VMware 2013 Annual Report Download - page 10

Table of Contents
Sales and Marketing
We derive the majority of our sales from our indirect sales channel, which includes distributors, resellers, system vendors and systems integrators. The
remainder of our sales is primarily derived from our direct sales force.
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. These resellers are part of our VMware Partner Network (“VPN”), which offers these resellers sales and product training, pricing incentives,
rebates and access to the worldwide network of VMware distributors and the VMware Partner Central Web portal.
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 highly leveraged Go-to-
Market strategy that includes a direct sales force that is complementary to our channel. 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 require end-user customers to purchase maintenance. Maintenance
periods typically range from one to five years. 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 via our channel, with some professional services sold directly. 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.
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 VMware and industry events, public relations
efforts, marketing materials, advertising, direct marketing, social media initiatives, free downloads and our website. We have invested in multiple online
communities that enable customers and partners to share and discuss sales and development resources, best practices implementation, 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 of virtualization and cloud computing. We believe the combination of these activities
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.
Customers
Our customer deployments range in size from a single virtualized server for small businesses to thousands of virtual machines for our largest enterprise
customers.
During 2013, three distributors, who purchased software licenses and software support from us for resale to end-user customers directly or via resellers,
each accounted for over 10% of our worldwide revenues. Arrow Electronics, Inc., Tech Data Corporation and Ingram Micro, Inc. accounted for 15% , 12%
and 11% , respectively, of our worldwide revenues in 2013. Our
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