDDC Products as the Building Block of Cross-Cloud Offering

blog item 4 SDDC

While the both the Monday and Tuesday General Sessions had titles that included “cloud”, the star of the show is still VMware’s suite of products to deliver a software-defined data center (SDDC). If you look carefully at the vision for Hybrid Cloud, you see it is enabled by SDDC. When you look at the layers of VMware’s Vision – Any Device, Any Application, Any Cloud, you see that the building block is the SDDC.

vSphere is the foundation of this approach, but the focus on virtualized networking and security (with NSX) and software-defined storage (with Virtual SAN) with management and automation provided by vRealize. Each of these elements continue separately, but Day 2 demo focused on how everything fits together to give businesses the agility they need, while making life easier for developers and simpler for end users.

VMware has often made a lot of product announcements at VMworld, but this year has been different. Announcements have focused on broad new product offerings and in the Day 2 General Session, VMware CTO Ray O’Farrell told the audience to expect product updates to vSphere (and we assume the rest of SDDC) at VMworld Europe in October.

 

  1. Maybe the time for Virtual Desktops and End User Computing is Finally Here?

blog itme 3 EUC

Sanjay Poonen, VMware EVP of End User Computing kicked off the Day 2 General Session by focusing on the top section of the VMware Vision –

“Any Device” with End User Computing Products that include

  • Apps and Identify
  • Work across desktop and mobile and have
  • Simple management and security built in everywhere

As discussed in previous VMworld’s, analysts and customers have shifted over the past few years to the point where VMware vision and execution are rated tops in magic quadrant and customer market share has shifted. In recent reports, VMware has reported that the End User Computing business is now a $1.2Billion business. Part of that is driven by enabling 15-30% lower costs per user driven by improvements in the products and part is attributable to the increasingly robust solution – particularly the AirWatch platform for mobile management.

Most of the session was an impressive demo that showed the capabilities of the platform to provide a simple and powerful end user experience to deliver all of a users applications through Apple devices, Android devices and Windows 10 desktops and leverage the built in identify management, security and availability of the platform.

 

  1. Security (and NSX) is everywhere – in every topic, in every demo and with every customer testimonial

security everywhere

Security was not a stand-alone topic in the General Session and perhaps this is a sign of its increasing importance and improvements in the VMware products? Instead, security and compliance were a part of the discussion during every topic of the general session.

·    Cross-Cloud Architecture

·    NSX as part of SDDC platform

·    Visibility with vRealize Operations

·    Security moving with workloads – from vRealize Automation

·    Micro-segmentation as a core capability of NSX

 ·    Encryption built into security policies and enabled by NSX

·    Security built into into SDDC, supporting Hybrid Cloud and Cross-Cloud Architecture

·    Security built into Horizon, AirWatch and End User Computing

 

and the #1 Takeway from VMworld is 

Cross-Cloud Architecture (including VMware Cloud Foundation and Cross-Cloud Services

Cross-Cloud Arch Ovr

All of the traditional hardware and software IT vendors have been struggling for a few years to determine what their role was in “cloud”. Some bought service providers, some built services, some tried to “SaaSify” their applications.

VMware has been on a dual approach of 1) building their own cloud service with vCloud Air and 2) selling their products as infrastructure components to Service Providers to build their own cloud offerings.

With vCloud Air receiving very little attention in general sessions and the focus on partnerships, it appears VMware seems to have pivoted on their “cloud” strategy to:

  • Offer a compatibility layer between the megaclouds (AWS, Azure and IBM) that ties to their virtual infrastructure
  • Continued/Increased focus on selling their technology stack into Service Providers.

They call this compatibility layer, “The VMware Cross-Cloud Architecture” and the 2 main components are a) new product called VMware Cloud Foundation which provides a unified SDDC platform for the Hybrid Cloud and 2) a set of Cross-Cloud Services that provide security, availability and agility – and tie to the core SDDC infrastructure. Is this really a new product or just a re-packaging of VMware’s cloud portfolio? You can decide for yourself by looking at the CTO blog (see link below) and visiting the tech previews at the VMworld hands-on-labs.

As part of this focus, VMware announced a partnership with IBM, and plans to partner broadly to this architecture as an abstraction layer across clouds.

Want more information? Follow the links below to articles, blog posts etc…

I welcome any comments below — And make sure you “Follow” our blog (look for the “Follow” link on the left sidebar) and have your say. I’m also available as a public speaker, to support local and global events in Silicon Valley, or the rest of the flattening world…

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Is Your “Partial-Channel” Business Stalling? 3 Human Emotions that Prevent Traction

February 27, 2016 10:04 pm / Leave a comment

Recently I had a call with a channel director for a company based in India. His company sold software for banks and he managed their channel for them across the Asia-Pacific. region. It struck me that the challenges they faced is common to many companies in the tech industry – and beyond, and that they were rooted in decisions made years ago by his company, when they set their route-to-market strategy.

His company had sold “direct” until about 5 years ago when they started adding “some channel”. Now they had a loose network of 1-2 companies per country who acted as “Agents” for them in Australia, Singapore, Taiwan, Malaysia, Vietnam, Thailand, etc.… He had previously managed their business in Europe and they had the same setup – and the same challenges….

Of the 20 or so countries he managed, with nearly 50 partners, he only considered 3-5 partners to be focused and enabled on his business. His plan was to get another 3-5 enabled in 2016. He’d done this before and knew he would need to 1) focus on a country or set of partners, ) he would need to spend a lot of time with the partners’ technical team to help them get “enabled” and 3) he would need to get them engaged with his field sales team with account targeting. But since he had gone through this process before, he also knew just how hard this was going to be – and in the end, that it was a gamble that might not work…

 

What Could the Channel Rep/the Company do to Become Relevant to Partners and Gain Their Focus and Commitment?

 

The company had a sales rep or two in each of these countries, and as we discussed the situation, what jumped out at me was the shallow relationship that the vendor seemed to have with these Partners. Sometimes they would be engaged (when the vendor brought them into a deal), but then they would not talk for a few months. In the channel manager’s heart, he knew that every week that went by without engaging, meant the Partners’ business was moving farther away from selling his product…

 

So what was the “Route-to-Market” decision that led to these issues?

The decision to have a “Partial-Channel” Sales Model!

 

What I mean by “partial channel” sales model is that some business is sold by partners, and they get compensated for what they sell, but a lot of the business is sold directly by vendor sales reps without involvement or compensation for any partner. They have “some partners”, but neither party is very committed to the relationship.

 

My experience is that

  • Vendors can have some success selling “Direct” (particularly in specific segments/markets)

OR

  • They can be successful with an “Indirect” (or channel) sales model.

 

But it is hard to be successful with “partial-channel” sales model.

 

The results are like the old saying, “You cannot be ½ pregnant”. Either you work with partners, or you do not. Working with partners only when it is “convenient” does not result in a true partnership (or much revenue).

So why is this the case? A “partial-channel”sales model makes building a channel difficult because it runs completely against 3 Powerful Human Emotions that dictate both vendor and partner behavior. These 3 emotions are incredibly powerful and stack the deck against a “middle-path” on channel –

  • Trust
  • Envy
  • Greed

Let’s discuss each of these emotions and the dynamics of selling in a bit more detail.

Trust

We intuitively understand that “Trust” is a good thing in a partnership – but clearly lack of trust can have a very bad impact. Unfortunately, a “partial-channel” model tends to create a lack of trust between a vendor and their partners.

Think of it this way – on Monday, you make a sales call together, with your partner.   But what is the vendor sales rep doing the rest of the week? In a “partial-channel” model, the answer often is, “calling on customers direct”. That’s OK and was probably the situation when the partner signed on, but it makes the partner ask themselves questions like:

  • “Why didn’t the vendor ask me to work with them on ABC opportunity (that I heard about in an RFP)?”
  • They sold XYZ opportunity direct – and I’ve known that account for years…
  • I just invested in training on their new product, how could I recover my costs if they don’t work with me?
  • I wonder how they decide when to work with me? It is probably just their sales rep trying to make more money on the deal by keeping me out…

All of these questions indicate a lack of trust in the partnership – and make it less likely a partner will commit, invest and initiate new sales opportunity for your products…

Envy

Google dictionary defines envy as “a feeling of discontentment or resentful longing aroused by someone else’s possessions, qualities or luck.”   When a vendor has a “partial-channel” sales model, they often create guidelines for when they will sell “direct”. For example, they might say they will sell direct only to a) some named accounts, b) their current customers, c) some particular geographic area or d) specific vertical markets (such as financial services).

The problem with these carve-outs is that they create “envy” in the channel. Even if the reasons for the approach make sense on the surface, they create a dynamic of “envy” where a Partner tends to ask themselves questions like:

  • “What if I did invest more in selling Vendor A,’s products? I can only sell it to some of my customers. I’m limited, and they are keeping the best accounts for themselves.
  • “I wonder if there is even any opportunity in the accounts/markets where I can sell? It might be a waste of my time – and then they may take other customers/segments direct later (lack of trust) ?”
  • Why bother – I have better opportunities to pursue…”

Greed

The last emotion that keeps a “partial-partner” sales model from thriving is “Greed”. Once again, some business is “Direct” and some business is “Partner”. The question becomes “How” does the vendor decide what is “Direct” and more importantly “Who” decides. The reality is that in many organizations, the field rep is loosely managed and can make the call whether to leverage partners or not. At some level that makes 100% sense – since they are in the best position to judge the customer situation and the partner capabilities to support the deal.

Unfortunately that is where “Greed” comes in. I cannot count the number of stories I have heard over the years from partners, from channel sales managers and even from sales reps, recounting that the deciding factor in whether to use partners was “How much will I get paid on this deal?”.

 Many vendor compensation plans pay less to a rep on deals that go through the channel – because they get paid on the net selling price (which is the price paid by the customer minus discounts taken distribution/ resellers). In the short term, the Rep gets paid more if they sell direct. In the long term, he may/may not realize/or believe that he would get paid more if they had a strong channel in their patch. But the lure of higher compensation today makes the long-term question disappear for many reps and for many vendors…

 

So What are the options if you are stuck in the middle with a “Partial-Channel? Sales model?

 

In my experience, if a vendor has decided they need a channel, then they need to go “all in” and be willing to have a business that is 100% “channel touch”. They can still set up programs to differentiate channel margins or commissions based on role the partner played, but the assumption needs to be the partner is involved at some level in every deal. With this mandate, the vendor field reps are encouraged to use “team selling” and know they cannot sell around the partners, just to maximize the value of a first deal. That policy provides some incentive to support and enable partners. At the very least, partners are involved in fulfillment – which helps some with “Envy” and “Greed”.

It takes a lot more than that to create a strong partnership – and to begin to build “Trust”. The goal is to get partners to go beyond reactive to proactively creating sales opportunities. A lot of things need to change in the vendor’s GTM to make this happen (strong channel program with incentives, field engagement model, partner enablement, etc.…). But the first step is knocking down (or at least minimizing) Envy and Greed that having a direct team “in competition” with the channel creates. It is not the end of your journey to driving more channel revenue, but at least it is a start…

I welcome any comments below — And make sure you “Follow” our blog (look for the “Follow” link on the left sidebar) and have your say. I’m also available as a public speaker, to support local and global events in Silicon Valley, or the rest of the flattening world…

For more details, and to stay in touch with this community, contact me or Subscribe to our “Climbing Out of the Box” Newsletter via the form below.