CXO / IT Leadership , Mergers & Acquisitions

Broadcom Overhauls VMware - Part 1

Broadcom Says Changes Will Benefit Large Customers Who Prefer Bespoke Products
Broadcom Overhauls VMware - Part 1
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When Broadcom acquired VMware in November 2023, the tech community was abuzz with speculation about Broadcom's new strategic direction and how it would consolidate VMware's extensive portfolio of nearly 168 products with over 8,000 SKUs. Customers and partners were concerned about the uncertainty around new pricing and packaging models. But recent developments indicate that Broadcom has streamlined VMware products, with major changes to product licensing and its partner program - much to the shock of VMware customers and partners worldwide.

Strategic Changes by Broadcom

  • Broadcom has restructured VMware product licensing, moving from perpetual licenses for individual products to subscription-based pricing.
  • VMware's stand-alone products have been consolidated into two product bundles: VMware Cloud Foundation (VCF) and VMware vSphere Foundation (VVF). The new bundles offer different term lengths (on-demand, 3-year, 5-year) with core-based pricing replacing the previous VRAM model.
  • Broadcom has introduced a tiered partner program ranging from Pinnacle to Registered levels.

Customer and Partner Reaction

CloudBolt Software commissioned Wakefield Research to conduct a study, titled "CII Reality Report: VMware Acquisition Aftermath," that surveyed 300 enterprise IT decision-makers across various industries from companies of all sizes that use VMware products. Majority of respondents (99%) expressed concern, reflecting a widespread apprehension across various industries, business sizes, and executive levels.

The study also found that 95% of respondents view Broadcom's acquisition as disruptive to their IT strategy, with 46% considering it extremely or very disruptive. While only 5% have already finalized their response to the acquisition, 58% intend to make a decision within 6 months, and 87% within the coming year.

All respondents expect VMware prices to rise under Broadcom's ownership, with 73% anticipating a hike of greater than 100%.

The timeline for decision-making among respondents reflects a strategic recalibration in progress and the complexity and urgency of the situation across the industry.

Broadcom's Approach to VMware Integration

Hock Tan, president and CEO, Broadcom, acknowledged that all these changes have created "some unease" among its customers and partners.

"All of these moves have been with the goals of innovating faster, meeting our customers' needs more effectively, and making it easier to do business with us. We also expect these changes to provide greater profitability and improved market opportunities for our partners," Tan said.

Tan told CRN that VMware's go-to-market model, previously characterized as "chaos and conflict," has been simplified under Broadcom's ownership. This includes massive SKU reduction, a decrease in the number of channel partners and a shift to handling thousands of top accounts directly.

Tan also said that many of VMware's largest customers prefer buying customized offerings direct from Broadcom.

"The largest 10,000 customers of VMware are large enterprises, the largest banks, the largest healthcare companies," he said. "And their view is [they] want bespoke service, support, engineering [and] solutions from us. So we created a direct approach, supplemented with their VAR of choice when they need to."

Broadcom's IT and sales operations teams completed the migration and transformation from VMware's "complex and cumbersome resource planning systems" to Broadcom's more automated system, Cindy Loyd, vice president of global partner and commercial sales, Broadcom, said in a blog post.

"Our teams have gone through the process of cleansing and migrating critical data from multiple legacy systems to a single unified Broadcom system," Loyd said.

The transition "delayed quotations" in recent weeks, but Loyd feels optimistic about Broadcom's progress with VMware's modernized product offerings.

Broadcom's global communications teams did not respond to ISMG's request for comments at the time of publication.

Part 2 of this article will cover how VMware customers have been affected by the licensing changes and the alternative options they might switch to.


About the Author

Brian Pereira

Brian Pereira

Sr. Director - Editorial, ISMG

Pereira has nearly three decades of journalism experience. He is the former editor of CHIP, InformationWeek and CISO MAG. He has also written for The Times of India and The Indian Express.




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