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VMware pricing draws large enterprises' ire

When it comes to pricing, VMware acts like it's "the only one," says an enterprise customer. Oh, wait; it is the only one -- for now.

VMware Inc.'s virtualization technology gets great reviews, but for enterprise customers, the company's business practices leave a lot to be desired, said the director of server architecture and planning at a global managed service provider.

For more on VMware and pricing/licensing issues:
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About a year ago, the IT director began an x86 server consolidation project and already has about 500 virtual machines (VMs) across 60 VMware ESX Server hosts in five global data center locations, out of a total 3,500 x86 servers. By the end of 2008, he plans to reach 1,000 server VMs. In addition, the firm has about 50,000 desktops worldwide and is actively considering Virtual Desktop Infrastructure (VDI) for the future.

VMware: First-class technology, but not an island
But the IT director, who is prohibited from speaking to the press, has serious compunctions about doing business with VMware. "I really like the technology, but there are just some things about the company that drive me nuts," he said.

For one thing, "they act like Oracle did in the 1990s -- like they're the only ones," adding that "they're still totally predatory on their pricing."
You'd think that if you sign a deal to spend a couple million bucks over the next two years, you'd get a discount.
The IT director of server architecture and planning at a managed service provider, a VMware enterprise customer,

His company has spent several hundreds of thousands of dollars with VMware and recently inked an enterprise license agreement (ELA) without seeing any savings from buying ESX licenses individually. "You'd think that if you sign a deal to spend a couple million bucks over the next two years, you'd get a discount," he grumbled. But that hasn't been the case. In fact, he continues to receive better price quotes from value-added resellers (VARs) than he does by going directly to VMware.

Part of that may be VMware's relative newness to the enterprise software game. After going through the ELA negotiating process with VMware, "I got the impression that they haven't written too many of these things," he said, citing difficulties with seemingly simple problems, like getting existing "onesie, twosie" licenses the firm had purchased to expire co-terminously. "It's been a struggle to get them to do this." The way VMware models its direct sales organization is another bone of contention. Unlike other large vendors like Hewlett-Packard Co. and EMC Corp., which provide the source with a single representative for the entire company, multiple VMware reps all serve this company, assigned according to geography, and fight one another for the company's business.

"I just want a single point of contact at VMware," he said plaintively.

With the lack of mature virtualization alternatives on the market, the source said he is comfortable signing a two-year ELA, but no longer. In the next three or four years, other players may emerge with credible enterprise stories. "As soon as the critical point hits, people are going to switch [to other virtualization vendors] if they continue treating people this way."

These kinds of complaints are not unusual for large organizations, said John Enck, research vice president at Stamford, Conn.-based research firm Gartner Inc. Enck said that among Gartner's enterprise clients, pricing is the No. 1 complaint he fields about VMware.

"They're very hard to negotiate with," Enck said. "Customers don't feel they're getting the recognition they deserve for making a long-term commitment."

The best deal VMware typically extends customers is a two-year enterprise license agreement, which extends out over the time of the Microsoft Hyper-V launch, Enck said. Microsoft's entry in to the market, however, will probably force VMware to lower its pricing, which could spawn further resentment on behalf of customers locked into unfavorable enterprise license agreements.

"We feel that VMware may be setting itself up for a second wave of dissatisfaction," Enck said.

Let us know what you think about the story; email Alex Barrett, News Director.

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