I was forwarded an email today from a VMware distributor that informs VMware authorised partners that their prices are going up.
No customer buys software directly from the big software vendors. Typically the path is either:
- Manufacturer > Distributor > Reseller > Customer
- Manufacturer > Large account reseller > Large customer
Each link in the chain (or channel) makes a small percentage. There is a “price list” at the top of the chain, but that is often discounted. Discounts are applied to large deals, and that discount can vary depending on sales targets for the product, what is included in the deal (adding more can sometimes reduce the original price), the time in the sales cycle and the size of the deal. In the case of VMware, few ever pay the prices listed on their website.
This is the email sent out to VMware authorised partners:
VMware are reducing those discounts, giving VMware more earnings and reducing the profitability of VMware software to partners.
Do note, that any reseller that has a business plan to make profit from licensing needs to sell A LOT of licenses. Real profits for resellers come in services, not in s/w or tin.