Spend Matters welcomes another guest post from Gregg Spivack of NPI, a spend management consultancy focused on eliminating overspending on IT, telecom and shipping.
VMware is everywhere these days. The virtualization giant is competing in a saturated market for its core server virtualization offerings, leading many to wonder if the company’s market share has peaked. Forbes recently explored this issue following an announcement from PayPal that it would drop 80,000 of its VMware servers and replace them with OpenStack’s offerings. Meanwhile, the company is investing in new opportunities in different offering categories, like Big Data and hybrid cloud provisioning.
VMware’s tenacity is one of its biggest strengths in the marketplace and at the negotiation table. Unlike some vendors, VMware’s sales teams are empowered to negotiate well outside of list price licensing and pricing structures. This can be advantageous to those customers who come to the table with a firm understanding of VMware’s licensing policies and pricing intelligence but dangerous for those that that don’t.
Over the last 18 months, VMware has made numerous changes to its pricing and licensing models. Many of these changes are difficult to understand, as evidenced by the tongue-in-cheek commentary from The Register’s Timothy Morgan last fall just as VMware announced its new Enterprise Purchasing Program:
“…the company is rolling out a new enterprise purchasing agreement that will presumably get some grease to the skids and the palms as companies look to install VMware's wares more widely and deeply. We say presumably because as is always the case with any kind of enterprise licensing agreement from any major software vendor, you need a PhD in marketeering and voodoo to sort it all out to see if you will get any kind of deal.”
The complexity of VMware’s changes is just one part of the problem. A larger issue is the fact that most companies don’t have a clear view into their VMware assets. The vendor’s licensing reporting capabilities are lackluster and bring little clarity.
To negotiate effectively, VMware customers need to have a software asset management program in place if they want to avoid overspending. This includes a clear understanding of how many VMware assets are being deployed, how they’re being used across the organization and the contract lifecycle for each. This will give buyers the ammunition they need to secure more favorable pricing, discounts and contract terms, not to mention avoid licensing programs that lead to over-licensing and overspending.
Companies should also benchmark VMware’s pricing and terms. This vendor is renowned for its creative pricing and licensing tactics, which has led to widespread pricing disparities among customers and an intense negotiation environment. Pricing benchmarks are an effective way to push VMware into fair market value range while diffusing negotiation intensity.