VMware chief executive Paul Maritz (pictured at VMworld, below left) claims the vendor’s virtualisation products have become the “accepted way of doing things in the enterprise”. But the company still has some work to do before it can say the same about the SMB market.
At the vendor’s VMworld 2011 European conference in Copenhagen, VMware said that despite SMBs accounting for a third of the company’s global business, too many small companies have not yet embraced virtualisation.
“There is still a huge opportunity in the SMB space,” explained Andy Hunt, vice president of EMEA partners and inside accounts at VMware. “One of the big requests I made to our Solutions Provider partners [on the first day of VMworld] was to get back into the SMB market, by looking at those customers that have not yet virtualised and spinning them up in the same way we did four to five years ago.”
To help partners with this, the virtualisation giant announced that 100 of its Ireland-based staff will now work on finding SMB sales leads for partners to fulfil. It is also developing a new sales incentive to reward partners that close deals in that segment.
John Churchhouse, former senior manager of VMware’s UK and Ireland partner organisation, was handed the task of overseeing the firm’s SMB operations across EMEA last month.
Speaking to CRN at the event, Churchhouse said the firm’s downstream push began three years ago, with the launch of its first SMB-focused products.
“[Back then] we really did not have any tailored offerings for the SMB market, which is something we knew we had to change because you cannot give small businesses enterprise solutions and expect them to be a good fit,” he continued.
“So we launched our Essentials and Essentials Plus bundles for SMB, which have been extremely successful and [these products] are part of the reason why we have so many customers in that part of the market today.”
The firm has broadened its SMB product portfolio since then, with the launch of VMware Go Pro and VMware vCenter Protect Essentials Plus.
The former is a SaaS product that helps SMBs manage, monitor and secure both physical and virtual machines through a single console. The latter is an on-premise end-point security and anti-virus management offering.
Churchhouse said there may be more SMB products in the pipeline, as a result of VMware’s in-house research and development activities.
“We have made lots of acquisitions over the years,” he explained. “Some have involved SMB-specific technologies, and [following] some of the general acquisitions we have done, we have then repurposed those for the SMB market.”
As an example of this, Churchhouse cited VMware’s buyout of infrastructure management vendor Integrien in August 2010 - a company whose virtual environment monitoring products were previously an enterprise-only proposition.
“We defined an entry-level version of its product, renamed it vCenter Operations Standard and priced it at a point that is ideal for the SMB market,” said Churchhouse. “It is also simple to use and deploy.”
VMware’s definition of an SMB is any company with up to 1,000 employees, and it claims that 70 per cent of its customers have fewer than 500 staff. Therefore, these products should provide partners with a chance to re-engage with their existing accounts, claimed Churchhouse.
“We are working with our distribution partners to drive up the number of transactions and new [SMB] customer acquisitions our existing partners get,” he added.
After the event, Richard Flanders, director of product marketing at VMware partner MTI, said he was heartened by news of the vendor’s efforts to court smaller firms, particularly on the product pricing front.
“VMware’s approach has been very enterprise-centric in the past, so it is encouraging that it has recognised there is a lot of opportunity for its channel to go after in the SMB market,” he said. “VMware has taken into account that this sector is very price sensitive and needs products that are easy to manage because they do not have the same staffing levels as larger firms.”
MTI is also a Virtual Computing Environment (VCE) partner, a coalition that was set up several years ago by VMware, Cisco and EMC to bring to market infrastructure packages that can be used to build private clouds.
Both Cisco and EMC announced SMB strategies earlier this year and VMware’s decision to do the same could help MTI roll out a wider range of cloud offerings for smaller businesses, added Flanders.
To back up all this, though, he would like to see the vendor re-run some sales and training initiatives to help partners pitch products in new markets.
“VMware did some road shows a while ago around its desktop virtualisation offerings, to help resellers understand the technical aspects of its technology and how to position them,” said Flanders. “We found these extremely helpful at the time and it would be good to see them do something similar around SMB.”
Following the event Clive Longbottom, service director at analyst Quocirca (pictured, right), warned that convincing SMBs to virtualise will be hard without an educational push, particularly for VMware partners that have previously focused on the enterprise.
Virtualisation is often pitched to enterprises as a way of saving money by allowing them to cull the number of physical servers they need. Smaller companies have fewer servers to start with, meaning the financial gains are often less great.
“Let us assume that a 1,000-user organisation uses 20 physical servers,” said Longbottom. “Virtualisation may allow it to cut five of them, delivering some financial benefits, but these will be nowhere near as big as those achieved by an enterprise that has managed to whittle 1,000 servers down to 200.”
As a result, enterprise-focused VARs will need to rethink how they sell virtualisation to smaller firms.
Flanders agrees, adding that virtualisation can benefit SMBs financially in other ways. “There are considerable agility and management benefits for small businesses, because it allows them to get more out of infrastructure by widening the range of tasks it can do at particular times of the day,” he explained.
Speaking after the event, Grant Tiller, senior product manager at workspace management vendor RES Soft-ware, said he does not think enterprise VARs will need to alter their sales tactics much for the SMB market.
“SMB IT managers have approached us over the past 18 months with demands that we previously saw only from the enterprise space,” he said. “We have put this down, in part, to the fact that [SMB] users are coming on board with far greater IT skills compared to just a couple of years ago.”
Even so, said Longbottom, enterprise VARs should bear in mind that SMB virtualisation projects are less labour-intensive, and often not as lucrative.
“In larger organisations, a move from 1,000 servers to 200 involves a lot of work, [such as] retrofitting datacentres and planning what applications to migrate, for example,” he added.
“For smaller companies, there is a lot less work involved and far less revenue.”
VARs can make up this shortfall, claimed Matt McPhail, global director of systems engineering at storage vendor Scale Computing, by stepping in to provide skills that SMB IT departments might lack.
“IT administrators in smaller businesses are adept at multi-disciplinary skills, but they may not have specialist skills, for example in storage administration [which are needed for these kind of projects],” said McPhail. “This may require VARs to take a more consultative approach with the customers, adding in training to bridge specific skill sets.”
There are also other barriers that VARs will need to negotiate to persuade more SMBs to virtualise, such as the risk of downtime and high deployment costs.
“With limited IT resources and fewer machines, moving to a virtual platform can prove arduous for SMBs at times, because every minute of downtime will have an acute impact on their business,” he asserted.
Even so, Daniel Fried, Veeam’s EMEA managing director (pictured, below left), told CRN after VMworld that VMware had picked a good time to join the SMB bandwagon.
“Most SMBs do not rush to invest in new technologies because they need more assurances that it is something that will make a positive difference to their business and can be easily managed with the limited resources they have,” said Fried. “The same applies with virtualisation, where we are seeing a growing interest from SMBs, which is making mass adoption seem increasingly likely.”
To take advantage of this, partners will still need to persuade end users to use VMware’s products over Microsoft’s, added Quocirca’s Longbottom.
“For the real SMB, Microsoft will be the tool of choice because Hyper-V is already part of the Micro-soft OS,” he said. “It will do everything an SMB needs, so long as someone tells them what it is capable of.”
Rick Jackson, chief marketing officer at VMware, played down this threat at VMworld, however, claiming that end users value product quality over low prices. Citing feedback from VMware focus groups, he admitted that many SMBs’ first experience of virtualisation is with Microsoft, but once they try VMware’s vSphere Hypervisor, they usually jump ship.
“Since I joined the company two years ago, I have heard the question ‘how can you compete against free?’ many times, and I have to say it is because of the quality of our products,” he claimed.
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