Analysts weigh in on Broadcom-VMware deal

Broadcom’s planned acquisition of VMware for $61bn could expand its reach into enterprise software as it seeks to diversity its portfolio, but it remains unclear how VMware customers and the market could be impacted by the move.

Michael Warrilow, vice-president analyst at Gartner, said VMware customers in Asia-Pacific (APAC) should not assume it will be “business as usual” in the long term.

“VMware customers in APAC will need to assess their exposure and press VMware to commit to specific provisions in writing before making further investments,” he told Computer Weekly, adding that the acquisition of VMware by Broadcom, if it closes, is of the highest significance to Broadcom.

Broadcom’s latest move comes amid its efforts to expand its footprint beyond semiconductors. In 2018, it acquired CA for $19bn followed by Symantec for $10.7bn a year later. It plans to fold CA and Symantec under the VMware brand after the deal closes.

“The semiconductor market has been hit hard by the pandemic with materials and shipping supply issues,” said Tracy Woo, a senior analyst at Forrester. And with flattening growth in performance and incremental improvements in innovation because of constraints in device physics, the chipmaker is looking at other areas for expansion, she said.

“VMware is a main player in enterprise software and especially wins with its management products [vRealize management suite and CloudHealth],” said Woo. “These products in VMware’s portfolio have seen tremendous growth year over year and it continues to far exceed its competition.”

Gartner expects Broadcom to continue investing in VMware’s core technologies, such as VSAN, NSX and vSphere/ESXi, but it remains to be seen what happens to other products in the VMware portfolio, said Warrilow.

Woo said VMware customers should be concerned if Broadcom uses the same playbook that followed its CA and Symantec acquisitions, where “CA and Symantec customers saw massive price hikes, worsening support, and stalled development”.

She noted that Symantec at the time had redirected its focus to its biggest resellers and customers and largely abandoned its customer base of 100,000 to prioritise its top 2,000 customers.

“With VMware, the big question is whether Broadcom can leverage a massive enterprise software portfolio and customer base to build a competent modern solution that extends from mainframe to edge,” she said. “Or does it continue with the same trend of squeezing clients for licensing dollars at a time of rising global inflation?”

VMware customers in APAC will need to assess their exposure and press VMware to commit to specific provisions in writing before making further investments

Woo said that if VMware customers are spooked by the Broadcom acquisition, then Red Hat could stand to benefit, noting that VMware customers looking to fully move off VMware could migrate to Red Hat’s open source kernel-based virtual machine as an alternative hypervisor.

“And although Pivotal – now Tanzu Application Platform (TAP) – took an early lead as a multicloud container platform standard for enterprises, Red Hat’s OpenShift cloud platform has surpassed TAP in total market share and capabilities as VMware faltered in satisfying its customers,” Woo added.

Warrilow said it is important to note that vSphere, which is VMware’s core product, already supports containers, but given that TAP is a relatively new suite within the VMware family, “existing and new customers may be more hesitant”.

But this alone does not guarantee that Red Hat OpenShift will be the beneficiary, said Warrilow. “A cloud-native application platform is different from the underlying container infrastructure. As an example, the CNCF [Cloud Native Computing Foundation] currently lists 68 certified Kubernetes distributions – including D2iQ, Microsoft, Mirantis and SUSE (Rancher). Also, all the major cloud providers have offerings in this space.”