VMware Explore 2024 is scheduled to begin next week, which will be a premier event for the company since Broadcom completed its purchase of VMware last November.
The $60 million transaction sparked concerns among enterprise clients since its announcement in May 2022: What will the new VMware appear like? Will Broadcom increase prices, introduce new licensing models, or streamline the product offerings? To this point, the buyout has resulted in several layoffs, some product terminations, and adjustments to the partner strategy. (Learn more about the Broadcom and VMware integration timeline)
VMware currently serves about 300,000 customers, points out Stephen Elliot, the group vice president at IDC. “This means the customer base includes all sizes – small, medium, and large,” Elliot remarks, having monitored the Broadcom acquisition of VMware since its initial announcement.
Ahead of their yearly conference, common apprehensions remain high among VMware’s diverse clientele. Customers are eager to continue witnessing innovation throughout VMware’s suite of offerings, Elliot notes. They also anticipate enhanced focus on integration, user interface design, and simplified adoption processes. “They are keen on receiving information on roadmap and architectural strategies,” he states. “They are also looking for support in developing business value propositions for their executive teams.”
In addition, customers are looking for help as they work across their internal teams, to sell the value of VMware to more buyers across the technology organization, Elliot says.
From the start, the acquisition led to real concern – and even animosity – among customers.
“Broadcom’s acquisition of VMware is disrupting established platform strategies and impacting sourcing, procurement, budgeting and architectural roadmaps, including strategic partnerships,” says Julia Palmer, a research vice president at research firm Gartner.
Gartner polled customers about the deal and found that 56% of impacted IT infrastructure and operations respondents are “very concerned” about the acquisition, while 42% are taking a wait-and-see approach, Palmer says.
Naveen Chhabra, a principal analyst at Forrester, expressed concerns regarding organizations’ dependency on VMware, highlighting uncertainty about future costs associated with their services.
Chhabra mentioned that major companies are exploring alternatives to their current setups.
Challenges confronting companies contemplating a switch include the pace of transition and the adequacy of potential replacements in meeting their needs. It’s essential for them to determine if the new solutions will seamlessly integrate into their existing IT infrastructures, according to Chhabra. He discussed this in the context of considering a platform shift.
Chhabra, who advises VMware’s enterprise clients daily, believes that VMware is perceived more negatively than warranted, especially after its recent acquisition. He noted a stark change in perception, describing VMware’s shift from a trusted partner to a “necessary evil” in the eyes of its customers.
According to a study by Wakefield Research for CloudBolt Software in June 2024, there’s noticeable concern among VMware customers post-Broadcom acquisition. Based on responses from 300 enterprise IT decision-makers who utilize VMware, a significant 99% are worried about future prospects, indicating a widespread unease across industries and professional levels. Moreover, 95% of these individuals believe that Broadcom’s takeover poses a disruption to their IT plans, with 46% viewing it as highly disruptive.
The survey also highlights concerns about future costs and services, noting unanimous expectations of rising VMware prices under Broadcom, with about 75% predicting a price surge of over 100%. This comes at a time when many VMware contracts are nearing expiration within the coming year—87% of the respondents are preparing to make crucial decisions regarding their continuation with VMware or exploring alternatives soon.
If VMware users are considering their options, they should take a measured approach, suggests Eliot, emphasizing a strategic examination of VMware’s direction under new ownership and its alignment with their organizational objectives.
Every customer and partner should put the time and planning into understanding where they want to go with VMware, Eliot says.
“We have advised many technology leadership teams, and we often find they have to rethink the art of the possible with VMware,” Eliot says. “They pull together multiple teams to rethink where they want to go, and how to get there. It usually ends up with a renewal discussion, a roadmap discussion with VMware product teams, and a partner discussion on skills and expertise.”
“Are some customers having conversations about VMware alternatives? Yes,” Eliot says. “The smaller the VMware customer, the more it comes up. However, when it comes to replacement options that meet technology, security, scale, hardware support, skills, and process integration requirements [and considering] the total cost to migrate, the conversations often change to a renewal strategy.”
The conversation of what to do going forward needs to be about business value and reducing the business risk, Eliot says. Migrating away from VMware is not just a technology consideration. “VMware has four divisions today with much more focus and autonomy than before,” he says. “For many customers, this is going to be a very good change as technology execution moves forward.”
Many Gartner clients have noted significant price hikes across a range of VMware offerings, according to Palmer, with increases ranging between two to five times the original costs. “In light of these price hikes, many are turning to us for advice on how best to proceed,” she mentions. “From the numerous consultations we’ve held, it’s clear that customers are considering various alternatives.”
These alternatives encompass both immediate and long-term solutions such as embracing hyperconverged technologies and different hypervisors, as well as advanced strategies like adopting hybrid distributed architectures including platforms like Azure Stack HCI, AWS Outposts, container technologies, and leveraging public cloud IaaS and SaaS offerings.
Palmer points out, “Transitioning away from VMware’s server virtualization software on a grand scale entails a significant investment of resources, potentially spanning several person-years, and it would carry considerable one-time financial costs along with associated business risks. Additionally, such a shift could require a timeline of 18 to 48 months to reach completion.”
Given these challenges, the key question arises: what strategies should Broadcom employ during the forthcoming VMware Explore conference—and beyond—to reassure existing VMware customers and ensure their loyalty?
“Number one, communicate the continued technology product innovation that the VMware brand represents,” Eliot says. “They have been executing well since the deal closed, but not all customers are aware. The event is a great platform to get the word out on the product roadmaps and timing.”
A second point is about partners, Eliot says. “The company has not had this level of clarity on partners for over a decade,” he says. “There are four types of VMware partners today, and each is being treated differently for good reasons. Partners are looking at how to work with VMware, where the revenue and profit opportunities exist, and getting clarity on customer opportunities and [partners’] ability to differentiate. This will take some time but is moving rather quickly.”
There has been a lot of talk about Broadcom raising prices, introducing a new licensing model, and rationalizing products, so this might be a topic of discussion.
The subscription pricing model “was in progress for the past five years at VMware, so it’s not really new,” Eliot says. “The only difference now is this is the only model for customers. The product portfolio – and associated contracts – had gotten too complex for customers and partners.”
Product bundles are increasingly seen as a simpler way to manage purchases, according to Eliot. He notes, “Customers now need to understand both the pricing and the bundles, which requires some time for them to adapt to the changes.”
This shift offers an advantage for VMware, its partners, and its customers to discuss future plans and how investing in VMware’s range can yield greater business and technological benefits, Eliot explains. “This is an additional chance for VMware, its customers, and partners to engage in meaningful discussions about the value of business and how investments in VMware’s offerings can enhance returns.”
For VMware’s clientele, maintaining price consistency is paramount, but they are also concerned about continuous investments in support, services, and R&D for VMware’s offerings, according to Palmer from Gartner.
Broadcom, therefore, must demonstrate its commitment to VMware’s main products and support systems, Palmer emphasizes. This includes clear communication about future plans and R&D efforts. Addressing issues identified in customer satisfaction surveys and outlining improvements in support and services are crucial, along with nurturing partnerships within the VMware ecosystem and with its major scale partners.
Primarily, Broadcom/VMware must show that it recognizes and will tackle customer difficulties and challenges, according to Chhabra. “Communicate, and acknowledge those pains,” he advises.