BMC and VCE Partnership Shows Consortium Is Gaining Power

Is there strength in numbers? The deal VCE recently struck with BMC suggests that a consortium of companies layering in best-in-class technology might be a more effective approach to win large-scale government and enterprise customers in the private cloud space, writes CIO.com's Rob Enderle.

By Rob Enderle
Fri, February 03, 2012

CIOVCE (Virtual Computing Environment) is a showcase for a new kind of company, one that is made up of a series of partners yet has its own identity and CEO in order to drive an independent agenda.

This week, BMC became the latest addition to the solution set, and while the relationship is similar to a typical partnership between traditional companies, it further validates the VCE model, which could become a template for other vendors courting enterprise and government clients in the rapidly expanding private cloud segment.

Let's explore VCE as a successful template for pursuing large enterprise and government customers.

The Very Large Enterprise/Government Problem

For most companies, at the core of building a unit that services very large customers is both the unique nature of every deal and the inability to manage pricing and contracts at this scale. We've certainly seen Google struggle in Los Angeles with one of its first attempts. Even IBM has distanced itself from government business in the past due to its cost, complexity and high degree of exposure.

Large government is especially challenging because it comes with a massive amount of unique requirements concerning domestic content, labor practices and favorable pricing strictures. This last point can be among the most problematic because each deal tends to be unique, making it nearly impossible to reach agreement on a comparable price. This can subject the deal to different interpretations, potentially leading to huge fines, depending on the outcome.

In addition, the deployments themselves tend to be incredibly resource-intensive. As a result, critical resources are at times pulled from other teams or parts of the business. Further, the company-wide demand that can put the projects in flux can jeopardize timely completion, an unhappy prospect given the substantial penalties firms can accrue when they fail to meet critical milestones.

And finally, because of the uniquely large scale of the client, solutions generally can't be contained within one company's product set, forcing unique one-off partnerships where the project leadership is learning aspects of the solution during deployment.

How VCE Began

VCE was born as a partnership among three enterprise-class vendors to go after very large enterprise and government accounts: Cisco, EMC and VMware. Michael Capellas, a practiced CEO of large-scale enterprise (Compaq, WorldCom) and seasoned hand at mergers (HP, Verizon), was called on to lead the effort. Intel joined the team later as a major funding partner and the core processor technology under the endeavor.

It is an interesting side note that in the contentious HP/Compaq merger it was Capellas who swung the major investors behind the deal and it was likely Carly Fiorina's fear that he would eventually displace her (as he had Benjamin Rosen at Compaq, due to his stronger operations skills) at HP that eventually forced him out and into WorldCom. HP was then forced to replace Fiorina with Mark Hurd, who had a skill set similar to Capellas, suggesting that ushering out Capellas only delayed Fiorina's departure, and HP then had to deal with the unique problems associated with Hurd's reign. Had Capellas stayed, much of HP's recent pain could well have been avoided.

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