As Broadcom nukes VMware's channel, the big winner is set to be Nutanix

A lot of IT depts can't wait to get past their ESX addiction

As the fallout from Broadcom’s takeover of VMware continues to rain down on the industry, rivals of the one-time virtualization giant have the opportunity to swoop on customers thanks to the massive changes happening to its channel.

US semiconductor and software multinational Broadcom finally completed its acquisition of VMware in November, and wasted no time in reorganizing its latest subsidiary into four new divisions, announcing layoffs, and setting about divesting itself of the bits of the company it sees as less desirable.

Broadcom’s strategy is to focus mostly on sales of VMware Cloud Foundation, which encompasses compute, storage, and network virtualization plus management, and also shift customers entirely to subscription licensing, as The Register reported in December.

As part of this move, Big B signaled an end to VMware’s partner program, with a select few to be invited to join Broadcom’s own club. It is also ditching the program that allowed cloud operator partners to provide a VMware-based cloud service for customers.

The VAR community sees a multiyear runway for the Nutanix Cloud Platform and Nutanix AHV

This upheaval has plenty of partners and customers alike worried. There is one possible upside: It could all be a substantial boon for VMware’s rivals, with Nutanix being singled out as chief beneficiary, potentially, by financial analyst Jason Ader at the William Blair and Company.

Ader wrote in a report Wednesday that the disruption in the infrastructure software market from Broadcom’s assimilation of VMware was “turning out to be more significant than we expected, per our recent round of value-added reseller (VAR) discussions.” The write-up spurred Nutanix's stock price to rise about six percent, from $50.38 on Tuesday to $53.36 today.

“While we expected Nutanix to benefit from this disruption, the VAR community sees a multiyear runway for the Nutanix Cloud Platform and Nutanix AHV [its hypervisor] to take market share from VMware,” Ader added.

While renewal quotes for VMware are valid until February, VARs – value-added resellers – have indicated customers are already looking at alternatives and are planning to recover their dependence on VMware’s ESX hypervisor, Ader said.

Cisco’s Nutanix channel activity is also "skyrocketing," according to Ader, with resellers seeing a "major uptick" in activity thanks to the recent pact with Nutanix. The two companies announced that strategic partnership last year, with Cisco ditching its own Hyperflex hyperconverged software in favor of putting Nutanix’s platform onto its UCS servers.

As well as the opportunity to replace Hyperflex as licenses for that expire, “the disruption at VMware creates a greater incentive for customers to adopt AHV as part of the combined UCS-Nutanix solution,” Ader claimed.

Meanwhile, channel insiders close to VMware suspect the prognosis for the rest of VMware’s product portfolio is not good.

The four divisions VMware was sliced into by Broadcom, as we reported last year, will oversee the VMware Cloud Foundation (VCF); Tanzu (TNZ); software-defined edge (SDE) products; and application networking and security (ANS) offerings.

Tanzu is all about applications, with the Tanzu Application Platform (TAP) for cloud-native development on Kubernetes, while Tanzu Application Service (TAS) is the former Pivotal Cloud Foundry platform. These go up against market leaders – such as Google Kubernetes Engine, and Red Hat OpenShift – and VMware has only announced a few customers for them.

The SDE division steers VMware’s SD-WAN, Edge, and Telco RAN platforms, though the SD-Wan resellers have largely had their contracts canceled while telco resellers were part of the now canceled VMware Cloud Provider program. The sentiment in the channel is that Broadcom will likely lose most of these resellers, who all largely sell rival products in any case.

AT&T is VMware’s largest customer for SD-WAN, said to account for about half of the total revenue, and the product is expected to be dead if the telecoms giant drops it.

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The ANS division encompasses products such as the NSX network virtualization tools and AppDefense workload protection platform. This product area is said to have decent revenue prospects, but while NSX may have revenue over $1 billion, this represents about a tenth of VMware's sales figures and not believed to be a vital concern for Broadcom, sources indicated.

Meanwhile, Broadcom has already announced its intention to divest itself of VMware’s end-user compute (EUC) and Carbon Black security software concern, after announcing the latter as an independent Broadcom business unit in November.

The dismemberment of VMware by Broadcom has thus come quicker than most industry observers expected, and its future looks to be largely developing the VMware Cloud Foundation (VCF) and VMware vSphere Foundation (VVF) server virtualization bundles that will be sold directly to the top 2,000 or so customers.

This may prove perfectly acceptable to those customers, with at least one VMware partner suggesting users would actually like the new subscription licenses. “We did some preliminary pricing validations for customers. So far, I must say it looks very good and very attractive," the partner claimed in a video. ®

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