Bad eggs

Last week I attended a successful event staged by one of our key customers, Nebulas Solutions, in London. They recently formed a division called Nebulas Virtualise, which focusses, as you might expect, on virtualisation and related technologies. Nebulas also employ what they call a "Technology Incubator" to help them decide which products should be incorporated into their corporate portfolio of "fully" approved offerings. Essentially, they thoroughly test a specific product themselves, then introduce it to their early adopter type customers and, if all goes well, they transfer it to the mainstream. RES Software, one of the vendors I am responsible for at COMPUTERLINKS, has just been included in this, alongside RTO Software, which many readers might already know of, plus, in the security space, Tufin.

The event was based mainly around delivering Virtual Desktops and was therefore headlined by VMWare. Citrix was also mentioned quite a bit throughout, but of course only in terms of their server-based computing solution and, rather unimaginatively, in the context of what Citrix XenApp CAN'T do. (I must admit it took some self-control not to point out to the VMWare speaker that Citrix have spent the last 2 years telling customers that, yes, of course XenApp is not the ideal solution for every scenario, hence the evolution of XenDesktop to solve some of those problems, but that it is without doubt the lowest cost option. I kept my trap shut...)

What did strike me, however, is that the VMWare pitch around VDI was exactly the same, and I mean almost a carbon copy, of what Citrix are preaching. I don't mean that is a bad thing, quite the opposite actually, with two companies pushing the same messaging, it means the market may grow that much quicker. Which solution a customer ultimately then goes with will be decided by a load of other factors but, if the concept of virtual desktops itself is a quantifiably sound investment, at least my personal future is safe(ish).

So VMWare and Citrix are saying the same thing and, as I heard at the above event, an analyst from Gartner predicted a couple of years back that every single new desktop will be virtualised by the end of 2010 (!), why are they currently the only two companies in the world capable of providing this? OK, OK, I'm sure there are one or two others such as the perennial Ericom, Quest or even Symantec (and probably Microsoft in the future) who will, perhaps justifiably, claim they can do it too, but in all honesty, VMWare and Citrix are the two vendors that immediately spring to most educated minds on the mention of virtual desktops.

So why on earth, and this is actually the main point of this article, are the Citrix and VMWare channels probably the least profitable, in terms of margin retention for distributors and resellers, of just about any software product there is?

Citrix and VMWare develop highly complex infrastructure-level software solutions yet it seems some of the channel are happy to sell licenses at about the same margin levels as they retain on hardware. Any Tom, Dick or Harry can assemble a PC these days, my brother-in-law made one for my parents last Christmas, yet when it comes to revolutionising the way a company actually accesses applications, and therefore, ultimately, how they do business, why are we happy to "knock out" the licenses as though they are PCs? And, added to that, there are only perhaps 3 or 4 companies who can do this! Compare that to the amount of PC makers there are.

The reasons, in my opinion, all boil down to the same thing - bad eggs. I suspect there are many fickle end users, quite happy to let one reseller do all the preparatory work (sometimes free of charge) and then just buy the licenses off the company who eventually submits the lowest bid, often one who has had absolutely nothing to do with the project (so no cost of sale) and probably never will. Secondly, the reseller community adopt the same approach with the distributors and, thirdly, the one or two distributors who let this happen.

In the current economic climate, perhaps some acceptance of pricing pressure is necessary, but it seems to me that there are certain organisations (and believe me, I really wish I could name them here but I'm sure I'd be sued if I did so please Do Not Sue me), who defy any sort of sensible, long-term thinking for the industry as a whole. They are quite happy to offer ridiculous pricing to both resellers and end users who do not deserve it, in the vain hope of meeting this month's revenue target, come hell or high water.

We work in a competitive industry, sure, and I suppose that, in a sense, it's every man for himself when the proverbial hits the fan, but I think we also have a responsibility to ourselves and to our chosen career paths and specific areas of technology, to ensure that some modicum of value remains. Citrix and VMWare are market-leading, "best-of-breed" solutions and are therefore expensive to buy - rightly so. In the same way as Mercedes-Benz and BMW cars are market-leadingly expensive.

Whilst the vendors carry some responsibility to protect their brand and prevent it becoming yet another commodity item, their hands are tied to a point - certainly from a legal point of view, so surely the buck stops with the channel. (On the other hand, don't the vendors have the option to pick and choose which organisations are accepted into their channels?) Please don't think I am advocating a market where price-fixing becomes acceptable, we need only look at British Airways to see the ramifications of that sort of behaviour, all I'm calling for is that the prices charged for those software solutions that a) have a high cost of sale in terms of training, staffing levels, up-front investment etc. and b) provide answers to problems only a handful of companies are skilled enough and experienced enough to do, are fair, appropriate to effort and at a level that ensures everyone's futures.

Currently, I'm afraid, I get the distinct feeling those few bad eggs are spoiling things for all of us, the market is degenerating into a smash n' grab fest and for those of us actually serious about these technologies, the desire to further invest is evaporating quickly.