Broadcom swings its axe at VMware

Freeform Dynamics

What a difference a week can make. The dust had barely settled on Broadcom’s $69bn acquisition of VMware before Broadcom, much as its critics had predicted, blew it all up in the air again.

Like many in the industry, we were initially relieved that the 18-month period of uncertainty was finally over. Now was the time, or so we thought, for Broadcom president and CEO Hock Tan to make good on his assurances – more R&D spending, more investment in the partner ecosystem and so on.

Instead, with somewhat less than immaculate timing, just five days later Broadcom started making VMware staff redundant and throwing their resellers and other partners into confusion.

Expecting the unexpected

Some cuts were expected, of course – Broadcom had previously said it could find $250m of ‘synergies’ once the deal completed, and VMware employees were warned earlier in the year that lay-offs were coming. They were told they’d receive one of three options: a new employment offer from Broadcom, a short-term contract as part of a transitional arrangement, or a ‘generous’ severance package.

Of course they didn’t know who would get which offer or how deeply the axe would cut, though. And even for VMware staff who’ve now been invited to stay on, there’s an added complication: Broadcom is mandating a return to office working, instead of VMware’s hybrid arrangements, making this an unpopular option for quite a few people.

And for partners, the problem is that this all comes on top of uncertainty over contract terms and fear over possible price rises – Broadcom had already said it wanted a rapid transition from perpetual licences to ongoing subscriptions. But subscriptions rarely cost less than purchases over time, and require buyers to account for them differently.

Rivals have pounced on this fear and uncertainty with glee, of course. As Nutanix boss Rajiv Ramaswami said, aiming to counter Hock Tan’s investment promises, “If you look at its history, Broadcom’s whole business model has been to maximize acquired assets in two to three years.” That means cutting costs and boosting revenues.

What’s your contingency plan?

Thus far, VMware has been somewhat sheltered by its position as an incumbent. For example, I recently spoke with an IT manager who’d tried open alternatives, but discovered that too much of the software their company ran was only available as vSphere-based virtual appliances.

This is changing, though – indeed, it has to. In this era of Kubernetes, hybrid cloud and serverless, there’s less and less excuse for software to be tied to a specific infrastructure. In other words, stay with VMware by all means, if it suits your needs and works for you. But don’t throw away your Plan B just yet, and if you don’t have a Plan B, then perhaps you should make one – there’s several independent resources online to help you do so.