Hewlett Packard Enterprise Thursday announced VM Essentials standalone as a global offering with a no-holds barred “channel only” go-to-market model backed up by a 10.5 percent rebate.
“We wanted to demonstrate our commitment to partners and therefore we made a decision that HPE VM Essentials standalone will be channel-only,” said HPE Worldwide Channel and Partner Ecosystem Leader Simon Ewington (pictured) in an interview with CRN. “The message that we want our partners to understand is that we are all in with partners on HPE VM Essentials…That is pretty unique in the industry. Most of the virtualization solutions in the market have a split route to market between direct and partners.”
The channel-only HPE sales model is, indeed, in sharp contrast to the channel strategy taken by Broadcom in the wake of its acquisition of longtime virtualization market leader VMware in November 2023.
After the deal was closed, VMware took the top 2,000 accounts direct, terminated partner agreements and invited select partners to rejoin the channel program, reduced the product portfolio and initiated a new per-core processor pricing model that resulted in sharp price increases for many customers.
HPE has responded to partner and customer cries for an alternative with the new HPE VM Essentials standalone offering that are supported on HPE’s new ProLiant Gen12 servers and Gen11 servers.
VM Essentials is not preinstalled on those servers, but is available for partners to quote and to be installed on those systems. The software was available to be downloaded in the U.S. in December but is now available worldwide as a term-based software license for one year, three year and five year terms.
HPE also has put in place a road map to offer VM Essentials standalone on competing third-party servers.
HPE sees a “big opportunity” in the enterprise market and below, said Ewington. “Partners are screaming out for choice to provide their customers with virtualization solutions from a credible vendor in the market they know is going to be around tomorrow,” he said.
IDC, the global market research company, estimates the virtualization market as a $4 billion market. “We want our partners working with HPE to take a piece of that market with us,” Ewington said.
“What we are saying to partners is when you work with HPE VM Essentials standalone you know it’s going to be channel-only because channel only means it is only through partners,” said Ewington.
HPE Goes All In On Partner Incentives To Drive HPE VM Essentials
The 10.5 percent rebate HPE is offering to partners selling HPE VM Essentials is just one part of the lucrative opportunity HPE is bringing to partners, said Ewington.
The bigger opportunity is for partners to take advantage of the HPE Partner Ready Vantage channel program in order to “wrap their own services” around VM Essentials with a focus on areas like VMware migration services for customers.
”That’s the bigger opportunity,” said Ewington. “That’s the opportunity partners are most excited about…They are going to make huge amounts of margin out of some of those migration services.”
Beyond the rebate structure, HPE has put VM Essentials at the highest 3X compensation multiplier for partners under the HPE channel program.
All that said, Ewington stressed that the biggest issue for partners goes beyond the incentives being offered by HPE. “The first question we get asked by partners is not what’s the rebate?” he said. “They just want to know they have got a credible alternative in the market that they can offer to their customers. They are desperate for choice.”
HPE Vice President of Worldwide Partner Programs and Operations Jesse Chavez, for his part, said partners normally see a 5x services opportunity for every dollar of licensing sold.
HPE made the decision to go all in with a channel-only model for HPE VM Essentials because of the “huge excitement” surrounding the product, said Ewington.
“I think it demonstrates when partners talk, we listen to them and we deliver,” Ewington said. “I am expecting this to magnify the excitement in the partner community. I think what we are doing is quite unique. We are entering a new market for HPE, an incredibly exciting market. Partners and customers are after alternatives and choice and we are making a decision to make that alternative channel only. I would expect it is going to drive a lot of excitement and interest across the partner community – not just traditional HPE partners.”
A Compelling Total Cost of Ownership For Customers
The per-core pricing model put in place by Broadcom is in sharp contrast to the per-server pricing model for HPE VM Essentials.
In fact, Ewington said, the per-socket pricing model put in place by HPE for VM Essentials is driving a whopping five times lower total cost of ownership.
With virtualization solutions in general taking a larger slice of the IT budget, customers and partners are looking for “innovative ways” to reduce those costs, said Ewington. “I think it’s really applicable across all virtualization vendors” he said.
Pat O’Dell, managing partner at Clinton, N.J.-based CPP Associates, one of HPE’s top enterprise partners, said with the per-core pricing model put in place by Broadcom, a typical CPP customer with 16 core dual socket servers now is being charged as much as $4,800 per system for VMware Enterprise Plus licensing – a whopping 400 percent price increase versus approximately $1,200 per server for the same server for HPE VM Essentials, said O’Dell. “When the price discrepancy becomes so large you have to pay attention,” he said.
Ewington, for his part, said he sees the opportunity for partners to serve customers under cost pressure. “Which customers are not under cost-pressure these days?” he asked.