Broadcom ditches VMware Cloud Service Providers

'How can they cancel a major program affecting hundreds, perhaps thousands of customers, with zero notice?'

Exclusive Broadcom is tossing the majority of VMware's Cloud Services Providers as part of its shakeup of the virtualization titan's partner programs, say sources, leaving customers unclear who their IT supplier will be.

The $61 billion purchase of VMware by Broadcom in November was swiftly followed by news of how it planned to reorganize the business into several Broadcom divisions. A month later we revealed that Broadcom intended to discontinue VMware's channel program, and that some solution providers/ resellers would be transitioned to its own scheme, but on an invitation-only basis, from February.

However, while Broadcom informed one part of VMware's channel of this change, a second notice was also sent to Cloud Services Providers (CSPs), informing them that their program is going to be terminated at the end of April. This program allows service providers such as smaller cloud operators to sell a VMware-based cloud service.

In the letter, seen by The Register, Broadcom tells its cloud provider partners: "Effective April 30, 2024, the ability to transact as a VMware Cloud Services Provider, under the VMware Partner Connect Program, will come to an end. However, we want to emphasize that you may have the opportunity to join the Broadcom Expert Advantage Partner Program. This invite-only program has simpler requirements and offers expanded benefits, and we will begin inviting partners to join in early 2024."

One service provider told us their company had been left in the dark since that letter was received, and Broadcom has given them no indication of whether they will be invited to join its partner program or not, or what their customers are supposed to do if the company loses the right to operate a VMware cloud service.

"I don't know how many smaller providers are affected by this but it must be a very large number," the source told us. "The VCSP program was the only way for MSPs and service providers to offer a multi-tenant VMware-based cloud service."

Chatter among some in the industry is that Broadcom is only interested in keeping the largest and most profitable customers, and the company simply doesn't care about the smaller users and the providers that service them. Unconfirmed fears that are only ten percent of Vmware's biggest CSPs will be invited to the new master program.

"This all sounds very much like Broadcom taking an aggressive approach to its route to market and focusing on those partners that can deliver growth and significant revenue," said Omdia chief analyst Roy Illsley.

"I suspect the intention is to ensure that VMware consists of only profitable products and they are sold in a more cohesive way with the rest of Broadcom. So I expect to see some news on this continuing to come out for most of 2024 as the company puts this plan into action. I would not rule out disposals of some assets in a drive to streamline the portfolio to those that fit with Broadcom's strategy."

Running a big channel can be expensive - although not as expensive as running a direct sales force.

Regardless of the reason, there must be many smaller providers that face losing their right to operate VMware cloud services on April 30, and their customers might be completely unaware of the need to migrate to a new provider at short order.

It is probable that many of these customers will find themselves ending up on one of the larger cloud providers, which are understood to have a different relationship with VMware. The VMware Cloud on AWS service, for example, is operated and supported by VMware itself.

This would be ironic as Broadcom itself used the spin that its takeover of VMware would actually lead to more competition in the cloud market, back when it was trying to sweet talk European Union antitrust regulators into giving it the go-ahead.

The notion that the Broadcom-VMware merger might stifle competition was precisely why various regulatory bodies around the globe decided to look closely at the deal before allowing it to proceed. However the regulators focused on whether Broadcom (which makes chips) might limit VMware's compatibility with rival hardware, and may thus have been focused on the wrong problem.

It is doubly ironic as the UK antitrust watchdog, the Competition and Markets Authority (CMA), is currently looking into potential measures to address the domination of the domestic cloud market by the large cloud providers.

A service provider source told us they were still trying to comprehend this decision by Broadcom.

"How can they just cancel a major program affecting hundreds, perhaps thousands of customers, with zero notice, and zero details?" the source asked. "They sent the notices out the Friday before the holidays, with no follow-up, which makes the situation even more egregious. What are we supposed to tell our customers? It's mind-boggling."

We asked VMware and Broadcom for a response, but they had not responded by the time of publication. ®

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