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Broadcom Shifts Strategy on VMware Customer Relationships

In a notable shift of strategy, Broadcom has decided to forgo direct dealings with VMware’s largest 2,000 customers. Instead, the company will now focus on working closely with VMware’s top 500 accounts, thereby opening up opportunities for channel partners to engage in deals and add value for VMware users. This pivot is perceived as an attempt by Broadcom to retain its customer base amidst mounting concerns about user migration away from VMware, although skepticism remains about the efficacy of this approach.

Following Broadcom’s acquisition of VMware approximately one year ago, various clients have expressed dissatisfaction with the resultant changes. Among the more controversial alterations have been the discontinuation of perpetual license sales, consolidation of VMware’s product offerings into fewer SKUs, and the termination of VMware’s established channel partner program. These decisions have prompted some businesses to reevaluate their partnership with VMware.

For instance, Beeks Group, a cloud service provider based in the UK, reported a staggering 1,000 percent increase in its VMware costs, which subsequently led the company to migrate a majority of its 20,000-plus virtual machines to the OpenNebula platform. Additionally, numerous clients have indicated to Ars Technica their intention to either explore or implement complete or partial migrations away from VMware in the past year, reflecting a significant trend in the market.

In an effort to curb potential losses, Broadcom is now integrating channel partners into the arrangements that were previously managed directly by the company. Earlier this year, CRN reported that Broadcom had taken control of over 2,000 of VMware’s key accounts, much to the bewilderment of partners and customers alike. During a March earnings call, Broadcom’s CEO Hock Tan emphasized a strategy focused on upselling these accounts. Recent reports from The Register indicate that Broadcom has now informed partners of its decision to limit direct engagement to just the top 500 VMware accounts.

A spokesperson for Broadcom stated:

“Broadcom continues to work on behalf of our partners to create new value in capturing the market opportunity for private cloud. Most recently, we announced a program currently in development to offer qualified VCF customers a 15 percent professional service entitlement of their annual contract value to access either partner-delivered or Broadcom professional services. This initiative aims to enhance both time to value and return on investment. The number of direct strategic accounts is not fixed; it evolves over time.”

At the Canalys APAC Forum, chief analyst Alastair Edwards elaborated on Broadcom’s strategy, noting that “Broadcom recognizes that its best defense against potential migrations is ensuring customers fully implement its comprehensive private cloud bundles and achieve strong returns on investment. By reallocating 1,500 major users back to partners, Broadcom is positioning itself to achieve this goal. They are even designating 15 percent of the deal value to its channel partners to fund professional services, ensuring that VMware software is operational swiftly,” according to reports from The Register.

Source
arstechnica.com