What's next for VMware? Long-term Virtzilla-watchers predict Broadcom's moves
Consensus is cuts and spin-offs are coming, whether they'll help is another matter
Broadcom's takeover of VMware is on track to conclude in just over four weeks, and while the semiconductor company's CEO Hock Tan has pledged extra cash for R&D to boost Virtzilla's multicloud offerings, The Register has also heard of looming job cuts, and noted silence on whether some of VMware's products figure in Broadcom's plans.
We've therefore asked some long-term VMware-watchers to share their opinions on what comes next. Our panel comprised:
- Justin Warren, founder and principal analyst at PivotNine;
- Jane Rimmer, former director of marketing for VMware EMEA, owner of hiviz-marketing, and former leader of UK and London VMware user groups;
- Keith Townsend, principal of the CTO Advisor.
The Register started by asking what the panelists think is the best-case scenario once Broadcom takes over.
Keith: There's a best case for investors, customers, employees, and partners – the disinvestment in products that aren't moving the needle for either group and the success of the cross-cloud play. VMware still has the pole position for cross-cloud and as a result, Broadcom has the ability to create new opportunities and solutions.
The worst-case scenario is Broadcom continues VMware's inability to execute on its cross-cloud claims
Jane: At VMware Explore 2023 a $2 billion investment in VMware was announced, $1 billion of which will be in R&D. The best case scenario for customers is that this investment happens and innovation continues to flourish under the VMware brand. I sincerely hope Broadcom embraces VMware user groups (VMUGs) and the VMware community at large. They should not underestimate the value of the VMUG and must continue to invest in it.
Justin: Broadcom communicates a clear and sensible strategy for how all the parts of its new entity all work together, quickly sells off or kills the under-performing parts of VMware and reinvests the money in the parts that align with that strategy.
VMware continues to provide suitably priced options that provide good value for money for SMB, midmarket, and enterprise customers that it can make a reasonable profit on.
Broadcom invests savings in R&D and product management and finally figures out how to make something developers want to build for that its traditional operator customers can run well. Maybe that's Tanzu, maybe it's something new.
VMware finally brings its heritage as a neutral infrastructure meeting place into the modern era and provides the quality hybrid/cross/multicloud operating environment that it's been trying to be for years.
If things get ugly?
Our next question asked for the panel's worst-case scenarios. Here's what our commentators had to say.
Jane: A concern I have is first and foremost for many of my ex-colleagues that there will be a talent exodus – voluntarily or otherwise. Broadcom has a responsibility to its shareholders where profit is king and so job losses are inevitable. VMware employees have already been informed of the three scenarios they will face under the new regime; new Broadcom contract, interim contract or redundancy. I appreciate there has to be attrition when companies are acquired but I really hope it's not to the levels that are currently rumored.
Justin: All happy companies are alike. All unhappy companies are unhappy in their own way. There are lots of ways things could go badly.
- Focus entirely on the high-end enterprise market, while SMB/midmarket customers leave due to a combination of attrition from neglect and deliberate price gouging that sucks everything but lint from their wallets on the way out.
- Abuse its market power and charge monopoly rents on the products that its customers can't afford to shift away from in any reasonable time frame.
- Pull a Unity and gouge customers with clip-the-ticket fees on everything.
- Combine Microsoft's security culture with Google's surveillance advertising culture and Amazon's monopsony culture as hapless regulators do nothing to stop it for a few decades.
- Broadcom boss dismisses notion China could derail VMware buy
- VMware edges towards its multi-cloud vision, with a side quest to virtualize AI
- UK clears Broadcom buying VMware, but deal yet to scale Great Regulatory Wall of China
- Broadcom asserts VMware's strategy isn't working and it basically needs rescuing
Keith: The worst-case scenario is Broadcom continues VMware's inability to execute on its cross-cloud claims. By disinvesting in important but non-core products Broadcom will put all of their innovation in just a handful of areas with cross-cloud being the most visible investment. While vSphere, HCI, and NSX will always be good enough cross-cloud is the growth opportunity. Failing at cross-cloud means Broadcom Software becomes the software king of extracting value out of mature products.
What's most likely to happen?
Lastly, we asked what our panelists think will happen.
Justin: There will likely be a major restructure and significant cuts. VMware has a lot of staff, and plenty of under-performing products in its portfolio that are badly in need of pruning.
Some of the savings will be returned to shareholders to buy support for bigger changes that will take time to pay off
Some will get sold off if a buyer can be found, others will just be killed. Some match the way Broadcom already groups things. The hardware parts should join the rest of Broadcom's hardware pieces. Storage will go to Enterprise Storage. The telco parts will likely end up under Wireless and Mobile Communications. The security pieces probably need to move under the Symantec banner. The maintenance phase enterprise software things will probably join the existing cash cow of similar software.
Some of the savings from cuts will be reinvested in R&D where Broadcom thinks the problems can be fixed. Cloud things, most likely. Tanzu needs help.
Some of the savings will be returned to shareholders to buy support for bigger changes that will take time to pay off.
Broadcom will make a bunch of mistakes because doing all of this well is really hard. It will do some other things successfully. It will be hard to tell which is which in advance.
Everyone who guesses right will proclaim their genius to the world. Those who made the wrong call will mostly pretend it didn't happen and no one will check.
Jane: You don't pay $61 billion for something to screw it up, so in general I think customers will continue to invest in VMware but might look to 'future-proof' themselves with alternative solutions, just in case. I haven't seen much discussion around the end-user computing (EUC) part of the business, it's all been very cloud-focused. So I wouldn't be surprised to see the EUC part of VMware spun off.
Keith: Broadcom will achieve its stated profitability goals. That's what they are experts in. On the way, we'll see layoffs in the 17K employee range.
You'll see products such as end user computing and security sold or spun out. Commercial (smaller customers) sales and support will go to partners, similar to how Dell and HPE handle these customers.
There will be even more marketing around cross-cloud with results coming a couple of years down the road.
The Reg view
From The Register's virtualization desk, the worst-case scenario is Broadcom pursuing multicloud without satisfying the huge numbers of core vSphere users.
Those users are also a market ripe for powerful and simple multicloud management tools that, in a best-case scenario, Broadcom would develop and deliver quickly. SaaS sprawl is real and has made IT perhaps even more complex now than in previous eras of computing. Whoever can tame that for IT pros will be thought of very well - as well as VMware is thought of now for taming server fleets.
The most likely scenario is that Broadcom makes enough cuts to VMware's people, and de-emphasizes some products, that a significant chunk of customers are upset enough to look elsewhere. Profits rise. Customer satisfaction doesn't. Broadcom emerges with a smaller and less engaged base of small and midsized customers, but deeper relationships with big customers who stick around in an uneasy symbiosis.
What do you think the future holds for VMware once it takes over Broadcom Software? We await your comments. ®