VMware users can now get a cumulative volume discount under a new Volume Purchasing Program (VPP) and directly manage their discounts through a new user-facing portal.
Previously, according to a document on VMware's older Purchasing Program, volume discounts were given to end users at the discretion of the VMware distributor and reseller. "The old program was channel-based, and we didn't disclose publicly what the [discount] levels were," said Ryan Knauss, VMware's senior director of pricing and licensing.
Now volume pricing tier information is publicly available: a $25,000 to $59,000 purchase receives a 4% discount; a $60,000 to $99,999 purchase, 6%; a $100,000 to $175,000 purchase, 9%; and purchases of more than $175,000, a 12% discount.
The new system's points don't accrue forever -- after two years, points "roll off" an end-user's total. This approach will also put the user, rather than a channel partner, in control of monitoring the accumulation of points through a new Web-based portal. "It's still a program we execute through the channel, but we're exposing information at a more programmatic level … with new program materials and customer-facing portals," Knauss said.
Volume discounts for the masses -- making VMware stickier in small environments?
Small and medium-sized businesses are most likely to benefit from the new program, Knauss acknowledged. In fact, a comparison with the older purchasing program document shows the new program makes volume discounts available at a lower level ($25,000) than the previous program (whose lowest tier was $50,000).
Large enterprises said the new VPP discount levels left them cold. "The levels of discount that they are talking about are pretty unimpressive," said David Grant, a data center manager for a large telecom.
"Larger enterprises would already have negotiated larger discounts on list prices." Further, the best of the discounts kicks in only at a relatively high level. "It's nice, but with the end-all discount being 12% for $175,000 in new purchases, it's a pretty narrow audience that benefits the most," said Rick Vanover, an IT infrastructure manager at a large Midwestern financial services firm.
Nor will existing VMware deployments benefit much from the new program at first. "It's unlikely to impact us very much, since I made a long-term purchase decision in 2009. We'd need to see significant growth in our business for me to start worrying about additional license purchases," Grant said. "[This program is] probably pitched more at those still hesitating in the shallows of virtualization."
Clearly, this program has the greatest appeal to small shops that are new to VMware, said Gary Chen, an analyst at IDC. "Any discount is good for a customer that isn't on an enterprise license agreement … and ELAs are only a very small percentage of VMware's customer base," Chen said. "This has a lot more impact for most customers."
VMware's Knauss said the main impetus for the program was "opportunities for improvement" in VMware's purchasing process, and he emphasized the new program's goal of simplification. "We want to provide a bit more structure … to help customers around predictability," he said.
The new program leaves less discounting discretion in the hands of VMware partners, but at least one reseller said he doesn't mind. According to Ron Dupler, the president and CEO of GreenPages Inc., "One of VMware's goals has been to simplify operations for partners and customers. … This is simpler and clearer than the old program."
Meanwhile, VMware faces pressure from Microsoft at the low end of the market. This new program also allows for a more gradual (and potentially more pervasive) "start small and grow large" deployment of VMware's products in smaller environments, rather than presenting customers with an immediate choice between a lower initial price and a higher, ongoing volume discount.
"People virtualize in waves: a little here, a little there," Chen said. "The problem is, they've hardly gotten any disount [in the past]. Now [the purchase program] will remember your purchase history, so you don't have to do it all at one time."
Beth Pariseau is a Senior News Writer for SearchServerVirtualization.com. Write to her at email@example.com.