Broadcom Explains VMware Strategy Amid Product 'Confusion'

In the three months since Broadcom closed its acquisition of VMware, the company has made sweeping changes to VMware’s software licensing, product portfolio, and partner program, and executives admit these changes have confused and concerned customers and partners alike.

In a blog post and media interviews this week, Broadcom’s VMware Cloud Foundation (VCF) division is taking another stab at explaining its VMware strategy, including switching fully to a subscription model and consolidating standalone products to two bundled offerings.

“This is [a] humongous change, and that has absolutely caused confusion in the market. We could have done a better job communicating,” said Prashanth Shenoy, vice president of cloud platform, infrastructure, and solutions marketing for Broadcom’s VCF division.

Product Consolidation

Broadcom is pushing simplicity and hoping to convince its VMware customers and partners that the changes will result in more value and innovation for customers and more opportunities and profits for its partners.

For example, VMware previously had four business units in charge of building the four products that make up VCF, VMware’s all-in-one software platform that combines compute, storage, networking, and cloud management services and enables organizations to run and manage their virtualized and containerized workloads on-premises and across multiple public clouds.

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Broadcom has consolidated those four business units in charge of vSphere, vSAN, NSX, and Aria into one VCF division, so the combined team can focus on building a better, integrated solution, Shenoy said. One forthcoming improvement: Instead of giving customers 20 different ways to log into VCF depending on which product they are using, the engineering team is now building a single sign-on experience, he said.

“Before, it was evident that we were all in our silos trying to build the best product for that silo. I believe we were not successful in truly creating a holistic, integrated experience,” Shenoy said in an interview with Data Center Knowledge. “Now, the charter of the engineering team is clear. We focus on this one core product and deliver the best value for customers.”

Rapid Changes Confuse Customers, Partners

In early December, several weeks after Broadcom closed its $69 billion acquisition of VMware, the company announced that it was ending perpetual licenses and switching to a subscription model, which upset some customers.

The company also announced that it was streamlining nearly 9,000 product SKUs and 160 product bundles to two primary bundles: VCF and VMware vSphere Foundation, which is designed for smaller and mid-sized customers and includes vSphere server virtualization software, Tanzu Kubernetes Grid, and Aria Operations management software.

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The consolidation of products left some customers with the wrong impression that the company was discontinuing products when in fact, they are not going away. The products are going to be sold in packages and not individually.

Then in late December, Broadcom announced it was discontinuing its partner program but gave no further details, leaving its 18,000 reseller partners in limbo. They wondered for nearly a month if they would be invited back.

Then beginning in mid-January, Broadcom began inviting its reseller partners to the Broadcom Advantage Partner program, and today, 100% of resellers that have sold VMware products to customers in the last two years have been invited back, Shenoy said.

“You heard out in the market that VMware as part of Broadcom is now not going to focus on partners. This is further from the truth,” Shenoy said. “The challenge is that in those few weeks, there was silence. We didn’t clearly articulate [our plans]. And they didn’t know if they were going to get an invite.”

Market Grab

Broadcom’s changes to VMware, and the confusion and consternation they caused, have prompted some VMware customers and reseller partners to start considering alternatives, according to media outlets. VMware’s competitors have pounced, hoping to grab a percentage of VMware’s 300,000 customers in the market for virtualization technology and tools for deploying and managing virtual machine (VM)-based and container-based applications in private cloud and hybrid, multi-cloud environments.

For example, Nutanix has launched a “VMware to Nutanix migration promotion” for VMware customers, while Scale Computing has announced a “rip and replace” program and is offering discounts to VMware customers.

Forrester Research Analyst Tracy Woo said she’s heard from VMware customers who have seen massive price increases and are unhappy about it. “There are certainly those that stayed on perpetual licenses because they had a much sweeter deal because of it,” Woo said.

Switching to Subscriptions

While Broadcom said reducing the product portfolio to two primary bundles is better and simpler, it means less flexibility for customers, Woo said. “It means that they are either overpaying or underpaying for something they want, and it makes it incredibly difficult for customers to extract the amount of value they want,” she said.

In response to licensing concerns, Shenoy said VMware began introducing a subscription-based model about 18 months ago, and now that VMware is part of Broadcom, it has fully switched to subscriptions to align with the industry standard. Today, a majority of VMware customers are still on perpetual licenses, so they will eventually have to switch to subscriptions, he said.

“We are maybe the last in the industry to move to a subscription model,” he said. “Every other major player has done this.”

As for pricing, Shenoy said VMware customers who use the VCF bundled solution will see a 50% decrease in subscription costs. When VMware was a standalone company, it charged $700 per core. Broadcom is charging half that: $350 a core, he said.

Customers that previously used two VMware products, such as vSphere and vSAN together, should see comparable pricing with a new bundled solution. But enterprises that only use vSphere in their data centers will face a price increase with the new bundle, he said.  

Matt Kimball, a vice president and principal analyst at Moor Insights & Strategy, said VMware is most vulnerable in the small enterprise and mid-market because they are more likely to have a smaller investment in VMware technology and more able to easily migrate to a competitor like Nutanix.

“These are the customers that are most likely to have only deployed vSphere, and as a result, could experience a price increase,” Kimball said.

However, large enterprises that have invested heavily in VMware – licensing, resources, and operations – are less likely to migrate, he said.

In fact, Woo of Forrester Research said that while some customers are building a business case to move off of VMware, some customers that she’s talked to said it would take them four to five years to migrate off of VMware.

VMware Product Roadmap, Google Cloud Partnership

Broadcom on Wednesday (Feb. 14) announced a new partnership with Google Cloud that enables license portability, meaning customers that have subscribed to VCF licenses can use those same licenses for their on-premises data center and in Google Cloud.

Because Broadcom has streamlined its product family, customers can easily migrate workloads from in-house data centers to the Google Cloud and know that the versions of VCF are compatible, Shenoy said.

“This is another aspect of business simplification: buying your software once and using it anywhere and truly getting a consistent experience,” he said.

The Broadcom executive said the company expects to strike deals on license portability with other cloud service providers in the near future.

As for its Broadcom Partner Advantage program, Shenoy said Broadcom has heard positive feedback from its reseller partners. Broadcom has standardized pricing and provided upfront discounts, so its reseller partners can better predict profits, he said.

Despite Broadcom’s promise of continued innovation and support, some VMware customers are concerned about Broadcom’s reputation with past software acquisitions and they worry they will see less support and innovation, Woo said.

But Broadcom is talking a good game. Product-wise, Broadcom plans to deliver a major release of VCF by year’s end and will provide more details of its product plans at its VMware Explore conference in August, Shenoy said. In the meantime, the company will ship a smaller release in May or June, which will include automation for data services and load balancing services, he said.

Clearing Up the FUD

Time will tell if Broadcom comes through with its promises of faster innovation and more value to customers and more market opportunities for its partners.

In the meantime, Broadcom’s current outreach program to further explain and fully inform customers and partners of its VMware strategy is the right move for the company, Kimball said.

“I do believe it will clear up a lot of ‘FUD’ that has been floating around for the last month and a half,” he said.