Throughout the 17-month journey of this deal, one constant has been that only Broadcom CEO Hock Tan truly knows what VMware's future will look like post-acquisition. Although Tan has declined to speak with CRN, his blog posts offer some valuable insights.
By the time Halloween decorations hit the discount bins, Broadcom should finalize its acquisition of VMware.
Since the May 2022 announcement, CRN has meticulously covered every development in the $61 billion deal, engaging with partners, analysts, customers, competitors, regulators, VMware's CEO (twice), and VMware's largest shareholder, Michael Dell, to explore the implications for VMware partners.
Only Broadcom President and CEO Hock Tan knows for certain what VMware's future will look like post-acquisition. Tan has often stated his intention to "embrace the channel." However, partners are still waiting to see how this will materialize.
“It’s yet to be seen,” said Bob Venero, president of VMware partner and Dell Federal Titanium partner Future Tech, based in Fort Lauderdale, Fla. “There’s no real direction or answer outside of, ‘Hey, this is what we’re going to do.’ We don’t see it in the contracts. We don’t see that in written emails or from a channel engagement perspective.”
Regulators worldwide have approved the deal, with the U.S. Federal Trade Commission allowing its objection period to expire without challenge.
The European Commission secured concessions from Broadcom to ensure fair practices, including a fast-track dispute resolution process for rival chip manufacturer Marvell Technology if Broadcom restricts access to VMware's technology.
However, China has posed a minor obstacle. Tracy Woo, principal analyst at Forrester, believes China won't hold out much longer. “China has been slowing the process down, but ultimately I don’t believe they will block the deal,” Woo told CRN via email. “This is a flex from China marking their presence on this major deal.”
CRN has repeatedly requested an interview with Tan to clarify his plans for Broadcom and VMware’s channel, but he has not granted one. Instead, Tan has addressed concerns through regular blog posts. Despite this, as the deal nears its Oct. 30 closure, VMware partners remain anxious about pricing, products, and channel strategy.
Bob Venero commented, “I think it’s still an unknown whether or not they’re going to let VMware be VMware, which is probably the smartest thing that they can do.”
Adding to the uncertainty last week was Rajiv Ramaswami, the CEO of Nutanix. Ramaswami, who spent four years at VMware and six years as EVP of Networking at Broadcom, discussed past issues with Broadcom's acquisitions of CA Technologies and Symantec during an interview at the XChange Best of Breed Conference.
“Customers are not necessarily very happy. They typically will see pricing going up, road maps potentially getting shrunk, some products being divested and support levels potentially coming down,” he said. “VMware, of course, is being used for mission-critical workloads by many customers. These are areas of concern [for customers].”
As the acquisition draws to a close, the industry is watching closely to see how Broadcom will navigate these challenges and shape VMware's future.
Pricing
Analysts and partners are skeptical about Broadcom's assurance that VMware product prices will not increase, despite CEO Hock Tan's repeated statements to the contrary in his October and November 2022 blogs.
Tracy Woo from Forrester, specializing in cloud management and high-performance computing, doubts Broadcom's commitment, citing reports of price hikes among VMware customers influenced by Broadcom leadership.
Bob Venero of Future Tech echoes this skepticism, advising clients to secure current pricing through new deals amid expectations of future increases.
This skepticism contrasts with Tan's assertions that Broadcom's growth strategy does not hinge on price hikes but rather on delivering enhanced value through continuous innovation and customer-focused research and development.
However, concerns persist among VMware users about potential price increases and reduced support levels, prompting exploration of alternative solutions.
Despite Tan's reassurances, the industry remains cautious as Broadcom prepares to integrate VMware and shape its pricing and product strategies moving forward.
Products
Solution providers like VirtuIT Systems are deploying VMware’s advanced products, including vSphere 8.0, with optimism about the Broadcom deal.
VirtuIT CEO Gary McConnell notes that it's "business as usual" as they prepare for upgrades. VMware identified vSphere and vSAN as core revenue drivers, and Broadcom CEO Hock Tan has praised these technologies for their potential to enhance enterprise application management and security.
Broadcom plans a $2 billion investment in VMware, focusing on R&D and accelerating solution deployment.
Tan also addressed concerns about VMware Tanzu, emphasizing its strategic importance and Broadcom's commitment. Tanzu, which optimizes applications across any cloud, remains a key part of VMware’s portfolio.
Average Tanzu sales are substantial, with significant recurring revenue and services. Tan highlighted the crucial role of modern applications in customers' multi-cloud strategies, reinforcing Broadcom's dedication to supporting and investing in Tanzu.
Partners
Following Broadcom's announcement of its $61 billion acquisition plan for VMware, partners expressed a primary concern summed up by one anonymous quote to CRN: "Don’t screw VMware up.
"This sentiment reflects apprehensions among VMware partners about potential changes under Broadcom's ownership, given Broadcom's historical approach to channel management, as noted by Nutanix CEO Rajiv Ramaswami.
Addressing these concerns, former Broadcom Software Group President Tom Krause initially reassured stakeholders that Broadcom intended to support and invest in the channel, learning from past acquisitions like CA
Technologies and Symantec.
However, Krause departed from Broadcom in July 2022, shortly after these statements, to become CEO of VMware competitor Citrix Systems.
Since then, Broadcom CEO Hock Tan has reiterated a commitment to embracing VMware's partner ecosystem, emphasizing a "no customer left behind" approach and highlighting VMware's robust channel engagement.
Gary McConnell of VirtuIT Systems noted ongoing communication with VMware's account teams, indicating continued channel focus despite the impending acquisition.
