VMware partners in Europe say recession still looms

VMware's European partners say cloud is out, VDI is in and the budget-conscious are turning to Microsoft in 2011.

COPENHAGEN, DENMARK -- European businesses are still battling the recession and new IT projects are approved on a must-have rather than a nice-to-have basis, according to attendees of VMworld Europe 2010. There isn't much stomach for risky strategies and cloud computing is perceived as one of them, especially in Europe where IT professionals are more conservative than their US counterparts.

The bundling of hardware with Microsoft enterprise licensing has always been hard to beat.


Justin Owens, managing director at Commtech in Ireland,

That theme sounded loud and clear at the VMworld 2010 show kicking off here this week, with more than 1,500 partners and 6,000 total registered attendees. While cloud dominated the opening keynotes, many IT integrators and resellers in Europe said they are having a different conversation with their customers.

"Cloud is out of scope for most of my clients," said Tino Ehrlich, a senior consultant at Fritz & Macziol, one of the largest system integrators in Germany.

"It's not secure enough for my customers, they want to know where their data is stored and what the encryption is … Nobody in Germany wants their data in Asia or America; they are very conservative," he said.

Achim Enders, sales manager at Fritz & Macziol, said the next step for companies in Germany is virtual desktops, not cloud. He said virtual desktop infrastructure (VDI) is for any organisation, large or small, and every industry. "Size doesn't matter … We're seeing proof-of-concepts everywhere."

Microsoft on the virtualisation rise
Across Europe, resellers and integrators see Microsoft picking up steam in the virtualisation market. "They came down from their high horse and are talking to customers about Hyper-V and customers are interested," Enders said. The recession is making people more cost-conscious and Microsoft's bundled offering is appealing on that level, according to VARs attending the show.

Justin Owens, managing director at Commtech in Ireland, echoed these sentiments. "People care about Microsoft coming in and selling BPOS at forty quid a seat," he said. "That's taking off."

BPOS, or Business Productivity Online Services, is Microsoft Exchange, SharePoint, Office Communications and Office Live Meeting delivered as a subscription service over the Internet.

Owens said that there was some interest in private cloud amongst very big corporates, but that was about it. Commtech has sold several vBlock systems from the VCE Coalition to large organisations, including Belfast Trust and the University of Ulster in Ireland.

In general, Owens said it's hard to move customers past the 30% virtualised mark. "It was easy to consolidate servers, the return on investment (ROI) was very compelling, but getting to 100% virtualised is very hard; the risks are greater," he said.

He also sees Microsoft making strides into VMware's territory: "The bundling of hardware with Microsoft enterprise licensing has always been hard to beat."

In Switzerland, the interest in cloud services is virtually nil, according to Daniele Palazzo, senior IT consultant at Lake Solutions AG. "The Swiss people have privacy and security burned into the brain, they don't want to give out their information to anyone," he said. Meanwhile, he said, there's plenty of server consolidation happening, and 2011 is expected to be an important year for VDI.

Light at the end of the cloud?
Belgacom, the incumbent telecom operator in Belgium, has implemented VMware vCloud Director and is pushing Infrastructure as a Service (IaaS) to its largest customers. It has about 10,000 hosting customers; a hundred of these are running on virtual platforms today, and just one, an IT company, is ready to move a production environment onto vCloud.

Djamila Ghoundiwal, senior product manager of hosting and virtualisation at Belgacom, said that before customers will adopt cloud services, "they need to be convinced they won't lose their job, that it's a transfer of skills; they need a good service-level agreement and a competitive price." She added that Belgacom is looking at tools from HP to help with automation and provisioning of these services.

Cloud is out of scope for most of my clients.


Tino Ehrlich, senior consultant at Fritz & Macziol,

Despite all the economic doom and gloom, Maurizio Carli, VMware's senior vice president for EMEA, said its European revenue grew 41% for the first half of 2010, versus the total software industry which is growing at 3% annually.

"GDP in Europe is 1% and governments are putting a lot of pressure on businesses with higher taxation to cover the national debt," he said. With 95% of its revenue in Europe coming from partners, Carli said VMware is more commited than ever to supporting its partners through this recession.

VMworld Europe comes a week before VMware's third-quarter earnings, where expectations about its ability to grow as fast it has are high. Industry watchers said that VMware will eventually face the law of big numbers and be unable to grow at the rate it has due to its size. VMware's Q1 2010 revenues were $634 million, a 35% increase year-over-year. Its Q2 2010 revenues were $674 million, a 48% year-over-year jump. All eyes are on its earnings announcement next week.

Check out all of our VMworld Europe 2010 conference coverage here.

Jo Maitland is the Executive Editor for SearchVirtualDataCentre.co.UK. Contact her at [email protected].

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