A wise man once said in a meeting:
If you want to see how indispensable you are, stick your finger in a glass of water and measure the size of the hole left when you pull it back out.
This week I’ve been reflecting a lot on that statement given the radical licensing changes that have originated out of VMware for vSphere 5.
I want to reflect on the background to the “are they right or are they wrong” argument here – I think every business is entitled to make a fair and reasonable profit. I also say this as an outsider – my area of interest remains backup and recovery, not virtualisation. In short, for me, virtualisation is a tool, a means to an end – it’s a butler, not the work.
So I think I can look at this as someone who is exposed to the business of virtualisation, but isn’t directly bound by it.
For any company that sells software rather than hardware, there are going to be times when licensing is re-evaluated and new cost models are developed. NetWorker for years had a licensing model that was growing in complexity. Over the last few years EMC has been working at simplifying that, with the most recent change being the capacity licensing. This hasn’t been a big hit because it’s more aimed at people who can’t quite step up to the enterprise license, rather than the average business, but it’s still a step in the right direction, and a portent of things to come.
VMware has clearly hit the point where they’re having to say to the market, “the way we’ve previously been pricing this is no longer sustainable”.
As has been so often the case within the IT industry over the past 20 years, pricing has raced to the bottom, and once it’s hit the bottom, there’s a need for an adjustment. I do partly blame Microsoft on this front – they’re renown for dropping their pricing pants in order to smack around the competition. That’s not a healthy business model.
Much is premised around a false sense of entitlement. “Someone produces X so I should get X for as cheap a price as possible”. It’s the logic of the IT industry, it seems. Yet let’s look at say, the car industry as a comparison. That business model – “get customers by giving it to them as cheap as possible” almost wiped out the US car industry. It was reported, for instance, that between the rebates and the discounts on offer by 2008, some US car companies were losing up to $500 per vehicle sold.
Selling volume at discount is fine.
Selling volume at loss isn’t.
VMware are by no means indispensable in the IT industry. The pricing model change will undoubtedly drive some companies to consider the alternatives out there – Hypervisor, Xen and Parallels, for instance.
But I think we, as an industry, have to take some responsibility here – we have to accept our part that this is a mea culpa of sorts: we’ve allowed the “race to the bottom” pricing model to become too pervasive, and are now getting to reap the rewards of that.
