Handling The Upheaval Caused By Broadcom Acquiring VMware

DateJun 26, 2024

In this episode of Forrester’s podcast “What It Means,” hosted by Stephanie Balaouras, Principal Analyst Naveen Chhabra dives into the significant changes brought by Broadcom following its acquisition of VMware. Technology executives are closely examining their roadmaps in response to these changes. Chhabra discusses the options available to VMware customers amid this transformation.

Stephanie Balaouras opens the episode by introducing the topic and welcoming Naveen Chhabra to provide insights into why this acquisition is causing concern among technology executives. Chhabra explains that while VMware has changed hands before, Broadcom’s acquisition is particularly impactful due to the sweeping changes it has implemented across product packaging, pricing, licensing, promotion, and partnerships.

Chhabra elaborates on the abruptness of these changes, noting that Broadcom was likely preparing these adjustments behind the scenes before the acquisition was finalized. The new approach includes a shift to subscription-based models for VMware products, eliminating perpetual licensing. Furthermore, VMware products are now bundled into only two packages, which can lead to significant price increases for customers who previously purchased products individually.

Discussing the broader implications, Chhabra highlights VMware’s deep integration into enterprise tech stacks, particularly through its hypervisor technology, which is foundational for server virtualization. This deep integration means that moving away from VMware is a complex and multi-year endeavor for many organizations.

Chhabra also touches on the shake-up in VMware’s partner ecosystem. Broadcom has streamlined the partner program, significantly reducing the number of partners and causing disruption for customers who have longstanding relationships with specific partners. This consolidation is aimed at ensuring quality but has led to fewer options for customers.

Despite the disruptions, there could be benefits for some customers. Those who utilize a wide array of VMware products might find value in the new bundled packages. However, the overall impact has been largely negative, with reports of price increases ranging from 400% to 700%, and in some cases, even higher.

For organizations looking to stay with VMware, Chhabra recommends several optimization strategies. Upgrading servers to meet the new licensing requirements and consolidating product usage can help mitigate cost increases. Additionally, moving certain applications off the hypervisor to physical servers could be a viable option to manage expenses.

Chhabra predicts that while some customers will begin migrating away from VMware, this process will take years due to the complexity and scale of such migrations. Broadcom, on the other hand, seems focused on retaining its top enterprise customers while allowing channel partners to manage the rest.

The episode concludes with advice for technology executives: start evaluating VMware licenses now, explore optimization strategies, and consider developing a comprehensive migration plan if moving away from VMware. Chhabra emphasizes the importance of proactive planning to avoid surprises and ensure a smooth transition, whether staying with VMware or exploring alternatives.

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