Featuring:
Naveen Chhabra, Principal Analyst
Show Notes:
While it wasn’t exactly out of left field, the acquisition of VMware by Broadcom, which closed last November, has caused significant disruption in the market due to the size of the VMWare customer base and the extent of the changes Broadcom made out of the gate. In this episode Principal Analyst Naveen Chhabra walks through the breadth and impact of the deal and lays out the options available to VMWare customers today.
The episode starts with Chhabra reviewing the breadth of changes to the VMWare offerings. Broadcom’s acquisition of VMware took a long time to close due to regulatory scrutiny, but once it did, Broadcom implemented changes swiftly. Chhabra says changes to VMWare cut across all of the “five P’s” of product marketing: product, pricing, place, promotion, and partners. One of the most concerning for VMware customers is the shift from perpetual licenses to subscription-based pricing. This means that customers can no longer buy individual products on a perpetual license and must instead purchase them as part of two packages. This change has led to significant price increases for some customers, with anecdotal reports of increases ranging from 400% to 700%.
The widespread adoption and integration of VMware’s technology make the changes even more impactful. Chhabra points out that VMware’s technology, particularly its hypervisor, is deeply ingrained in most organizations’ tech stacks and has been instrumental in cloud adoption and hybrid cloud.
From there, the conversation focuses on the changes to the partner ecosystem, which have also caused concern among customers. Dell, a previous partner, has announced that it will no longer sell VMware products. Additionally, Broadcom has cut its partner program way back, making it more difficult for customers to work with their preferred partners.
While there may be some benefits for customers who use all or most of VMware’s products, such as lower costs when purchasing the larger package, the overall disruption caused by the acquisition and the changes in pricing and the partner ecosystem have led many customers to consider migrating away from VMware. In its 2024 Predictions, Forrester stated that this year, 20% of VMware enterprise customers would start to move away from the platform, and Chabbra says that’s holding true so far.
Overall, says Chhabra, Broadcom’s strategy seems to be focused on the top 600 enterprise customers, while the rest of the customers will be addressed by channel partners. Competitors, such as Nutanix, are also ramping up their marketing efforts and offering alternative solutions to unhappy VMware customers.
During the episode Chhabra walks through the options available to VMWare customers who want to optimize their licenses and minimize the impact of the price increases. He discusses options such as server optimization, consolidating licenses, and exploring alternatives to VMware for specific use cases. He says the key advice for technology executives is to not wait until their contracts are up for renewal or pricing increases are close to start evaluating their VMware licenses and exploring alternatives. Developing a comprehensive plan early that addresses dependencies and potential challenges is crucial to success in the long-term.
To learn more about your VMWare options, check out the agenda for the upcoming Technology & Innovation Summit North America, where Chhabra will provide real examples of approaches that technology organizations are taking and walk through a VMware migration checklist.
