Broadcom CEO promises $2 billion annual boost to make VMware better at the things it already does
Hock Tan thinks hybrid multicloud can be made much easier to use
Broadcom CEO Hock Tan has promised his planned acquisition of VMware will come with an annual increase in spending of $2 billion, to acclerate work on Virtzilla's products and improve its services capabilities.
"VMware has an amazing opportunity to further grow and scale its pioneering virtualization technology, and Broadcom is committed to innovation and building VMware's professional services capabilities," states a Wednesday post from the CEO. "That's why we plan to invest an incremental $2 billion a year to better unlock customer value – with half focused on R&D and the other half focused on helping to accelerate the deployment of VMware solutions through VMware and partner professional services."
VMware's most recent annual report states that the company spent $2.7 billion on R&D in FY 22/23, but notes the $170 million year-on-year increase can be attributed to higher wages – and that financial year featuring an extra week. The company has a history of spending around a quarter of its revenue on R&D.
Tan's R&D ambitions center on delivering "next-generation software-defined datacenters" spanning customer premises or private clouds "instead of being largely or exclusively dependent on a mixed cloud environment, as we see today."
"The core technology to do this already exists at VMware," Tan added. "Broadcom will make additional investments to help this technology work together seamlessly and much easier to use; and resources to help more customers adopt and deploy this great technology."
That ambition is hard to argue against. However, VMware could argue that it already offers a seamless hybrid multicloud – that was the essence of the virty giant's "Cloud Smart" push of 2022.
Tan's post continued: "By extending our multi-cloud strategy, we will invest in extending VMware's software stack to run and manage workloads across private and public clouds, which means any enterprise can run application workloads easily, securely, and seamlessly on-prem, or in any cloud platform they prefer."
Again, that's VMware's current position.
"Our goal will be to achieve this multi-cloud strategy in a way that is cost neutral to customers, while allowing them to choose where they want to run applications or workloads. That's what this is all about – ensuring customer choice and flexibility in managing their data and workloads."
Once more, that's established VMware doctrine. But the mention of cost-neutrality will be welcome given Broadcom's history of increasing prices for acquired software products.
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Tan's post also states: "As a part of Broadcom, VMware will have more resources and scale to support the number of customers that want its technology and services, and help customers deploy it more than it was able to as a standalone company." The document mentions VMware becoming "able to partner with global system integrators" and pledges to "double the investment in professional services at VMware to help customers configure, use, and benefit from this technology, unlocking even more value."
"We expect that investment as well as deploying private and multi-cloud solutions in a scaled manner to many enterprises will take some time. VMware needs more partners to grow, and we will help it succeed in doing so."
Once again, Tan has described existing arrangements: VMware already teams with most global integrators that matter.
Yet there's also something to like there, as Tan has previously expressed enthusiasm for VMware’s partner community – an item of concern because Broadcom was ruthless with Symantec's channel after acquiring the security outfit.
But the post also fails to mention three contentious matters.
One is Broadcom's efforts to have regulators sign off on the acquisition of VMware. UK and EU regulators are investigating whether Broadcom could or would shut other hardware vendors out of the market for servers to run VMware by only allowing, or preferencing, its own storage and network adapters. Market regulators worry that could see server customers forced to pay higher prices.
Another is Broadcom's already stated plan for a rapid shift to subscriptions.
The last is how Broadcom can increase R&D investment and achieve its stated goal of adding $8.5 billion of pro forma EBITDA to Broadcom within three years of the deal closing.
In theory, Tan will be free to say more from November 1 – the start of Broadcom’s financial year and the date by which the CEO has often stated the acquisition will be completed. ®