VMware adds $10B to expected TAM

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VMware president and COO Carl Eschenbach

By Robert Dutt

In February, at its Partner Exchange event, VMware president and COO Carl Eschenbach told the company’s channel that it sees its total addressable market (TAM) growing to $50 billion (U.S.) by 2017. At this week’s VMworld event,  Eschenbach admitted they’d been wrong – it’s actually a lot larger.

At the Partner Day ahead of the start of VMworld, Eschenbach told partners the company now sees its TAM growing to $60 billion by 2017, with much of the growth coming from outside of VMware’s core market of data centre virtualization, or, in VMware parlance, the software-defined data centre. That core of the market still makes up a slim majority ($33 billion) of the TAM figure, but cloud ($17 billion) and end user computing ($10 billion) are making up a growing part of the mix for VMware.

“Almost half of the market opportunity we have is in hybrid cloud, public cloud, end user computing, and mobility,” Eschenbach told partners. “We’re investing in those market opportunities, and we’re doing this collectively with all of you.”

The figure for end user computing is particularly expanded – as recently as last year’s VMworld, the software company had pegged its desktop virtualization and mobility business at about 10 per cent of its overall mix, the new figures would peg end user computing at more than half-again that figure.

A growing market is good news for VMware, and surely for the partners who sell the vast majority of those solutions. But the growth is not without some pain. Eschenbach said VMwre and its partners “have to transform how we sell into the market,” particularly as the company has gone from a one-product vendor to one with a growing number of products in a growing number of spheres.

“What we did in the past is not the path to the future,” Eschenbach said. “We need to understand how to sell on-premise transactional business, as well as new business models, like subscription and utility. We have to have deeper, more meaningful, most lasting relationships with our customers.”

Like many other vendors, VMware is now highlighting the important of moving from selling software solutions to selling based on business outcomes, with professional services playing a growing role in making that happen. He told partners that VMware is rapidly becoming “a platform company” with a growing emphasis on selling “suites and bundles” of products produced internally at VMware, as well as those acquired through the company’s many purchases in recent years.

While that’s the new reality for the enterprise side of the market, there are also changes coming to the midmarket/commercial business, where the focus is more on a broad number of channel partners and a high number of transactions. Eschenbach walked partners through the Power Plays the company has in place around top growth initiatives – Virtual SAN, vSphere with Operations Management, Horizon 6 Enterprise and Advances, and Disaster Recovery-as-a-Service. “If you align with us around these power plays, you’ll be able to see much more profitability on your business,” Eschenbach said, showing that partners can get up to 12 per cent discount through Advantage Plus depending on partner tier, plus a 10 per cent “accelerator” bonus around these Power Play solutions, and up to 15 per cent more for having certifications appropriate to the solution sold.

Eschenbach hinted that the tent could become a lot bigger for events like Partner Day at VMworld and Partner Exchange, noting that through the expanding areas of focus and through the acquisitions it has completed and will complete, the company is moving “from a narrow partner ecosystem to a world with many new partnerships that expand the ecosystem for VMware.”

To wit, the company introduced its technology partners as the newest members of its new Value Channel program championed by global channel chief Dave O’Callaghan. Under the program Eschenbach said VMware will incent technology partners to invest with VMware in the same ways it has with solution providers and distributors over the last year. While many vendors have technology partners in their partner programs, VMware is somewhat unique in the breadth of technology parnters with which it works. In fact, upwards of 40 per cent of Partner Day attendees were from technology partners, and not traditional channel (distributor and solution provider) organizations.

This story was originally published in Channelbuzz on August 26 at http://www.channelbuzz.ca/2014/08/vmware-adds-10b-expected-tam-10582/

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