VMware 2009 Annual Report Download - page 10

Table of Contents
Research and Development
We have made, and expect to continue to make, significant investments in research and development (“R&D”). We have assembled a
strong group of developers with system level, systems management, desktop, security, application development, and open source software
expertise. We also have strong ties to leading academic institutions around the world, and we support academic programs that range from shared
source code for research to sabbatical programs for visiting professors.
We prioritize our product development efforts through a combination of engineering-driven innovation and customer and market-driven
feedback. Our R&D culture places high value on innovation, quality, and open collaboration with our partners. We currently participate in
numerous standards groups, and VMware employees hold a variety of standards organization leadership positions, including the Distributed
Management Task Force, the Standard Performance Evaluation Corporation, and the OSGi Alliance. We believe that the strength of our R&D
organization is a competitive differentiator.
Our R&D expenses totaled $496.6 million, $429.2 million and $285.9 million in 2009, 2008 and 2007, respectively.
Sales and Marketing
We sell and market our products largely through a network of channel partners, which includes distributors, resellers, x86 system vendors,
and systems integrators, with over 75% of our revenue in 2009 derived from this network. The remainder is primarily derived from direct sales.
We have established ongoing business relationships with our distributors. Our distributors purchase software licenses and software support
from us for resale to end user customers via resellers.
A substantial majority of our resellers obtain software licenses and software support from our distributors and market and sell them to our
end user customers. The majority of these resellers are part of our VIP Partner Program, which offers these resellers sales and product training
and pricing incentives and rebates and access to the worldwide network of VMware distributors and access to the VMware Partner Central Web
portal.
We offer several levels of membership in our VIP reseller network 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 VIP network 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. Our channel partners also introduce our sales force to their end user customers.
In addition, our channel partner network includes certain system 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, x86 system vendors,
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. Software maintenance is sold both directly to end user customers and via our network of channel partners and the
majority of professional services are sold directly,
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