VMware 2010 Annual Report Download - page 11

Table of Contents
We offer several levels of membership in our VPN depending on a reseller’s interest and capability of providing demand generation,
fulfillment, service delivery, and education to customers and prospects. We also have certain resellers, as well as systems integrators, who obtain
software licenses and software support directly from VMware. The VPN agreements signed by the resellers carry no obligation to purchase or
sell VMware products and can be terminated at any time by either party.
We have a direct sales force that complements our channel partners’ efforts. Our sales force works with our channel partners to introduce
them to end-user customer accounts and new sales opportunities.
In addition, our channel partner network includes certain systems integrators and resellers trained and certified to deliver consulting
services and solutions leveraging VMware products.
We generally do not have long-term contracts or minimum purchase commitments with our distributors, resellers, system vendors and
systems integrators, and our contracts with these channel partners do not prohibit them from offering products or services that compete with
ours.
We primarily sell our software under perpetual licenses, and our sales contracts generally require end-user customers to purchase
maintenance for the first year. Maintenance periods typically range from one to five years. Customers often purchase additional licenses when
their initial maintenance period expires and renewals have typically been equal to or longer than the initial maintenance period. Software
maintenance and renewals are sold both directly to end-user customers and via our network of channel partners. The majority of professional
services are sold directly, with some professional services sold via our channel partners. End-users can obtain licenses to our products through
individual discrete purchases to meet their immediate needs or through the adoption of enterprise license agreements (“ELAs”). ELAs are
comprehensive volume license offerings that provide for multi-year maintenance and support at discounted prices. ELAs enable us to build long-
term relationships with our customers as they commit to VMware’s virtual infrastructure solutions in their data centers. Our sales cycle with end-
user customers ranges from less than 90 days to over a year depending on several factors, including the size and complexity of the customer’s
infrastructure.
The competitive landscape in which we operate includes not only other software virtualization vendors, but also traditional hardware
solutions. In establishing prices for our products, we take into account, among other factors, the value our products and solutions deliver, and the
cost of both alternative virtualization and hardware solutions.
Our marketing efforts focus on communicating the benefits of our solutions and educating our customers, distributors, resellers, system
vendors, systems integrators, the media and analysts about the advantages of our innovative virtualization technology.
We raise awareness of our company and brands, market our products, and generate sales leads through industry events, public relations
efforts, marketing materials, free downloads and our website. We also have created an online community called VMware Technology Network
that enables customers and partners to share and discuss sales and development resources, implementation best practices, and industry trends
among other topics. Our annual user conference, VMworld, which is held in both the U.S. and Europe, has grown in attendance each year. We
also offer management presentations, seminars, and webinars on our products and topics of virtualization. We believe a combination of these
efforts strengthens our brand and enhances our leading market position in our industry.
Our business is subject to seasonality in the sale of our products and services. For example, our fourth quarter revenues are affected by a
number of seasonal factors, including fiscal year-end spending trends. Such factors historically have contributed to stronger fourth quarter
revenues in any given year. We believe that seasonal factors are common within our industry.
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