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Should VMware customers be considering Plan B?
Tue, 23rd Jan 2024

While VMware’s $61bn acquisition by Broadcom is now, finally, complete, it has left partners, customers and employees of the virtualisation software pioneer unsure about what the future holds.

What we’re hearing from many customers and prospects, especially among enterprises heavily invested in complex VMware environments, is that they are anxious about where they stand, given Broadcom’s track record in the wake of earlier takeovers.

Before we look at those concerns in more detail, we should recall that there was a point at which it appeared to industry observers Broadcom had undergone a change of heart following previous rocky and turbulent mergers. Senior management gave assurances during VMware negotiations that things would be different this time.

But in a recent blog titled ‘The Worst is Yet to Come’, GlobalData analyst Steven Schuchart clearly felt that this was a false dawn. “Broadcom management, including CEO Hock Tan, reassured everyone that this time would be different and that the company had learned its lesson,” he writes. “For some, this was a positive sign that VMware, a staple of IT in enterprises, would fare better and its essence and spirit would remain intact. So far, it seems that hope was misplaced."

In addition, staff layoffs have already commenced, and Schuchart’s clear message is that the standard Broadcom playbook is already in motion and that VMware’s customer base should take note.

Among customers, the fear that history is repeating itself is intense. Many will remember that, in 2018, Broadcom bought CA Technologies for $18.9bn and immediately set about reducing its workforce. Chunks of the company were sold off to private equity, including its application security testing platform, Veracode. Only a year later, customers saw a repeat performance following Broadcom’s purchase of Symantec’s enterprise security business for $10.7bn. Bits of that business were also broken off and sold on. In line with that pattern, it has already been made clear that VMware End-User Computing (EUC) and Carbon Black business units will be divested.

Concerns aren’t just focused on which chunks of VMware may be disposed of, or which staff may be made redundant. Broadcom also has a history of adjusting its pricing upwards in the aftermath of M&A moves in return for little to no corresponding increase in functionality or value. One VMware customer, Phil Matuszak, technology services director of Kinship Trust Company LLC, has already bemoaned a switch away from perpetual licensing to annual subscriptions, leading to a 2-5x price hike.

Along with raised prices, analyst firm Forrester noted that customers have reported other negatives in the wake of Broadcom’s takeovers. “For a window into the future, simply look back to its previous two acquisitions, CA and Symantec,” commented Forrester principal analyst Tracy Woo. “Between the two companies, customer support reduced significantly, and innovation was stunted.”

From what we at Nutanix are hearing, customers are noting changes, and many are starting to look elsewhere. We are being told that VMware customers want a level of choice, value and pricing certainty that they are no longer confident of getting.

So, what can VMware customers do? A dual-vendor strategy is, of course, a bargaining chip. If pricing gets hiked, R&D is neglected or service levels drop, then the customer can credibly threaten to move all workloads over to a provider like Nutanix if they don’t get the terms they want. We naturally believe that Nutanix is the best option for organisations looking to reduce their dependence on VMware, but at the very least, this could be the time for tough talking and decisive action to avoid disappointment down the line. In the event of needing a full alternative, then it is just a matter of moving their remaining VMware workloads over to the other vendor.

What businesses today prize more than ever before is agility and the chance to pivot in the event of changes to their environment. VMware has played a full part in allowing them to support change through IT over the years, but if new owner Broadcom continues to play fast and loose with that relationship, then customers need to have a Plan B in place.