Uncertainty lingers with Broadcom’s VMware acquisition

Broadcom has a history. 

Just days after completing its $18.9bn acquisition of CA Technologies in 2018, Broadcom ‘optimised’ the business at the expense of 300 of its new employees. A further 2,000 were put on notice that their days were numbered. 

Not only were large numbers of employees let go, CA’s application security testing platform, Veracode, sold to private equity before the ink had even dried.

Just a year later, Broadcom stuck to the same playbook with Symantec following its $10.7bn purchase of the cyber vendor’s enterprise security business. It took just six months for most of Symantec’s Cyber Security Services business to be sold to Accenture.   

Based on all this, and now that its $61bn acquisition of VMware is now complete, many partners and customers are concerned. 

The cause of their concern? Not only are the targets of its acquisitions divided and sold off, but prices are also routinely increased, with little-to-no corresponding increase in functionality or value. 

Tracy Woo, a senior analyst at Forrester, recently said: “Following the purchases of CA and Symantec, Broadcom raised prices, decreased support, and stopped investing in innovation.”

“VMware customers would be wise to have an exit plan,” she added. 

Since the VMware acquisition was first announced, we have fielded numerous inquiries from major organisations across the Asia-Pacific and Japan region. Large enterprises with complex VMware environments – banks, insurers, major manufacturers, and critical infrastructure providers in particular – are looking to de-risk their businesses from the potential changes.  

According to Forrester, these are just a drop in the ocean. Principal analysts Michele Pelino and Naveen Chhabra recently wrote an article highlighting their top predictions for 2024, and they didn’t mince their words; “Twenty percent of VMware enterprise customers will escape the VMware stack,” they wrote. 

At the time, they noted: “The impending acquisition of VMware by Broadcom has cast a shadow on an already beleaguered VMware customer base. Many are exhausted by significant price hikes, degrading support, and mandatory subscription to software bundles in which some modules such as NSX and Aria Suite/vRealize Suite end up as shelfware.” 

These issues mirror the concerns we’ve been hearing from current VMware customers.

Increasingly, we see a trend where organisations are looking to implement a ‘dual vendor’ strategy. By doing so, they seek to gain two key benefits. 

The first is to have an established alternative should they need to migrate more of their workloads away from VMware if prices are significantly increased. This gives their business greater resilience and essentially provides a ‘backup plan’ should the dire predictions come true. 

The second is to gain leverage. Should Broadcom announce a VMware price hike, they intend to use the threat of switching their environment over to Nutanix as a bargaining chip to get a better deal. 

Either way, the concern is real. 

VMware has historically been an innovative tech leader, but this acquisition changes the relationship that customers will have with the company going forward. If you look at its history, Broadcom’s whole business model has been to maximise profitability of acquired assets within a few years.

Those who previously relied on VMware will feel the change. From their customers to their employees, we’re hearing concerns over what’s to come next. 

Until those changes come to pass, organisations should consider a strategy that gives them flexibility and reduces their dependence on VMware. 

Aaron White is general manager and vice-president of Nutanix Asia-Pacific and Japan