There comes a time when a company needs to move from direct to mostly indirect or channel sales. For VMware, that time is about now.
The VMware sales force is the single most costly line item on its operating statement. Moving this line item from VMware to the existing channel reduces all the expense losing little of the revenue.
The first question is whether the VMware sales force actually sells anything. Here, there is a lot of room for dispute. There is a strong case that VMware sales reps are the software equivalent of a Cheesecake Factory waitperson. They are not there to sell anything.
They exist to explain a complex menu to hungry customers who are going to buy one way or another.
VMware core salespeople sell to customers who own VMware’s basic products. Everyone, or almost everyone, uses the VMware virtualization. Why is there a need for more selling there? Give that to the VAR community and eliminate the costs.
VMware sales types are basically order takers. Such an order taker gets a 6-figure salary, an office, expense account and a commission for taking an order that would have been placed with or without their help.
Order takers do not add value; they consume capital.
Some VMware products do require a sales force. Unfortunately, they require something quite different from the mindless, wildly overpaid “core reps” who get a list of accounts that determines their success rather than the opposite.
A VMware rep we know regularly made more than the world’s top brain surgeon. That lasted 3 or 4 years. Then his account list changed and he made a little more than a base salary.
Because at legacy software companies like VMware, Oracle, SAP and scores of others, the sales person is just there to take an order, meet with the customer regularly to do a forecast and have someone to call. If they have great accounts who buy stuff, they get cool plastic awards and go on trips. If their customer has a pause, they starve. Actually, they don’t miss a meal because they do have those 6-figure salaries.
The VMware core rep has zero ability to be a “trusted advisor” to a C level exec at a pretty big company.
VMware is essentially plumbing software used in the bowels of the IT department by people who work in cubicles and eat way too many carbos. If you visit a Fortune 500 company IT shop you will see the VMware logo-wear and awards around many of those cubicles.
A VMware core rep is more likely to see a CIO in the annual report than in a face to face meeting. In some recent chats with VMware types, they laughed that the few times they actually got a CIO level call, they had to bring their manager, a tech manager, a tech, maybe a major account rep.
The result was that the CIO spent more time finding chairs than discussing his or her “strategic needs.”
Let’s not pick on VMware. After all, they are now part of Dell, a company that has failed to see every new tech market for a generation. Dell missed the phone, the tablet, the cloud, the wearable and now, they are missing the edge, which is going to be more of a disruptor than an opportunity.
Now that Dell owns pretty much all of VMware (80%), they seem to be realizing that the massively overpaid VMware sales force might just be the next pile of cash for them to suck in and use for their financial projects.
That may be a very good thing for Dell investors. The VMware sales force should be a fraction of what it is today and those remaining should be the very few who actually know how to sell a complex product to an executive.
Surely the existing VMware sales force is not a hunting ground for those skills.
We are told the only CIO level product VMware ever tried was its Apptio equivalent, a piece of financial software that told the CIO her cost of compute for every app.
The core VMware sales reps were, we were told, so unable to handle a product that did not have a 90-day sales cycle that VMware sold the product to a private equity firm a couple of years after they bought it.
Today, in the hands of a quite competent C-level selling force, that IT-costing product is doing remarkably well.
The days of VMware virtualization driving growth are pretty much over. Now VMware has to compete in a far more complex environment of the micro service, containerized app that may not even need a virtual environment.
That means they are going to have to call on people who have many very different buying choices. This is new ground for VMware core reps where companies pretty much HAD to buy their virtualization.
This also requires a rep who can traverse an organization, work their way up the chain, bring a value add point of view. VMware core reps are almost universally unable to sell against a prevailing wind. They have never had to compete head-to-head with other reps who had products that appeared on the buyer’s menu.
The recently acquired Pivotal sales force will not help much as so many of them are just VMware retreads. Pivotal itself saw a 50% haircut in its stock price after it continually failed to make its numbers.
Dell seems to realize this and recently started cutting back on the Pivotal people.
Going forward, VMware should focus, as much as Dell will let it, on developing a cadre of great, talented sales teams who know how to sell in a very competitive environment. The existing core reps should slowly be transitioned to the VAR community where they can call on existing accounts, deal in a non-competitive environment and be home by 5:00 for soccer practice and get lots of plastic trophies.
While Dell is not much of a technology company, it is known for excellent cost cutting. Maybe Dell will eliminate these massive selling costs and find a way to move them into the VAR channel.