Why Broadcom Is Killing off VMware’s Standalone Products
To many enterprise IT observers, Broadcom — the new owner of what used to be known as VMware for 25 years — believes that its prized $69 billion acquisition’s product line was too complicated, far-flung and perhaps even becoming irrelevant here in the mid-2020s.
Why else would Broadcom discontinue 56 (and counting) standalone products that are used in virtually all of the world’s data centers daily?
VMware’s loyal customers may be asking that legitimate question now, but there’s more to it than that.
VMware’s $13.2 billion business, originally privately owned and operated, then bought by Dell Technologies-owned EMC and later by a private equity firm, as of Nov. 22, 2023, has officially been merged into Broadcom, owner of more than 40 previous acquisitions.
The Home of Virtualization
VMware’s name will forever be tied to virtualization, and it’s a generally agreed-upon principle that more than 95% of all data centers use at least one VMware component.
VMware’s roots are everywhere, and pulling them up is going to unearth a lot of dirt. The acquisition seriously changes the relationship customers will have with the new version of the company going forward.
Determining the exact number of individual products offered by VMware is tricky because the portfolio includes various types of offerings — some being categorized as suites or platforms containing multiple components. Some components of platform suites are sold on an individual basis, according to use cases required by customers.
Keeping track of the individual SKUs was a challenging job at the former VMware; apparently Broadcom will have no part of that.
Broadcom on the first day of its official possession changed the signs at VMware’s headquarters in the Palo Alto, Calif. foothills, then wasted little time in trimming down the aforementioned product offerings. Broadcom’s stance is to simplify VMware’s portfolio to “a few offerings focused on our best technology.” Products getting the heave-ho include network and security virtualization platform NSX, application mobility platform HCX, multicloud platform bundle vSPhere+ and many others. (See the listing of doomed standalone products here.)
Licensing a Major Pain Point of Contention
Changes in the licensing procedures are causing widespread consternation among IT buyers at companies large, medium and small who deploy public, private and hybrid clouds for their enterprises.
Many of these VMware customers have perpetual licenses to some of their infrastructure applications that simply require a yearly maintenance fee; those will soon be gone with the wind if Broadcom sticks to its approach. Customers are worried that Broadcom will try to force them into more expensive annual subscriptions if they want to maintain their current deployments.
A subscription model may deliver short-term savings for some customers, but with subscriptions, long-term customers will have to pay or be stuck with non-functioning IT infrastructure. This also impacts the small integrators whose businesses are built around VMware.
To questions about licensing, VMware published a blanket answer in a Jan. 15 media advisory, which has since been taken down: “All licensing options, including Perpetual, Support & Subscription (SnS), SaaS/hosted and subscription, as well as all editions, suites and pricing metrics of each product, unless otherwise noted, are included in this announcement. These products are no longer available for purchase.”
Broadcom Clarifies Message to Customers
The company subsequently published a blog post on Jan. 22 designed to clarify that previous message.
“As an outcome of this portfolio simplification, many VMware software solutions will only be offered as part of VMware Cloud Foundation (VCF) or VMware vSphere Foundation (VVF). They will not be available for purchase as standalone point solutions,” wrote Rick Walsworth, director of product marketing for the cloud infrastructure team.
“In the interest of clarity, presented below is a recap of the changes we have brought to our portfolio:
- “VMware Cloud Foundation is VMware’s new solution for customers looking to capture the value of full stack infrastructure with a platform that offers vSphere, vSAN and NSX with the full Aria management and orchestration suite with new services included.
- “VMware vSphere Foundation is VMware’s solution for data center optimization in traditional vSphere environments. It includes Tanzu Kubernetes Grid in addition to Aria Operations and Aria Operations for Logs as part of its standard suite of features. Additionally, customers with lighter requirements such as basic hardware consolidation or virtualization on a very small number of servers can still purchase subscriptions to vSphere Standard and vSphere Essentials Plus Kit.
- “VMware add-on services are available for VMware vSphere Foundation and VMware Cloud Foundation to further enhance the customer journey and address additional storage, security, disaster recovery, Generative AI and other specific use cases.”
In summary: Broadcom will be focused on selling VMware platforms, not point products.
Pricing and Sales Support
Naturally, pricing is another major issue. VMware was already considered expensive tech to own, so will Broadcom want to inflate values even more going forward?
“When Broadcom bought VMware and implied that ‘We’re going to increase prices and do that because we have pricing power over customers,’ customers are like, ’Wait a minute, I’m already spending a lot of money on VMware. You’re really causing me to go look around,’” Bryan Cantrill, co-founder and CTO of Oxide Computer, a maker of next-gen hyperscale rack servers, told The New Stack. “That’s what we heard from the market. Broadcom is a company that carries itself differently. The VMware we have known is no more. Employees know that and customers know that.”
Services are the third major issue, Lee Caswell, senior vice president of products and solutions at VMware competitor Nutanix, told The New Stack.
“Having customers look at alternatives means they’re also concerned about support going forward,” Caswell said. “So one of the things that changed here is the unilateral decision on how partners would be supported and the fact that changes are being made without having the full impact to be understood. And that’s hard for people to go and gather.”
Uncertainty in the Channel
There’s a lot of uncertainty in the channel as a result of this merger, Caswell said. “VMware offerings were supported by channel partners, reseller partners, and delivered to OEM partners. So the fact that resellers don’t have contracts today and are waiting, there’s uncertainty, so customers are concerned about the change in support,” he said.
“Frankly, they’ve already seen changes — many of them because of layoffs that have happened where they’re seeing a change in their account coverage. So all of a sudden, it seems to me that it’s the support risk customers should be thinking about.”
Caswell said he thinks that there may have been a material miscalculation from the Broadcom team on treating infrastructure as if it’s an application, which is what the San Jose, Calif.-based company acquired in the past.
“It’s a little bit like, if your microwave goes on the fritz in your house, well, that’s annoying, right? But you have some other ways you can go and cook dinner,” he said. “That’s what we’re watching here: This is not a microwave. If your power goes out, that’s another issue. This is the infrastructure that runs all of your applications and provides your data. Without data and applications, the livelihood of modern business is stopped. Every business today is an application technology business. That’s what we’re seeing right now.”
A Crossroads of Sorts for Many VMware Users
In light of the merger, this new year 2024 represents a potential pivot point for VMware users, who might find this a natural segue into a new-generation SaaS system or data center designed and built with AI applications and infrastructure in mind. VMware tech goes way back to the late 1990s, although it has been updated constantly through the years.
“Companies will be looking to use Generative AI in new containerized applications, which are making their way into the on-prem environment with Kubernetes orchestrated applications,” Caswell said. “Or it could be this new hybrid multicloud operational model, which says, ‘I’ve got applications that run on-prem and in the public cloud.’ If I want a future-proof system, then a company like Nutanix can help.”
Virtuozzo, a longtime data management alternative to VMware built on OpenStack, is another company that stands to win VMware users over to its camp.
“CIOs are looking to move more and more payloads in-house, or at least most of the hyperscalers,” Rony Moyal, vice president of the Americas for Virtuozzo, told The New Stack. “So I think it’s a compound of what Red Hat is doing by trying to move upstream, VMware moving upstream, and CTO/CIOs and cloud service providers following along.
“There’s a void after this day that nobody knows where it leads,” Moyal said. “I get a lot of communication from CSPs that they need an alternative. They’re not necessarily going to replace VMware immediately, but they’re going to stand up a parallel platform so that if worse comes to worse, they have an alternative solution.
“Because of the pending acquisition by Broadcom, a lot of those CSP service providers and even enterprises did not update their hardware. They were waiting to see what will happen. So a lot of them are looking to spin up an alternative platform again. So it’s all kind of culminating around the end of Q1, beginning of Q2, a lot of those service providers will have to make a decision,” Moyal said.
Reportedly, Broadcom is looking to offload VMware’s end-user computing unit for some $5 billion. This will include its Workspace ONE and Horizon products, which comprise an access control, application management, and unified endpoint management platform; and a set of virtual desktop products.