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Broadcom's VMware battle plan is to challenge hyperscalers
As 17 percent of customers see Virtzilla's short term strategic significance shrinking
Broadcom has signalled its intention to take on hyperscale datacenter operators once its acquisition of VMware concludes.
News of the plan emerged in a newsletter Broadcom sent to VMware staff and which – as it comments on the future of the two listed entities – was disclosed by both VMware and Broadcom as a regulatory filing.
The document is mostly corporate blurb that explains Broadcom is committed to innovation, is doing all the work needed to understand VMware so the $61 billion acquisition doesn't strike trouble, and wants to build "an inclusive and welcoming culture."
Readers were also offered some optimistic words about the "significant progress" on the regulatory filings Broadcom has made with authorities around the world that have reviewed the acquisition, plus an assessment that "We have an excellent team focussed on these efforts and continue to expect the transaction will close in Broadcom's fiscal year 2023."
The newsletter also outlines a "common goal" for VMware and Broadcom: "Together, we will provide customers greater choice and the opportunity to accelerate innovation by addressing their most complex technology challenges in this multi-cloud era."
The document concludes with the following bold declaration:
Together, Broadcom and VMware will increase competition faced by hyperscalers.
Just how the two will do that was not explained.
Presently, VMware's strategy is to offer an overlay so businesses that find themselves using hybrid multi-cloud can link those resources with virtual networks and apply consistent security policies instead of having to treat each of their clouds as a silo.
That approach competes with hyperscalers by giving VMware customers the chance to adopt multi-cloud with (theoretically) less complexity and pain, rather than feeling they might need to commit to fewer clouds for the sake of simplicity. But it also complements hyperscalers, who know that hybrid multi-cloud has happened – mostly by accident, rather than as a result of planning or strategy – and needs to be accommodated before it irritates customers.
VMware also facilitates the creation of large-scale private clouds, and has fostered a 3,000-plus constellation of small public cloud operators that run on the vStack. Both represent competition for hyperscalers.
But just how else a combined VMware and Broadcom could increase competition for hyperscalers is harder to divine. The big clouds have mostly made SaaS at scale their real differentiators.
The Register has sought comment from Broadcom.
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The employee newsletter wasn't the only Tuesday filing from VMware and Broadcom. Another linked to an analysis piece that echoed The Register's view that the European Union's probe of the acquisition – on grounds it could reduce competition for hardware – is barking up the wrong tree. VMware's business is based on virtualizing as much hardware as possible, so the EU isn't really making much sense there.
A third filing links to research from analyst firm IDC that tested the statement "My company's overall investment and strategic partnership with the combined Broadcom and VMware will likely grow over the next two years."
Broadcom proudly points out that 83 percent of respondents completely agree, somewhat agree, or are neutral towards that statement.
But on the document's second page, IDC breaks down the numbers to reveal that 48 percent of respondents were neutral – leaving just 35 percent positive about future intentions.
And of course the 17 percent who responded with somewhat or complete disagreement that the Broadcom/VMware combo's significance will increase represents roughly one in six customers.
That's a lot of negative sentiment. But IDC suggests if you're among the disagreeable 17 percent or the neutral 48 percent, you have leverage.
"Broadcom will gain thousands of small and medium-sized businesses with this acquisition, which diversifies their revenue and reduces risks," the analyst firm wrote. "They are likely to go the extra mile to retain this market. These customers should be in an ideal spot to have their voices heard."
IDC's advice to customers included a suggestion not to assume Broadcom will use the same unpleasant tactics it employed when acquiring Symantec and CA. However it also advised that customers "should ask tough questions and engage Broadcom and VMware management about their concerns, including plans for VMware products and pricing models."
A couple of questions about how VMware will challenge hyperscalers might also be handy. ®