VMware by Broadcom‘s recent annual user event Explore in Las Vegas was like no other I can remember in recent history.
The most notable change was the crowd size. Since acquiring VMware Inc., Broadcom Inc. has clarified that the focus is on the top 5,000 customers, which created a limited audience.
That had a ripple effect on the event as the lack of audience created an Expo Hall that was a virtual ghost town, particularly for the sponsors. The VMware booth had a moderate number of people, but many of the sponsor booths were empty. The same can be said for the learning labs, which are typically packed, given the primary audience is the information technology practitioner.
Despite the smaller audience, the show’s content and discussions gave me many insights. Here are my top five thoughts from VMworld Explore:
New management brings new priorities
At Explore 2023, Broadcom Chief Executive Hock Tan (pictured) stood up and told the audience that “not much would change.” That turned out to be Tan pandering to a nervous audience.
Since then, everything has changed, with Broadcom having revamped the channel program, the way customers buy products, customer focus and much more. One of the most notable points is that the portfolio has been reduced from 8,000 to four.
This is a double-edged sword for customers as the four SKUs make it easier to buy products, but it also forces organizations to purchase things they may not need or where they prefer to use a third party, eliminating choice. During his keynote and Q&A with analysts, Tan had no qualms about blaming previous management for the portfolio’s previous state.
I understand why Tan was so critical of previous management, but I felt he wasn’t being fair. Under former CEO Pat Gelsinger, VMware was an engineering-led company that constantly acquired and built new technology. It didn’t always fit together, but the company strived to be on the leading edge. Under Broadcom, financial strength will be the driver and that means VMware will shift to a fast follower.
Customer are paying more, and they aren’t happy about it
Broadcom has been open about the fact that pricing would change. Perpetual licensing is gone in favor of subscription. What does this mean for the customer?
No one knew for sure except that customers would likely pay more. Explore allowed me to talk to many customers of all sizes. Every customer I spoke to expressed that staying with VMware would cost them more, with an increase ranging from 30% to over 300%.
Needless to say, no one was happy about it. Many customers, particularly enterprise-class, feel stuck as their infrastructure is built around VMware, and decoupling it is next to impossible. Many customers are looking for alternatives, and Nutanix Inc. is coming up most often. This is a calculated decision by Broadcom; it knows many customers will leave, but those that stay will use Broadcom more and, in turn, pay the company more.
It’s all about VCF
The big news from the show was VMware Cloud Foundation 9.0, the company’s private cloud platform. Tan described the product as “AWS on-prem,” which is directionally correct but an exaggeration of the capabilities, since VCF’s handful of features doesn’t come close to the thousands that Amazon Web Services Inc. offers. That said, many customers are returning data and workloads to private clouds, and the VMware stack is excellent.
From a product perspective, if it’s not aligned with VCF, it will likely go by the wayside. At the event, I talked to a customer about ESXi Embedded product, which many original equipment manufacturers use to build VMware functions into products. This is used in many mission-critical environments, such as public safety and energy. The product has been shut down, leaving the OEM partners holding the bag.
“Forcing everything to VCF throws away a lot of innovation done at the edges with partners like us,” one partner told me. “Police cars, control systems and factory robots all used Embedded ESXi, and now those customers and partners are left scrambling.”
Broadcom is driven by its financial metrics, particularly its operating margin, and the decision to consolidate its products to a handful of skews will keep profits high. It will also cause a deterioration of customers, but I’m sure Broadcom considers that collateral damage.
The private cloud opportunity is real and significant
The public-private cloud debate has raged on for the better part of the past five years. Currently, several macro issues are causing companies to look at private clouds. These include the war in Ukraine, which created concerns around data sovereignty, security issues, AI, which requires control over data, and the recent CrowdStrike issue, which put a lens on business resiliency.
I expect private cloud growth to outpace public cloud, although off a much smaller base. VMware’s turnkey approach with a fully engineered solution should enable it to grow the VCF installed base inside the top 5,000 customers, where the company is focused.
The broader opportunity is hybrid multicloud, including edge and public cloud. VMware Edge Compute is one of the leading solutions, and its hypervisor is portable across all hyperscalers. I would have liked to have seen Tan’s keynote talk track extend to hybrid multicloud instead of solely focusing on private cloud, but that opportunity is certainly there. The company has an excellent story, led by its software-defined wide-area network and secure access service edge portfolio, which I called out in this post.
The end of VMware Explore is coming
I suspect if VMware had not committed to Explore this year, there would not have been an event. If one looks at other Broadcom companies, none has user events, and, in reality, the company doesn’t need it. As has been discussed, the focus is on the top 5,000 customers, which are the biggest of the big, and typically, vendors will go to those customers to talk roadmap, pricing or anything else relevant to them, making an event such as Explore less relevant to them.
Also, historically, Explore was used to roll out new products, and with the keynotes being so full of updates, it took a lot of work to keep up. The limited set of products means fewer announcements and less of a reason to have a marquee keynote. In fact, the one this year was only an hour, with no product-led discussion as in years past.
From my conversations with VMware employees, the company is committed to 2025 and maybe 2026, but after that, I’m expecting VMware Explore to follow CA World into being nothing but memories.
VMware Explore 2024 is in the books and as one would have expected, it was markedly different than in years past. The rationalized portfolio and focus on simplicity are good for many customers but not for all. I’m sure Broadcom has done its due diligence and is expecting collateral damage from lost customers, but that’s to be expected when the focus shifts from products to profits.
