Broadcom’s purchase of VMware is one of the most significant technology acquisitions in recent years. This acquisition reshapes the enterprise IT landscape by integrating Broadcom’s hardware expertise with VMware’s cutting-edge virtualization and cloud solutions. However, while Broadcom’s streamlined, profit-driven approach aims to enhance VMware’s efficiency, it has caused concerns among customers and channel partners who are uncertain about the future implications of these changes for VMware.
This blog post explores the acquisition details, key changes to VMware’s offerings, and what partners and clients can expect in the evolving tech landscape.
What are Broadcom and VMware?
Broadcom, well-known for its hardware and semiconductor products, recently entered the software market through strategic acquisitions like CA Technologies and Symantec’s enterprise security. This shift towards software makes Broadcom a comprehensive provider of both hardware and software for the advanced IT market.
On the other hand, VMware is widely recognized for its vSphere, vSAN, NSX, and Tanzu products, which make it a leader in cloud and virtualization technology. For the last couple of decades, VMware has become a significant partner for businesses pursuing hybrid and multi-cloud strategies because its solutions enable organizations to manage virtualized and cloud environments efficiently.
Broadcom’s acquisition of VMware was a strategic move to enhance its software portfolio and strengthen its offerings in data center and cloud infrastructure. By leveraging VMware’s virtualization and cloud management expertise, Broadcom makes itself a one-stop service provider for corporate IT infrastructure. As the two companies combine their strengths to transform cloud and enterprise IT, this union is expected to impact the technology sector significantly.
November 2023: Broadcom completes acquisition of VMware
In November 2023, Broadcom completed its acquisition of VMware for approximately $61 billion. This acquisition combined Broadcom’s strong hardware capabilities with VMware’s advanced cloud and virtualization technologies, making it one of the largest transactions in the technology sector. Broadcom aimed to establish itself as a major player in enterprise software by expanding beyond semiconductors.
This acquisition drew some serious concerns from enterprise customers, as many VMware customers were concerned about possible changes to VMware’s pricing, service, and product offerings because Broadcom has a history of prioritizing operational competency and cost-effectiveness. Despite the transaction’s eventual regulatory approval, the review process raised concerns about market competition and the potential impact on innovation in cloud and virtualization sectors.
Broadcom invested in VMware’s core products, including vSphere, NSX, and vSAN. CEO Hock Tan said the acquisition enhanced Broadcom’s ability to address the increasing demand for multi-cloud solutions. Consequently, businesses can monitor and secure their IT infrastructure more effectively across various environments.
2024: Channel frustration, confusion, and concern
At the beginning of 2024, VMware partners and resellers experienced significant changes and rising concerns due to Broadcom’s takeover of VMware. Some channel partners and customers remain uncertain about their relationships with VMware under Broadcom’s new strategy, which focuses on streamlining VMware’s offerings and enhancing productivity.
The VMware Partner Program ends in January
In January 2024, Broadcom announced the discontinuation of VMware’s long-standing partner program, which previously offered customized support, resources, and incentives to VMware channel partners. The discontinuation interrupted the operations of several resellers and systems integrators who depend on VMware support to provide specified solutions to their clients. Broadcom’s shift to a more limited partner strategy caused some VMware partners to feel overlooked, which led them to worry about less support and restricted access to VMware’s conventional sales and marketing resources.
Broadcom’s decision to standardize offerings and fuse VMware’s extensive portfolio raised concerns about the long-term profitability of partners specializing in VMware products. These partners may need to change their priorities or consider VMware alternatives to adapt to Broadcom’s changes and keep offering their customers the same level of service.
Other vendors and partners step in to fill technological gaps
As VMware’s channel program disappears, other VMware alternative platforms strive to attract VMware partners and customers seeking new virtualization, storage, and cloud management solutions. Several alternative providers are moving forward to fill gaps left by VMware’s reorganization, including:
Scale Computing: Scale Computing is well-known for its hyper-converged infrastructure (HCI) and edge computing solutions, simplifying virtualization and storage for small and medium-sized businesses. It offers a rip & replace program with a 25% discount to its partners who want to migrate from VMware to Scale Computing.
Verge IO: Verge IO provides software-defined data center (SDDC) offerings, integrated computing, storage, and networking in a virtualized environment. This makes it an attractive solution to organizations looking for a more efficient alternative to VMware.
Red Hat Virtualization (RHV): Red Hat Virtualization is an open-source KVM-based hypervisor that enables virtualized infrastructure in multi-cloud and hybrid environments. It is an attractive option for enterprises looking for open-source alternatives.
Scaleway: Scaleway’s cloud services provide affordable multi-cloud solutions, allowing businesses to manage applications seamlessly across cloud and on-premises environments.
Proxmox VE: Proxmox VE is a powerful open-source virtualization solution that enables you to manage virtual machines and containers. It is a cost-effective option for IT administrators familiar with the VMware ecosystem.
These alternative vendors are actively working to assist VMware’s partners and customers by offering attractive programs, training, and incentives to facilitate the migration. Some design migration services to help organizations reduce downtime and ensure operational continuity when transitioning from VMware virtualization to cloud management products.
Growing concerns among partners and customers
Many partners and customers remain concerned about the future of their VMware investments due to limited product focus and possible price increases. Many customers say that the prices rose to 300 percent after the acquisition. Customers accustomed to VMware’s specialized solutions may have fewer options, while partners are concerned about how streamlined offerings and program limitations affect their viable edge.
Broadcom continues changes to VMware offerings
After acquiring VMware, Broadcom also made significant changes to its product line, restructuring offerings to align with a profit-driven model. Although Broadcom said it was committed to maintaining VMware’s core technologies, it shifted its focus to a few flagship products and strategic integrations.
These changes are expected to position VMware as a major enterprise cloud and hybrid IT infrastructure player while discontinuing or consolidating less profitable products.
VMware on AWS “available” but with adjustments
VMware Cloud on AWS is a significant integration for VMware’s hybrid cloud strategy under Broadcom. This service connects customers’ on-premises VMware infrastructure to AWS, which leads to seamless hybrid cloud operations. Customers who use VMware Cloud on AWS may have noticed that certain features or support services are now subject to pricing controls due to Broadcom’s recent changes to VMware’s partnership with AWS.
This includes adjustments to pricing structures, support levels, and guidance on the platform’s long-term cost-effectiveness. Broadcom’s emphasis on profitability may lead to additional changes in services in the future. As a result, customers should carefully consider the costs and benefits when developing long-term hybrid cloud strategies.
Increased focus on VMware Cloud Foundation (VCF)
Broadcom keenly focuses on VMware Cloud Foundation (VCF), which combines core VMware products such as vSphere, vSAN, NSX, and ESXi into a single user-friendly platform. VCF intends to provide a comprehensive private cloud infrastructure with public cloud features, providing customers with a scalable and secure on-premises solution. Broadcom has also integrated VMware Aria and Tanzu into VCF to improve multi-cloud management and application modernization capabilities.
This emphasis on VCF demonstrates Broadcom’s commitment to establishing VMware as a viable alternative to public cloud platforms, focusing on hybrid cloud flexibility. Broadcom is willing to make VMware’s services more effective by merging its extensive products around VCF. This will help enterprises manage their infrastructure in a unique, cost-effective way.
Expansion of VMware Cloud Foundation to Google Cloud VMware Engine
Broadcom is expanding VMware’s integration with major cloud providers by bringing it to Google Cloud. VMware Cloud Foundation is now available on Google Cloud via the Google Cloud VMware Engine, allowing enterprises to run VMware workloads natively on Google infrastructure. This development helps customers with a multi-cloud strategy by allowing them to use Google Cloud services while remaining compatible with their VMware-based infrastructure.
This multi-cloud capability benefits organizations that have invested in VMware technology because it enables application portability and consistent workload distribution. By extending VCF capabilities to Google Cloud, Broadcom ensures VMware’s relevance in increasingly hybrid and multi-cloud environments.
VMware channel leadership departs; Broadcom CEO Hock Tan defends actions
VMware partners expressed concern about the leadership changes, as they had previously relied on the former leaders for strategic guidance and resources. As Broadcom focuses on core products and profitability, some partners are concerned about the company’s commitment to their success.
Broadcom CEO Hock Tan supported these changes, stating that a smaller organization would enable VMware to strategically improve its major services, such as VMware Cloud Foundation and vSphere. Tan believes this strategy will ultimately benefit businesses by ensuring the long-term development of focused products that meet enterprise IT requirements. However, many partners are concerned that Broadcom’s emphasis on efficiency and profitability will harm the VMware ecosystem.
VMware’s channel partners view these changes as transitioning to a new operational environment with less direct support. As VMware’s importance in the enterprise IT landscape grows, Broadcom must strike a balance between its streamlined model and its partners’ needs.
AT&T Sues Broadcom over Contract Dispute
Despite Broadcom’s ongoing integration with VMware, AT&T has filed a legal action against the organization, claiming contract disputes over pricing and service agreements. AT&T claims Broadcom failed to comply with the terms agreed upon with VMware before the acquisition, particularly regarding service continuity and cost protection. The complaint reflects the concerns of many long-term VMware customers about possible pricing changes and contract terms under Broadcom’s management.
The AT&T dispute reflects broader concerns among VMware customers, particularly as Broadcom focuses on profitability and restructuring. Many businesses that rely on VMware for critical infrastructure keep a close eye on this legal development, fearing it will signal a trend of higher costs or reduced support. How Broadcom addresses these concerns and whether or not it reaches a settlement with AT&T may impact its future relationships with other large VMware customers.
2025 poised to see more changes to VMware
As Broadcom’s merger with VMware advances, VMware’s products, pricing, and partnerships will change significantly by 2025.
- Product realignments: Broadcom is expected to maintain its focus on core offerings such as VMware Cloud Foundation, vSphere, and NSX while consolidating or discontinuing less important products to improve efficiency.
- Pricing and subscription models: Broadcom’s desire for profitability may result in higher subscription-based pricing, increasing costs for long-term VMware users. Given these developments, enterprises may want to reconsider their VMware investments.
- Partner ecosystem: VMware’s partner programs may be simplified, whereas Broadcom emphasizes relationships with larger partners. Smaller partners may have fewer support resources, prompting them to seek alternatives.
Customers and partners will be closely monitoring how Broadcom’s reshaping of VMware affects their IT strategies.
Channel impact through 2024 points to uncertainty and growth
Broadcom’s acquisition of VMware represents a turning point for both companies and the wider IT channel. Broadcom, a semiconductor and infrastructure technology leader, partnered with VMware to expand its virtualization and cloud solutions portfolio. This merger aligns with Broadcom’s strategic goal of providing integrated, end-to-end enterprise IT solutions. However, it also resulted in significant changes, creating uncertainty among VMware’s partners and customers as Broadcom implements its profit-driven strategy.
As Broadcom continues integrating VMware, the coming years will be critical to both companies’ futures. Enterprises that use VMware products should stay current on product roadmap changes, pricing adjustments, and support options to make proactive and strategic decisions. Current developments may present both challenges and opportunities in hybrid and multi-cloud environments.
Bottom line: Now is the time to re-evaluate
For businesses that rely on VMware, now is the time to reconsider their IT strategies. Evaluate current VMware investments, investigate potential alternatives, and monitor how Broadcom’s restructuring efforts may affect its infrastructure.
The VMware acquisition is one of many that have reshaped the IT channel. Read our summary of recent M&A activity to learn more about other deals changing the way the channel operates.