Broadcom Shifts Strategy to Save VMware Business
Broadcom to Work with Top 500 VMware Customers, Channel Partners to Gain
Broadcom will no longer take VMware’s biggest 2,000 customers directly. Instead, it will work with VMware’s 500 biggest customers, giving channel partners the opportunity to participate in deals and provide additional value for VMware customers. This reversal is being viewed as an effort from Broadcom to discourage migrations from VMware, but there’s skepticism around how much impact it will truly have.
Customer Laments and Migrations
Various customers have lamented the changes that succeeded Broadcom buying VMware about a year ago. Controversial moves have included ending perpetual license sales, bundling VMware products into a smaller number of SKUs, and ending VMware’s channel partner program. These changes have led some firms to consider reducing their business with VMware.
Recent Examples of Migrations
This week, for example, UK-headquartered cloud operator Beeks Group said that a 1,000 percent increase in VMware costs led to it moving most of its 20,000-plus virtual machines to OpenNebula. And numerous customers that Ars Technica has spoken with in the last year are seriously researching or planning total or partial VMware migrations.
Broadcom’s New Strategy
Now, Broadcom is looking to save some business by incorporating channel partners into deals that it previously ushered them out of. In January, CRN reported that Broadcom took over more than 2,000 of VMware’s biggest accounts, circumventing partners and confusing some partners and customers. In a March earnings call, CEO Hock Tan said Broadcom would focus on upselling those accounts. As The Register reported today, Broadcom recently announced that it will only work directly with the top 500 VMware accounts.
Broadcom’s Statement
In a statement, a Broadcom spokesperson said:
Broadcom continues to work on behalf of our partners to create new value in capturing the market opportunity for private cloud. Most recently, we announced a program that is currently in development to offer qualified VCF customers a 15 percent professional service entitlement of their annual contract value to access partner-delivered or Broadcom professional services. This will help customers improve both time to value and ROI. Broadcom does not have an official, static number of direct strategic accounts. The number of customers with whom we work directly changes over time.
Canalys’ Analysis
At Canalys’ APAC Forum event today, Canalys chief analyst Alastair Edwards said that "Broadcom recognizes that its best defense against possible migrations is making sure customers implement its full private cloud bundles and see strong return on investment. Broadcom sees giving 1,500 big users back to partners as the way to make that happen, and is even giving its channel 15 percent of the value of deals they win to fund professional services so that VMware software is quickly made operational," per The Register.
Conclusion
Broadcom’s new strategy may help to mitigate some of the damage caused by its previous actions, but it remains to be seen how effective it will be in preventing migrations from VMware. The company’s decision to work with top 500 customers and channel partners may help to create new value and improve the return on investment for customers, but it is unclear whether this will be enough to stem the tide of customer defections.
FAQs
Q: What is Broadcom’s new strategy?
A: Broadcom will work with the top 500 VMware customers and channel partners to provide additional value and improve the return on investment for customers.
Q: Why is Broadcom making this change?
A: Broadcom is making this change to discourage migrations from VMware and to create new value for customers by working with channel partners.
Q: How will this affect channel partners?
A: Channel partners will have the opportunity to participate in deals and provide additional value for VMware customers, with 15 percent of the value of deals they win funding professional services.
Q: Will this strategy be effective?
A: It is unclear whether this strategy will be effective in preventing migrations from VMware, but it may help to create new value and improve the return on investment for customers.
