Broadcom reverses controversial plan in effort to cull VMware migrations

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Broadcom reverses controversial plan in effort to cull VMware migrations

Broadcom has decided it will keep 500 of VMware's biggest customers, instead of 2000 - with the others being returned to channel partners.

Published on 10th December 2024

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. The 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.

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.

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 in the last year are seriously researching or planning total or partial VMware migrations.

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, circumnavigating partners and confusing some partners and customers. In a March earnings call, CEO Hock Tan said Broadcom would focus on upselling those accounts. Broadcom has now announced it informed partners that it will only work directly with the top 500 VMware accounts.

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.

At Canalys’ APAC Forum event, 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”.

In a LinkedIn blog post last month, Edwards noted several other recent “major reversals,” including bringing back-end rebates back to the Broadcom channel program “following the unsuccessful move to a front-end discount-only program at the start of 2024 in a drive for simplification” and launching a points-based partner program to replace the VMware one it canned early this year.

Customers re-examining VMware dependence

VMware has been the go-to virtualization platform for years, but Broadcom’s acquisition has pushed customers to reconsider their VMware dependence. A year into its VMware buy, Broadcom is at a critical point. By now, customers have had months to determine whether they’ll navigate VMware’s new landscape or opt for alternatives. Beyond dissatisfaction with the new pricing and processes under Broadcom, the acquisition has also served as a wake-up call about vendor lock-in. Small- and medium-size businesses (SMBs) are having the biggest problems navigating the changes, per conversations had with VMware customers and analysts.

Speaking to The Register, Edwards claimed that migration from VMware is still modest. However, the coming months are set to be decision time for some clients. In a June and July survey that Veeam, which provides hypervisor backup solutions, sponsored, 56 percent of organizations were expecting to “decrease” VMware usage by July 2025. The survey examined 561 “senior decisionmakers employed in IT operations and IT security roles” in companies with over 1,000 employees in the US, France, Germany, and the UK.

Impact on migrations questioned

With the pain points seemingly affecting SMBs more than bigger clients, Broadcom’s latest move may do little to deter the majority of customers from considering ditching VMware.

Rick Vanover, VP of product strategy at Veeam, said he thinks Broadcom taking fewer large VMware customers direct will have an “insignificant” impact on migrations, explaining:

Generally speaking, the largest enterprises (those who would qualify for direct servicing by Broadcom) are not considering migrating off VMware.

However, channel partners can play a “huge part” in helping customers decide to stay or migrate platforms, the executive added.

“Product telemetry at Veeam shows a slight distribution of hypervisors in the market, across all segments, but not enough to tell the market that the sky is falling,” Vanover said.

In his blog, Edwards argued that Tan is demonstrating a “clear objective to strip out layers of cost and complexity in the business, and return it to strong growth and profitability.” He added: “But so far this has come at the expense of customer and partner relationships. Has VMware done enough to turn the tide?”

Perhaps more pertinent to SMBs, Broadcom last month announced a more SMB-friendly VMware subscription tier. Ultimately, pricing will be a big factor in whether this tier successfully maintains SMB business. But Broadcom’s VMware still seems more focused on larger customers.