VMware Gets Away from Legacy Partner Compensation Models

VMWARE VMWORLD — As traditional resale fades away, so too must legacy partner compensation models. The modern era of cloud capabilities demands it. But more vendors still need to get on board with shifting away from volume discounts and other hardware-centric reimbursement; indeed, many continue to operate on this basis even though they have turned more into cloud suppliers.

This week, it became clear that VMware ranks among the first of the large hardware-turned-software providers to take a more updated approach to paying its partners differently. The changes come as the vendor emphasizes its new multicloud portfolio and capabilities.

Since March, VMware has been working on new Customer Lifecycle incentives tied to its cloud platforms. The company shared those updates with Channel Futures this week. And VMware isn’t necessarily asking the channel to sell specific solutions. Rather, the industry stalwart is viewing organizations as potential VMware users for life. With that ethos in mind, the company is pushing its managed service providers, cloud service providers, system integrators and VARs to craft cloud platforms (since that’s VMware’s focus now) that enable business outcomes — not that just meet a technology requirement. Along the way, VMware will reward partners on a more regular cadence, instead of a one time post-sale.

VMware’s Sandy Hogan

“Everything you’re going to see is influence, deploy, consume,” said Sandy Hogan, senior vice president of partner and commercial sales at VMware. “We’re enabling and incentivizing partners at all points of the life cycle.”

The idea isn’t new. Indeed, Channel Futures spoke just a few weeks ago with another cloud provider eyeing the same changes VMware is making. However, channel compensation models that better reflect cloud’s recurring and constantly evolving demand have yet to represent the industry norm. That stands to change soon enough. After all, COVID-19 fast-tracked organizations’ cloud adoption; that momentum promises to trickle down to partner compensation changes, which arguably are overdue.

“We’re focusing on the value partners bring,” said Tracy-Ann Palmer, vice president of partner experience at VMware.

‘Partners Are Ahead of Us’

Of interest is that VMware channel partners actually guided much of the development of the phased compensation model. That’s because partners themselves were forced to accelerate their own strategies to better help customers amid the pandemic, Hogan said.

“Our partners are ahead of us in many respects,” she said.

Palmer agreed. A number of partners told VMware this year they already were conducting proofs of concept, technology assessments, full deployments and other activities for which the vendor now will reward its channel experts.

“It’s just that we weren’t doing it with them,” she said. “So now there’s a commitment from VMware that we are with them on this journey.”

Added Hogan, “It’s all about the push-pull and how we do it together.”

That push-pull has VMware gravitating toward a value mindset, one that prioritizes facilitating business outcomes. In fact, Hogan predicts a whole different set of sales goals.

“Eventually it’ll be outcome as a service, not the technology itself,” she said. “That’s really what we’re aiming to build.”

Over the next six months and beyond, look for VMware to back that statement with new competencies. These will revolve around partner capabilities and use cases, not so much technology itself. These certifications will “really take our ‘customer for life’ definition to the next level,” Hogan said.

VMware continues to create those competencies, so Hogan could not go into detail. Topic areas, though, could revolve around disaster recovery as a service or retail enablement, as two examples. Regardless, when the big reveal does arrive, VMware channel firms probably won’t find any surprises.

“Partners have been at the heart of helping us craft our strategy versus just being a recipient of it,” Hogan said. “We have been thriving on the partner feedback.”

One area where the channel may soon see adjustment is in licensing. End users want flexibility, Hogan said, and partners need a simpler contracting process.

“It’s all about being customer-first, partner-led at VMware,” Hogan said.

Factors Fueling Compensation-Model Changes

Overall, Hogan said at a VMworld press gathering on Wednesday, organizations need help dealing with the complexity of technology evolution, especially during times of crisis. All this, she said, “puts our partners squarely at the center of the opportunity to truly lead our customers through this transformational journey.”

“Everything is about ‘with’ the customer,” Hogan said. “We’re all in an age now where it’s not technology for technology’s sake, and that is the unique opportunity with multicloud. Our focus is enabling partners as fast as possible … Our job is to enable, keep up the pace and ensure we’re providing everything that’s needed so, frankly, we don’t get in the way. We are accelerating.”

Palmer concurred.

VMware’s Tracy-Ann Palmer

“It’s a long game. Multicloud will be a reality for years to come,” she said.

Succeeding in that environment means partners must capitalize on their unique differentiators, Palmer advised. And when they encounter an area where they don’t specialize, they should turn to peers for help.

“Be open to the broader partner ecosystem,” she said.

No one can sell or deliver everything on their own, she added. Yet, “together, if we have that customer obsession, we can ultimately deliver that customer-for-life value in this multicloud world.”