n November 2023, Broadcom completed its $61 billion acquisition of VMware. The VMware Broadcom acquisition was completed to build out what the company
sees as a multi-cloud strategy. The Broadcom VMware acquisition marked one of the largest technology deals and the Braoadcom reputation has increased.
The Broadcom VMware acquisition has been announced and has sparked worries that Broadcom’s aggressive cost-slashing and financial optimization measures will harm VMware’s reputation as a trusted partner and obstruct its capacity to innovate.
So, let’s take a look at Broadcom’s troubling past and the companies they take over and then selling off non-core assets:
- Broadcom purchased CA Technologies- after the purchase of CA Technologies for $18.9 billion in 2018, they sold the company’s Veracode platform next year for $950 million, and at the same time, they laid off the employees. Also, the customers from CA Technologies stated their dissatisfaction post-acquisition. They complain about the lack of client focus.
- Broadcom acquired Symantec’s software business- after they purchased the Symantec enterprise software for $10.7 billion in 2019, they sold the cybersecurity services business to Accenture and the enterprise consulting group to HCL Technologies in 2020.
So, if you look at the history of Broadcom it is possible to follow the same path with the VMware. After a month of the VMware acquisition, Broadcom has already created disturbing disorders and serious concerns for VMware clients. These breakdowns are:
- the moment when they end partner agreements for an invite-only program
- when they take over the top 2000 VMware accounts
- when many senior executives go away from VMware
- changing from constant licenses to membership-based pricing
- issues around price growth, reduced support, and constrained investments
The History of VMware and Broadcom
VMware was founded in 1998 and developed virtualization technology, letting multiple virtual machines run on a single server, creating the multi-billion cloud market. VMware increased its product offerings, like vSphere, ESXi, and Workstation. With time, they become a dominant cloud and infrastructure player. VMware started to create many software solutions for data center management, networking, security, and the digital workplace.
VMware has had several owners. Previously, VMware was owned by Dell, which acquired the virtualization company following their $67 billion purchase of EMC in 2016. EMC acquired VMware in 2004, and in 2021, Dell extended their share of VMware. This extension paved the way for the Broadcom VMware acquisition.
Broadcom was created in 1991 and specialized in growing semiconductors, focusing on communication and networking chips. After some years, the company has expanded into many other areas, including security, infrastructure storage and management, and industrial solutions. Now, Broadcom is focused on semiconductor solutions and infrastructure software. Also, Broadcom is known for its aggressive purchase strategy and focus on financial returns, often creating problems with its commitment to product innovation and long-term support.
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What Changed in the VMware company?
What Is Happening to the VMware end-user computing portfolio?
The Broadcom CEO, Hock Tan confirmed during the Q4 earnings call in December 2023, they want to divest themselves of end-user computing. This means they won’t offer virtual desktop infrastructure products like VMware Horizon. Also, Broadcom said the VMware vSphere Hypervisor (Free Edition) has been pronounced as EOGA (End of General Availability) and there is no replacement for this type of product.
After the Broadcom VMware deal, the plan for the VMware Workstation was ignored for desktop hypervisor products and platforms. So, according to Michael Roy, the product line manager for desktop hypervisor products, since these products apps used for virtual desktop infrastructure share the same code as VMware ESXi, they take advantage of improvements made across both product sets.
How Is VMware Licensing Changing?
When the VMware Broadcom acquisition was made, Broadcom was pushing subscription software licensing over VMware products. The company has cut the price of VMware Cloud Foundation aiming to stimulate customers to take up an annual software subscription. When they announced the end of the license sale, the company also declared they would no longer offer support and subscription (SnS) renewals for constant offerings.
With the VMware acquisition, Broadcom introduced a `bring-your-own-subscription license` option. This new option had the goal of providing license portability to VMware-validated hybrid cloud endpoints running VMware Cloud Foundation. The new subscription offerings are seen well by the senior vice president of the VMware Cloud Foundation Division. He admitted that these offerings fit alongside an easier VMware product portfolio and this will allow customers of all sizes to provide more value from their funds in VMware.
How Is Supplier Management Changing?
With the VMware Broadcom acquisition, the first thing that can be noticed is the job cuts. Also, with the changes to software licensing, the IT buyers may no longer be dealing with the VMware partner they have used in the past when buying new VMware software licenses.
The Freeform Dynamics principal analyst, Bryan Betts said that Broadcom is for the return to office working, rather than the VMware hybrid plans. This plan can be an undesired decision for a few people. Also, the cuts were predictable, and the employees were announced.
What Is the Impact Of the VMware and Broadcom Merger?
VMware was a giant in cloud computing, with almost all enterprises licensing their virtualization technology. Most enterprises eventually realized that both public and private clouds had their advantages and drawbacks and settled for a hybrid environment to influence the strengths of each cloud type.
- Undertaking recommendations
CIOs who had fixed on hybrid cloud strategies have been left with urgent questions by the Broadcom VMware deal. CIOs need to decide if they want to stay with VMware, look for other companies, or wait and see what is happening. If they decide to stay it is a good opportunity to reevaluate service providers’ innovative problem-solving abilities or reconfigure hybrid cloud portfolios.
So, all the businesses should follow the next steps:
- Reconsider the hybrid cloud portfolio mix- many businesses have an inefficient blend of workloads on public and private clouds, resulting in a low-value realization. Any business should reexamine the workloads and create a strategic migration and modernization plan.
- Evaluate the Virtual Desktop Infrastructure (VDI) need- VMware and Citrix have been the dominant VDI vendors despite the technology’s performance challenges. Handling the VMware interruption in the VDI space should be somewhat simple.
- Estimate the implications of staying with or leaving VMware- every business should evaluate the cost-benefit impact and make an analysis. Also, they should consider the next factors:
- With the VMware acquisition, Broadcom moved from permanent licenses to membership-based pricing
- Many organizations interacted with Dell as the VMware reseller would see an even higher price impact since Broadcom eliminated Dell’s preferred pricing with VMware.
- Most businesses have been using VMware software for a long period. An adaptable approach would require an important transformation with open investment, talent management, and business continuity planning.
- Actively include service provider partners- partners have adopted VMware solutions through third-party service providers. So, clients should accept their help to understand the options, advantages, limitations, and integration risks and make them create original opportunities.
- Service supplier recommendations
Service provider partners play an important role between technology providers and businesses in helping supply guidance and the next steps to guide the uncertainty. VMware must act faster to determine the best step for their business customers. Because delaying and watching aren’t options, they can:
- Understand and judge all options- the Broadcom acquisition of VMware is an important step to understanding all the alternatives to maintain credibility with partners.
- Improve and accelerate hybrid cloud go-to-market- VMware created an opportunity to add new energy to a sustained cloud go-to-market and messaging. Because many businesses declared a lack of service provider cloud innovation over the last two years, this could be an opportunity to start new conversations and intensify relationships.
- Push Desktop-as-a-Service(DaaS) offerings- DaaS or VDI have been accessible from vendors, including service providers, and specialists, but haven’t taken off. VMware could be a catalyst for the transition to DaaS.
- Collaborate with Broadcom without prejudices- because of Broadcom's reputation, the VMware acquired was seen as not so good. The service providers should be open to the Broadcom VMware deal, and see what Broadcom can offer. Keeping an open mind will let providers jump ahead of their equals on the Broadcom acquisition of VMware.
- Adversary recommendations
The VMware competitors have the rare opportunity to grab their clients, potentially giving them considerable future income. Rivals have launched social media attacks on VMware as well as direct outreach. Because Broadcom has VMware acquired, many competitors desire to take their competitors and capture a larger market share.
- Create a structured attacker strategy- going after many clients can be attractive, but it’s not an effective way. Identify a list of accounts to target, prioritize them based on relevance, and after that create teams with KPIs and OKRs.
- Build wider account intelligence to win more clients- winning new clients can be hard and requires more marketing tactics. To remain relevant, VMware needs to understand the specific context of each client, and this includes pain points, decision-making stakeholders, and integration challenges.
- Maximize channel partner influence- create joint attacker strategies in collaboration with service providers who understand clients’ needs better.
Even if the reputation of Broadcom is not seen as so good, the moment when VMware acquired was made, can represent a new start for the company. The Broadcom acquisition of VMware has brought many changes, like the subscriptions and the employees from the company. Also, the Broadcom VMware deal is seen as a disaster, but also as a golden opportunity for companies hoping to future-proof their virtualization technology.
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