9 Predictions for VMware Users of Unexpected Broadcom Consequences 

VMware customers, particularly those with knowledge of Broadcom’s acquisitions of CA and Symantec, are expressing concerns over pricing, packaging, sales coverage, product plans, and support.  

There is no doubt that Broadcom, after a year of planning, is moving quickly and decisively to execute changes consistent with a plan to nearly double VMware profitability over three years.¹ Layoffs², product bundling changes³, canceled channel contracts⁴, and a direct sales coverage model for the top 2,000 customers⁵ are just some of the changes publicly announced and underway.  

9 Predictions on Unexpected Consequences

Business model changes often carry unexpected consequences for customers and many VMware customers are now asking Nutanix for advice on how to minimize their exposure to these Broadcom changes. With these asks in mind, here is a list of the top nine unexpected consequences we expect customers may encounter as the Broadcom playbook goes into effect.  

1. Most VMware customers will pay more. Despite Broadcom statements that it would not focus on raising prices⁶, we believe new bundling strategies will drive up effective prices for most customers. For example, vSphere ENT+ customers could see 2x – 3x increases now that this product is only available bundled with vSAN and vRealize licenses – especially if a vSphere customer is not an HCI customer. For other impacts of bundling, see https://www.nutanix.com/blog/vmware-customers-prepare-to-bundle-up  
2. Legacy storage payback periods will lengthen. SAN and NAS investments are often justified based on the consolidation benefits of moving from physical to virtual servers, offset by the added cost of the hypervisor. Customers should be asking SAN and NAS providers to update their TCO and ROI models with higher effective vSphere costs.
3. Channel partners will reduce VMware investments. VMware has 65,000 reseller partners⁷ and 4,500 active cloud, hyperscaler and managed service providers⁸.  By our estimates, Broadcom’s plan to take VMware’s top 2,000 customers direct could eliminate up to $650M in channel margins and lead to a decrease in channel-delivered VMware installation and support resources.  
4. Expect Dell, HPE, and Lenovo to similarly reduce VMware investments. VMware has extensive relationships with the largest systems providers, including Dell, HPE, and Lenovo. Joint deals have been typically fulfilled by channel partners, with partners realizing margin on the aggregate solution value. System companies risk alienating their channel partners by promoting VMware offerings and may look for more channel-friendly alternatives.   
5. VMware EUC offerings may become more open. Sales and support strategies for VMware Horizon and View solutions have been largely tied to vSphere. If Broadcom divests the EUC business as has been reported⁹, it’s possible the new EUC owner would offer support for other hypervisors to increase market reach and escape the effective cost of vSphere Ent+. 
6. VMC may no longer be a VMware-managed service. Managed services are expensive because they require dedicated investment in cloud resources. With Broadcom’s focus on cost containment, VMC may become a customer or provider-managed service. This may introduce switching costs for all existing VMC customers.
7. Dell may shift VxRail focus to ScaleIO. VxRail is a joint HCI offering from Dell and VMware. With Broadcom going direct, sales of VxRail would likely require joint selling and shared account control between Dell and Broadcom. Consequently, Dell may attempt to substitute ScaleIO in place of vSAN, even if ScaleIO does not offer an HCI experience.  
8. DPU adoption could slow. Customer plans to support SmartNICs and DPUs from NVIDIA, HPE, and Intel may slow down if the vSphere Ent+ bundling strategy and higher effective cost is extended to the more complicated DPU environment.  
9. Customer support may change. VMware’s top 2,000 customers may see changes in coverage as layoffs proceed and they lose channel support. 

We’re talking with customers everyday about these and other concerns. Let us know how we can help you navigate the changing VMware landscape and help you manage these and other risks.