VMware Explore 2024 is gearing up to commence next week, marking an inaugural event for the major customer gathering since Broadcom completed its purchase of VMware in November last year.

The $60 million acquisition sparked uncertainties among enterprise clients right from its announcement in May 2022: What is the future for VMware? Will Broadcom implement price increases, new licensing frameworks, or streamline offerings? Since then, the acquisition has resulted in some layoffs, halts in production, and alterations to the partner program. (Discover more about the Broadcom-VMware timeline)

With approximately 300,000 clients, VMware serves a diverse customer base, observes Stephen Elliot, group vice president at IDC. “This means it caters to every type of customer imaginable – small, medium, and large,” explains Elliot, who has been monitoring Broadcom’s VMware acquisition from its inception.

A common concern among the extensive VMware customer community remains as the annual conference draws near. Customers are eager to witness continued innovation in the VMware suite, notes Elliot. They also seek improved integration, user interface designs, and a streamlined adoption process. “They are eager for insights into the roadmap and architectural strategies,” he mentions. “They also seek support in creating business value when formulating their cases for executive decision-makers.”

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.

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, notes that organizations are worried about their dependence on VMware due to uncertainties regarding future contract renewals.

Chhabra adds that many tech leaders at major corporations are now looking at alternative solutions.

Organizations contemplating changing their platform face several challenges, according to Chhabra. They are concerned about the speed of transition to a new platform, whether alternative vendors and products can match their needs, and if these options can seamlessly integrate into their current IT ecosystems.

“I am in daily discussions with VMware enterprise clients,” Chhabra mentions, “advising them on realistic options and strategies. Despite the negative sentiment, I think VMware is receiving more criticism than warranted at this point. The perception of VMware as a partner has shifted to a ‘necessary evil,’ a change which has occurred almost instantly following the acquisition.”

Wakefield Research carried out a survey in June 2024 for CloudBolt Software, focusing on the experiences of VMware customers following Broadcom’s acquisition. The study included responses from 300 IT decision-makers from varied industries who use VMware solutions.

The survey revealed significant unease among VMware users, with 99% of respondents indicating concerns which showcase a wide-spanning worry across different sectors, business sizes, and executive levels, according to the study. Furthermore, a significant 95% of these professionals see Broadcom’s acquisition as a disruption to their IT strategies, including 46% who feel it is extremely or highly disruptive.

An additional point of concern highlighted by the report is the uncertainty regarding future pricing and packaging under Broadcom’s oversight. All participants anticipate a rise in VMware’s pricing, with about 75% expecting increases to exceed 100%. Also, many VMware clients have contracts approaching their end within the next year, leading 87% of surveyed individuals to plan their future actions within this timeframe.

Eliot gives advice to VMware customers who are considering their options in light of these developments, reminding them that “this is a marathon, not a sprint.” He highlights the importance of continuing to work closely with partners and directly with VMware to strategically align with their business and technology goals.

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.”

Gartner clients have reported significant price hikes across a range of VMware products, according to Palmer, with some experiencing increases by two to five times their original cost. “In light of these developments, stakeholders are turning to us for advice on how to best handle the situation,” she notes. “Drawing on thousands of client interactions, we’ve observed a trend of customers considering different options.”

These options include both tactical alternatives like hyperconverged solutions and other hypervisors, and strategic choices such as adopting hybrid distributed infrastructure platforms like Azure Stack HCI and AWS Outposts, as well as exploring container platforms, public cloud infrastructure-as-a-service (IaaS), and software-as-a-service (SaaS).

“A large-scale migration away from VMware’s server virtualization platform would require extensive resources, potentially spanning multiple years and significant one-time project expenses, while also introducing considerable business risks,” states Palmer. “The entire transition could take anywhere from 18 to 48 months to fully implement.”

With this backdrop, the pressing question remains: what measures must Broadcom take during the forthcoming VMware Explore conference, and more broadly, to appease and secure the loyalty of VMware’s customer base?

“Firstly, it’s critical to highlight the ongoing advancements in technology products that the VMware brand is known for,” Eliot notes. “They have been performing well post-acquisition, however, not all clients have been updated. This event serves as an excellent opportunity to inform them about the future product strategies and schedules.”

Eliot also emphasizes the importance of partners. “For the first time in over ten years, the company has clear policies regarding partners,” he states. “Today, there are four distinct types of VMware partners, each treated differently for valid reasons. Partners are examining their collaboration avenues with VMware, including revenue and profit potentials, as well as understanding client engagements and how they can stand out. Although this process will require some time, it is advancing quite speedily.”

Discussions likely will include topics such as Broadcom’s potential price increases, the introduction of a new licensing model, and product rationalization.

“The shift towards a subscription pricing model has been evolving over the past five years at VMware, so it’s not a new concept,” Eliot explains. “The key change now is that this model is the sole option for clients. The previous product portfolio and related agreements had become overly complex for both 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 states.

This shift also opens doors for VMware, its partners, and customers “to discuss roadmaps and future business value realization, and how a broader adoption of the VMware portfolio can drive a higher business and technology return,” according to Eliot. “It’s another chance for VMware, customers, and partners to revisit the business value conversation, and how adopting the VMware portfolio can enhance those returns.”

For customers, ensuring price consistency is paramount with the new VMware strategies, but they are also looking for assurances on investments in support, services, and R&D roadmaps for all VMware products, notes Gartner’s Palmer.

Consequently, Broadcom needs to demonstrate steadfast commitment and support for the main VMware products, Palmer indicates. This includes clear communication of future roadmaps and R&D investments. The company must also address issues highlighted in customer satisfaction surveys and display plans to enhance support and services, Palmer adds, as well as to cultivate 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.

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