In-Depth

Piecing Together Your Virtualization Model

Rapid growth in virtual technology means partners with the right business plan can reap serious profits.

• By Keith Ward
• February 01, 2009

None of that, of course, is good news for the IT industry, and it's especially worrisome for the channel. When money's tight, the emphasis turns to profitability through cost-cutting rather than expansion, with projects that had been green-lighted suddenly being put on hold. But there's a small ray of sunshine piercing this bleak scenario. It's called virtualization.

This technology, which breaks the traditional dependencies between hardware and software, saves money and increases efficiencies, allowing IT departments to do more with less-which may be a clichŽ, but, in this case, it's one that happens to be true. Most companies dip their toes in the virtual pool by consolidating a few servers in their data centers. Once administrators see the resulting cost savings-which are nearly immediate-they start wanting to learn about what else virtualization can do for them.

For channel partners, virtualization offers the chance to tap into a new, still-evolving market. It's a true ground-floor opportunity, one with strong profit potential-even during a recession.

The Front Door: Server Consolidation
The starting point for most partners selling virtualization is hardware virtualization, also known as server consolidation. Combining multiple applications onto fewer physical boxes generates swift return on investment. "In terms of revenue dollars, server consolidation is still the primary virtualization play," says Bill Nemesi, vice president of Mainline Information Systems Inc. of Tallahassee, Fla.

The benefits of server consolidation are well enough known that even in the current economic environment-or because of it-those jobs aren't a tough sell. "It's become rather routine to talk about server consolidation and what servers to consolidate," says Nemesi, whose company is an IBM channel partner and also a major partner of VMware Inc., the leading virtualization company.

Server consolidation is earning the same reputation globally. "It's very easy selling," says Ruben Spruijt, an architect for PQR B.V., a Gold Certified Partner based in De Meern, the Netherlands. In fact, consolidation is a part of every virtualization implementation that Spruijt's company does, and he estimates that 90 percent of his customers are aware of consolidation before they contact PQR.

Getting a foot in the door through server consolidation is the real key to profitability with virtualization. Once that's done, the technology's other benefits typically swing that door wide open.

"The neatest thing about virtualization for a system integrator, VAR or other [channel partner] is it opens this Pandora's Box of other things we need to talk about," says Tom Zorn, vice president of Alternative Technology Inc., a Gold Certified Partner and VMware specialty distributor. "That's really good, because it allows that VAR or that solution provider or system integrator or whatever to have all these conversations, and at a higher level in the corporation than we may have had earlier."

Next Up: Desktop Virtualization
Of those areas, desktop virtualization looks like it could be the next big one. Mainline has been doing desktop virtualization (also known as virtual desktop infrastructure, or VDI, and hosted desktops) longer than most competitors-at this writing, about two years. "We have more and more consulting engagements and proof-of-concept [deployments] with desktop virtualization, so we're very confident that it's beginning to ramp up substantially," Nemesi says.

Desktop virtualization is significantly more complex than server consolidation and can be more expensive up front. But the growth potential is greater for desktops simply because there's a much larger market for end-user computers such as desktops and laptops. That's why large vendors like VMware and Citrix Systems Inc. are spending a lot of effort developing their desktop virtualization solutions. VMware calls its VDI infrastructure "VMware View," while Citrix's implementation is called XenDesktop. Currently, they lead the desktop virtualization space.

"We're getting a lot more calls [about VDI], and we think that the solution ecosystem has really caught up with what was needed. The ecosystem and solution have started to come together, and we think it's going to be an attractive 2009 play," says Nemesi.

In fact, desktop virtualization today is much like server consolidation was in the recent past-companies are just starting to hear about it and put in some test projects to see what it can do. Tom Flink, vice president of channels and emerging product sales for Fort Lauderdale, Fla.-based Citrix, says the recent increase in coverage of desktop virtualization gives partners a new opportunity. "It allows you to take advantage of the market awareness around virtual desktop," he says. "[Partners need to ask] 'what gets me in door to talk to customers?' It's virtual desktop."

Once that first virtualization project is running, other opportunities present themselves, says Zorn, of Alternative Technologies. "They start down that path [of server consolidation] and then they begin looking at all kinds of things like pushing applications out in a virtual desktop environment from the data center. So now all of a sudden, you're not out there trying to service 500 PCs or 5,000 PCs," he says. Instead, you're getting companies "to re-evaluate the total concept" of how they do IT.

Be forewarned, though, that it's usually harder to close a desktop virtualization sale, primarily because you're dealing with more people. "In desktop virtualization, you have more customer departments involved," says Nemesi. "It's not just a data center play like server consolidation. End users are impacted, and desktop support, and networking, so there are a lot more groups that are involved. It's definitely a longer sales cycle."

But the payoff can be worth the wait. Raj Mallempati, a group product manager at VMware, says that selling VMware View licenses is just the beginning of the channel-partner opportunity. "For every dollar that you sell of VMware View licenses, we expect that three to four times that [profit can be made] in hardware," Mallempati says. "It comes from additional servers needed to run the desktop virtualization component."

PQR's Spruijt agrees that the desktop virtualization market is currently small but poised for big growth. He says his company is beginning to do a lot of projects in both application virtualization and virtual desktop infrastructure. "VDI is a niche," he says. "We have about 10 customers using VDI in proof-of-concept and in production environments." The split, he says, is about 50-50 in terms of VMware and Citrix implementations. He says he's getting more and more calls these days about desktop virtualization-a trend that he expects to continue.

Also on Deck: Storage Virtualization
All those efforts in server consolidation and desktop virtualization lead to the need for more storage space and storage virtualization. That, in turn, leads to the necessity of beefing up business continuity and backup/disaster recovery.

Says Zorn: "You can't talk virtualization without understanding storage. And if you're talking storage, we might as well talk business continuity and disaster recovery. Early on, we may have skipped over the storage ramifications of putting in virtual servers. Then VARs all of a sudden had to go back to the end user and say 'Oh, now you need X amount of storage.'"

That's exactly the way it happens for Idealstor, a storage company that makes both hardware and software for virtualization. It just released a new virtualization product specifically for VMware environments. "All of a sudden, [customers] realize 'I've got five servers running on this one physical box, and I know when I run my backup at night it puts a lot of load on those individual [backup] servers,'" says Ben Ginster, channel marketing manager for the Gaithersburg, Md.-based company, a Certified Partner.

"So now, when they have five jobs running on one physical box, they realize that it crushes the performance of their physical servers," Ginster says, still speaking about customers. "Now that they have many servers running on one [physical server], there's got to be a better way to back up their data. That kind of happens after the fact."

For Mainline, disaster recovery currently isn't a major focus, but Nemesi says that's already changing. "We have more engagements" in that area, he says. "Customers are becoming increasingly concerned with disaster recovery."

Plenty of Partner Opportunity
As areas such as server consolidation, desktop virtualization, backup and disaster recovery continue to expand, the need for channel partners with consulting expertise and service and support offerings will continue growing as well. In fact, the major players in this space believe that there's more potential profit in service and consulting than in selling products.

Zane Adam, Microsoft's senior director for virtualization strategy, can sum up what he's hearing from Redmond's army of channel partners in a single word: Solutions. "Customers know they need to start saving money," he says. "They're trying to reduce costs, and they know virtualization is a key part of that. They know they need to have good planning. Now they're asking, 'Help me virtualize.'"

And it's not only the enterprises, Adams says. "Medium and small businesses are looking to virtualize, and looking to partners to help-not just to sell virtualization, but [to provide] solutions."

Citrix's Flink also sees the potential for the channel in services. "A huge percentage of the money a partner can make can be driven by services," he says bluntly. He offers the following suggestions for how partners can carve out a slice of that pie: "They need to be building repeatable, refinable assessment services and working with the customer hand-in-hand in virtualization, in either the data center or the desktop," he says. "If they're not taking advantage of the opportunity to get in early and help customers understand their [virtualization] needs, they're leaving money on the table." And he, too, emphasizes the need for a solution-provider approach: "If they start talking product at the beginning, they're not going to be successful" in selling virtualization, he warns.

The Big Boys
It's also important to understand who the dominant vendors are so that staff can be up to speed on the various platforms. For companies already using virtualization, one company is the clear leader-VMware. Most larger IT shops are using VMware, and that's also the platform for which most ISVs develop first. Coming in second and third, respectively, are Microsoft and Citrix. There are also a number of companies making inroads, including Virtual Iron Software Inc., Sun Microsystems Inc., Red Hat Inc., Novell Inc., Hewlett-Packard Co., IBM Corp., Oracle Corp. and others.

Mainline, while it gets some questions about other vendors, still builds its virtualization business around VMware and doesn't yet sell Microsoft virtualization solutions. "We don't feel like Microsoft is there yet," Nemesi explains. "I know they have products, but before customers start implementing Microsoft virtualization, I think [they're] going to have to prove themselves a little bit more." Customers often ask about Hyper-V and other Microsoft virtualization products because they see that they're free, Nemesi says, adding: "But when they see what they get with it and need to add to that, the VMware story improves dramatically."

That may be, but competition from Microsoft, Citrix and others has helped make virtualization more affordable. As Adam, of Microsoft, points out: "The cost of virtualization has gone down because of our entry into the market." Microsoft and Citrix also emphasize how well their virtualization products interoperate, a critical factor in a heterogeneous data center.

Seeing Green (The Old-Fashioned Kind)
In selling any virtualization solution, or combination of solutions, it's more important now than ever to help customers see the potential ROI and total cost of ownership benefits.

"The first thing end users look at is 'What's the total effect on my bottom line?'" in terms of both capital expenditures and operating expenditures, Zorn says. Obviously, customers may have to shell out for virtualization on the front end-but they're likely to see reduced operating expenditures over a number of years as a result.

In fact, that's happening already, Zorn says: "In server consolidation, without a doubt, customers have received the benefits they expected and, in many cases, have exceeded those benefits."

That's good news for channel executives, some of whom report reaping benefits of their own. In fact, Ginster says the recession hasn't harmed his company. "To be honest, our business has never been better," he says. "Our business continues to grow, our activity domestic and abroad continues to increase and our sales are increasing."

PQR also reports strong growth despite the downturn. "It's not really hitting hard in our market because the virtualization solution is all about cost savings and doing more with less. That's really helpful in times like these," Spruijt says. "We should survive this crisis."

Edward L. Haletky, an IT consultant and author who works primarily with VMware technologies, believes that partners should now pursue small and midsize businesses (SMBs) in this climate. "SMBs are now grabbing onto virtualization," says Haletky, owner of AstroArch Consulting Inc. Traditionally, "mom-and-pop" stores and small medical practices and law firms are among the last to invest in new technologies, but even they're starting to look at virtualization as a path to cutting costs. "For a small business, saving $10 per month on electricity can be a godsend," Haletky notes.

Bottom line: If you're not already into virtualization, consider getting in soon-and plan to stay with it for the long haul. As Nemesi notes: "I think there's going to be a lot of work in the virtualization space for the foreseeable future."