Rules of engagement: the VCE battle

By Brett Winterford on Sep 19, 2012 3:21 PM
Filed under Hardware

How to live in harmony with shareholders and channel.

In aiming to absorb complexity on behalf of its customers, VCE has itself become a complex vendor.

VCE is a joint venture between VMware, Cisco and EMC. The company ships pre-integrated server, storage and network stacks (vBlocks) direct from factory to customer as an alternative to similar offerings by Oracle/Sun, HP and IBM.

The relative success of VCE during its first three years of operation is hard to gauge. The company does not release its sales figures, and its founding partners each obfuscate expenses and share of profits attributable to VCE in their financial reports.

What can be said for sure is that the company is growing at a steady rate - from 130 staff three years ago to over 1200 today. At this rate, VCE is heading for a scale that could be a genuine concern not only for competitors like IBM and Oracle, but potentially also for VCE’s own shareholders and channel partners.

VCE employs over 70 staff are in the Asia Pacific region. Its main focus has been on Japan and Australia, where the company has chalked up customer wins with the likes of SoftBank Telecom, Fox Sports and SingTel.

Among those hires are several influential Australian IT sales executives, such as former VMware MD Paul Harapin and former Sun Microsystems MD Paul O’Connor. Both have a strong sales pedigree and deep connections in key accounts and the sales channel.

Like VMware, VCE operates as an ‘independent company’, with the largest stakeholder being EMC (58 percent), followed by Cisco (35 percent) and the remainder split between VMware and Intel.

The company reports that over 75 percent of its sales involve channel partners, with EMC and Cisco Systems splitting most of the remainder. VMware, which hires fewer sales staff than its hardware peers, typically plays a supporting role.

So what are the official rules of engagement? How does a VCE sales rep ensure they are not stepping on the toes of an EMC or Cisco rep, let alone their channel partners, when responding to a sales opportunity?

"Our rules of engagement dictate that investor companies and VCE collaborate prior to pitching to an account, as VCE is a joint venture in which all investor companies have a stake," explains Rick Lacroix, director of corporate communications at VCE.

"Our common competition is traditional server vendors, not each other.  By working together, we win deals."

Putting those rules of engagement into practice is not a simple effort. US VARs talking to CRN have complained that this collaborative approach can slow down sales.

Australian VARs told CRN that VCE’s sales staff have no scruples about competing head to head with an EMC or Cisco reseller on an account.

Others say the company should be credited for at least putting together a formal leads management process to keep all parties on-side.

"Often we lead the sale," VCE’s Asia Pacific vice president Paul Harapin told CRN.

"If we’re in the customer, we’ll aggressively drive the value proposition of converged infrastructure. But if the customer want to know thermals of UCS – we’ll put them in touch with a Cisco engineer. And if they have existing agreements with EMC or Cisco, we work with that too - we buy at the customer’s ELA or whatever agreed discount price they had with EMC and Cisco."

"Conversely, if Cisco loads a lead, we work with them, or work with whatever SI partner is leading a deal – be that Accenture, CSC, DiData etc. Everyone gets paid on what they deliver."

The beauty of VCE leading the sale, Harapin said, was that there is "one number to call."

Most of VCE’s staff, he noted, are not former Cisco or EMC sales reps, but those with experience in ‘solutions sales’ or after-sales support. 

"When you’re selling both hardware and software as an integrated system, you need to ensure your support capability is very strong,” he said. “We offer a seamless support offering – when we take a call for the platform – the issue might be VMware, storage, server, network.

"We can resolve it ourselves in most cases, or engage level 3 technicians from member companies. We have access to all of their [EMC, Cisco, VMware) systems, such that the customer gets an extra level of support, but we still take the responsibility to load and manage the problem."

That’s appealing to customers, Harapin says, as too often they have built systems where problems can’t be pinpointed. The storage vendor will assume it’s a network problem, the network vendor blames the server vendor, and so forth.

VCE, by contrast, tests the various patches released by EMC, Cisco and VMware against each other – and against ten major software applications – to ensure they work in harmony before updates reach customers.

"We’re doing the testing so a customer doesn’t have to do it on their own,” Harapin said. “There is no value as a customer in acting as a systems integrator – all they should be focused on is the app store that sits on top of the stack."

Harapin dismisses concerns that VCE’s growth might come at the expense of the partner base of EMC, Cisco and VMware.

"The biggest competitor to VCE is a customer’s own IT organisation," he said. "Many of our biggest customers have a storage group, a server group, a network group. The alternative we offer is to have a system running in your data centre within 45 days. The model of the last 25 years is not necessary anymore."

Usually, Harapin notes, a customer buys a vBlock for a specific project – a virtual desktop rollout, an Exchange or SAP refresh, or moving into a new data centre. VCE subsequently offers ‘fast track’ programs that pre-load this software in the company’s Cork (Ireland) factory before the system is shipped to the customer in Australia.

"If it’s a VMware View deployment, for example, we simply ask them, how many desktops? We take their images, build the system in-factory and ship it on site."

That efficiency does come at a price – customers will typically pay more on the purchase order. But over the 3-5 year lifecycle of the equipment – especially the period that a customer might otherwise have spent acting as a systems integrator – Harapin claims the solution is 50 percent cheaper.

"VMware got us to a point where we can do a lot of this stuff, we were only restricted by the complexity of the underlying infrastructure. Not anymore."

 
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