Things sound good now, but will they stay that way?

Following the announcement of Broadcom’s plan to buy VMware, people have been wondering what it might mean for the channel.  If you listen to Thomas Krause, president of Broadcom’s Software Group, the answer seems to be only good things.

“I think there are some things that we have learned relative to the CA and Symantec acquisition in terms of the value of the channel. We want to continue to support the channel,” he told analysts in a call. “That’s going to allow us to support a lot more revenues in a cost-effective way. So we see a real opportunity to leverage that.”

He didn’t stop there, adding at a later point in the call: “I think one thing we’ve learned is there’s an opportunity to embrace the channel, the two-tier distribution model, distribution partners and key value-added resellers…with this transaction, we are focused on serving all customers via a combination of our collective direct sales organisations as well as through our important channel partners.”

Still, a closer look at those comments might concern some existing VMware partners. It’s not quite as unequivocal an endorsement of channel partners as it might first appear. Notice the use of “key value-added resellers” and the way the sentence emphasises “our collective direct sales organisations as well as our important channel partners”. 

Then there is the debate over which strategy Broadcom pursues once it buys VMware. Forrester senior analyst Tracy Woo told Computer Weekly that VMware customers should be concerned if the company uses the same playbook as it did after buying CA and Symantec, where “CA and Symantec customers saw massive price hikes, worsening support and stalled development”.

Not just customers, I would suggest, because those kinds of tactics probably reflect just as badly on the channel partners tied to the vendor.

In any case, VMware partners didn’t seem too impressed in the immediate aftermath of the announcement. A snap global survey of VMware partners by Canalys found that 46% had concerns about the acquisition’s impact and only 16% thought it was a great move.

As Canalys pointed out, this may be due to Broadcom’s strategy after the CA and Symantec takeovers of focusing “on building direct sales relationships with around 600 large enterprise customers across the globe, with the channel business covering mid-market and SMB largely ignored”.

It noted that certain product lines were cut with little prior warning to Symantec’s channel and customers, and agreed product roadmaps between Symantec and key accounts were scrapped as part of cost-cutting measures.

Canalys believes Broadcom’s plans for VMware will be “underpinned by an expanded direct sales focus”. Broadcom plans to push its direct sales model “into a further 1,500 enterprise accounts, a large proportion of which are currently served by VMware’s largest resellers and GSIs – this will be a source of real worry for many leading VMware partners”.

It’s hard to see how it couldn’t be. There is a danger, however, that this plan may undermine the acquisition because VMware does not have the direct salesforce to sell and deliver its complex technologies. Neither does Broadcom. The emphasis on expanding direct sales could be difficult to achieve.

Similarly, Broadcom has committed to maintaining the two-tier distribution model for VMware beyond the 1,500 direct enterprise accounts, “but it lacks experience of operating a broad channel business”.

As Canalys points out, the best way for Broadcom to reduce sales costs and gain greater efficiency would be to increase its investment in VMware’s indirect channels. That does not appear to be what Broadcom has planned.

“The biggest risk for VMware’s partners is that Broadcom pursues aggressive cuts to partner investments, resources, incentives and support, through a lack of belief in the strategic value of VMware’s channel model,” said Canalys. “Channel partners will fear any disruption to this, while competitors, including Nutanix and Microsoft, will seek to capitalise on these concerns.”

It will be interesting to see how this pans out, but based on past behaviour, there probably isn’t a lot of cause for optimism from the VMware channel.