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VMware CEO Pat Gelsinger probably stated nothing more than the obvious when he told the audience at VMWorld Europe that he expected there to be shift away from perpetual licences to a subscription-based approach over the next few years.
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He pointed out that VMware’s service subscription revenues were up to 9% of its total business and “growing about three times faster than our overall business”.
And the pace of growth was likely to increase even further, he added: “We expect that piece of our business to grow more rapidly going forward,” he told the keynote audience. Within a couple of years, there would be some customers that would probably pay for all their products through the subscription model, Gelsinger predicted.
Should we surprised? Not really. The growth in subscription-based business is to be expected. Given the trajectory of the market, it would be more of a cause for concern if growth in VMware’s subscription businesses was anything less than it is as that would demonstrate that many customers were yet to be persuaded of its relevance in a multi-cloud future.
It’s not just customers, of course, although their enthusiasm for subscription-based licensing is the main driver for its adoption by vendors. The other part of the equation is channel partners. How prepared are they for the shift to cloud and the profound changes in what is sold and how it’s sold?
Very few doubt that partners have a powerful role to play in helping customers with their journey to cloud. In fact, the only people who might doubt it are partners themselves.
While customers are registering varying degrees of enthusiasm for cloud, the process of getting there from where they are now is something that partners should be ideally placed to help them navigate. Just like their customers, many partners are trying to decide what investment they should make in the cloud and many are uncertain about the pace of any migration of their business to the cloud and the scale of it.
Commenting on the issue, Alanzo Blackstock, director, VMware partner organisation, UK and Ireland, observes that partners are “starting to build out their business model to make sure they are still relevant and building out services is going to be a key component”. He believes they have a strong role to play in “supporting customers and enabling them to transition to the cloud”.
The good news for those that have recognised that role and started to advise customers accordingly is that “those services are margin rich so they are more than willing to venture on that path”.
The only quibble is that some of them aren’t going as quickly as they could. “We would like the pace to be sped up,” Blackstock says. “We would like partners to help speed up the journey to cloud for us.”
It’s not easy though. As VMware vice president and general manager for Northern Europe, David Parry-Jones admits, moving to a cloud and subscription-revenue based model “is a tricky road for partners to navigate”.
The majority of partner business is “still from traditional sources – hardware, software and services – and they’re all trying to work out how to get to that new world”. Just like their customers.