Customer concerns loom as VMware Explore event approaches

VMware Explore 2024 is set to kick off next week, marking the first time for the flagship customer event since Broadcom finalized its acquisition of VMware last November.

The $60 million deal raised questions among enterprise customers from the minute it was proposed in May 2022: What will the new VMware look like? Will Broadcom raise prices, introduce new licensing models, or rationalize products? To date, the acquisition has led to some layoffs, production discontinuations, and shifts to the partner program. (Read more about the Broadcom-VMware timeline)

VMware has about 300,000 customers, notes Stephen Elliot, group vice president at research firm IDC. “This means that you have every type of customer imaginable – small, medium, and large,” says Elliot, who has followed Broadcom’s acquisition of VMware since it was announced.

Among the broad VMware customer base, some consistent concerns have stayed at the forefront as the annual conference approaches. One is that customers want to continue to see innovation across the VMware portfolio, Elliot says. They also want a focus on integration, interface design, and an easier adoption path. “They are hungry for roadmap and architecture strategy sessions,” he says. “They are also looking for business value support when developing their use cases for executive management.”

In addition, customers are looking for help as they work across their internal teams, to sell the value of VMware to more buyers across the technology organization, Elliot says.

Deep-seated uncertainty

From the start, the acquisition led to real concern – and even animosity – among customers.

“Broadcom’s acquisition of VMware is disrupting established platform strategies and impacting sourcing, procurement, budgeting and architectural roadmaps, including strategic partnerships,” says Julia Palmer, a research vice president at research firm Gartner.

Gartner polled customers about the deal and found that 56% of impacted IT infrastructure and operations respondents are “very concerned” about the acquisition, while 42% are taking a wait-and-see approach, Palmer says.

Likewise, Naveen Chhabra, principal analyst at research firm Forrester, says organizations “are anxious about their exposure to VMware because they don’t know what their renewals would look like.”

“Tech leaders at large enterprises are considering alternatives,” Chhabra says.

Organizations that are considering a platform shift face a number of issues, Chhabra says. They’re concerned about how quickly they can move to a new platform, and whether the alternative vendors and products they’re considering will offer the capabilities they need. They also need to know whether the alternatives simply provide a replacement product or will actually fit into their existing IT ecosystems.

“I am talking to VMware enterprise clients each day,” Chhabra says. “I am consulting them on the pragmatic options and strategies. I believe VMware has gathered more animosity than it deserves or needs at this stage. Customers considered VMware a partner, but now they consider it a ‘necessary evil,’ and this change has happened almost overnight” following the acquisition.

Wakefield Research conducted a survey in June 2024 on behalf of CloudBolt Software, a provider of cloud financial management services. The findings provide some insight into how tenuous the situation is with many VMWare customers.

Wakefield surveyed 300 enterprise IT decision-makers across various industries that use VMware, and it found widespread apprehension among VMware users in the wake of Broadcom’s acquisition. In fact, nearly all respondents (99%) expressed concern, “reflecting a broad sentiment of unease across various industries, business sizes, and executive levels,” the report says. And the vast majority of respondents (95%) perceive Broadcom’s acquisition as disruptive to their IT strategy, with 46% considering it extremely or very disruptive.

Adding to these worries is the lack of clarity on pricing and packaging, the report says. All respondents expect VMware prices to rise under Broadcom’s ownership, with nearly three out of four anticipating an increase of greater than 100%. The research shows that many VMware customers indicate they have contracts expiring within the next 12 months, and 87% of respondents plan to make their “go-forward decision” within the next year.

To stay with VMware or to move on?

For those customers that are still anxious about the new VMware or might be considering jumping ship for other solutions, Eliot cautions that “this is a marathon, not a sprint. Customers are going to continue to work directly and with partners to understand where they want to go with VMware, and the related business and technology value aligned with each strategy.”

Every customer and partner should put the time and planning into understanding where they want to go with VMware, Eliot says.

“We have advised many technology leadership teams, and we often find they have to rethink the art of the possible with VMware,” Eliot says. “They pull together multiple teams to rethink where they want to go, and how to get there. It usually ends up with a renewal discussion, a roadmap discussion with VMware product teams, and a partner discussion on skills and expertise.”

“Are some customers having conversations about VMware alternatives? Yes,” Eliot says. “The smaller the VMware customer, the more it comes up. However, when it comes to replacement options that meet technology, security, scale, hardware support, skills, and process integration requirements [and considering] the total cost to migrate, the conversations often change to a renewal strategy.”

The conversation of what to do going forward needs to be about business value and reducing the business risk, Eliot says. Migrating away from VMware is not just a technology consideration. “VMware has four divisions today with much more focus and autonomy than before,” he says. “For many customers, this is going to be a very good change as technology execution moves forward.”

Broadscale platform changes wouldn’t be easy

Gartner clients have reported price increases for many VMware products, Palmer says, with some facing cost increases of two to five times. “As a result, stakeholders are seeking guidance from us to navigate this situation,” she says. “Based on thousands of inquiries Gartner conducted, customers are actively exploring alternative paths.”

This includes tactical moves such as hyperconverged solutions and alternative hypervisors, and strategic ones including distributed hybrid infrastructure platforms such as Azure stack HCI, AWS Outposts and others, container platforms, public cloud infrastructure-as-a-service (IaaS), and software-as-a-service (SaaS) solutions.

“Migrating from VMware’s server virtualization platform on a large scale would necessitate significant effort spanning multiple person-years, substantial one-time project costs, and entail business risks,” Palmer says. “Furthermore, the entire process would likely take anywhere from 18 to 48 months to complete.”

Clarity and reassurance at the confab

So, what does Broadcom need to do at the upcoming VMware Explore conference – and in the bigger picture – to reassure and retain VMware customers?

“Number one, communicate the continued technology product innovation that the VMware brand represents,” Eliot says. “They have been executing well since the deal closed, but not all customers are aware. The event is a great platform to get the word out on the product roadmaps and timing.”

A second point is about partners, Eliot says. “The company has not had this level of clarity on partners for over a decade,” he says. “There are four types of VMware partners today, and each is being treated differently for good reasons. Partners are looking at how to work with VMware, where the revenue and profit opportunities exist, and getting clarity on customer opportunities and [partners’] ability to differentiate. This will take some time but is moving rather quickly.”

There has been a lot of talk about Broadcom raising prices, introducing a new licensing model, and rationalizing products, so this might be a topic of discussion.

The subscription pricing model “was in progress for the past five years at VMware, so it’s not really new,” Eliot says. “The only difference now is this is the only model for customers. The product portfolio – and associated contracts – had gotten too complex for customers and partners.”

Product bundles are now the way forward for simplicity, Eliot says. “Customers now have to get educated on both the pricing model and bundles, so it’s taking time for them to understand the changes,” he says.

It also provides an opportunity for VMware, partners, and customers “to have conversations about roadmaps and future business value realization, and how broader adoption of the VMware portfolio can drive a higher business and technology return,” Eliot says. “It’s another opportunity for VMware, customers, and partners to revisit the business value conversation, and how VMware portfolio adoption can drive those returns.”

While obtaining a guarantee of price consistency is the most crucial aspect of the new VMware for customers, they are also seeking reassurances regarding investments in support, services, and R&D roadmaps for all VMware products, Gartner’s Palmer says.

To that end, Broadcom needs to showcase a commitment and support for main VMware products, Palmer says. That includes clearly communicating a future roadmap and R&D investments. The company also needs to address concerns raised in customer satisfaction surveys and show plans to improve support and services, Palmer says, as well as foster partnerships within the VMware ecosystem and its hyperscale partners.

Primarily, Broadcom/VMware needs to demonstrate that it understands – and will address – customer pains and challenges, Chhabra says. “Communicate, and acknowledge those pains,” he says.

Deep-seated uncertainty

To stay with VMware or to move on?

Broadscale platform changes wouldn’t be easy

Clarity and reassurance at the confab

Read more about the Broadcom-VMware deal