Broadcom Acquisition of VMware – Know Your Risk
December 4, 2024
Written by Alan Nicholson, Executive Advisor
The acquisition of VMware by Broadcom has significantly impacted the enterprise technology landscape. Broadcom, known for its semiconductor and enterprise software solutions, has shifted VMware’s go-to-market approach, licensing models, and portfolio structures. This move has raised concerns about product quality/innovation, significant price increases to support virtualization assets, and cultural differences between the combined two companies. Despite these challenges, the acquisition offers opportunities for organizations to reassess their infrastructure hosting strategy, optimize their infrastructure stack to better manage costs, and explore alternative solutions such as private cloud services, public cloud migration, or alternative hypervisors/containerization. Enterprises must carefully evaluate their options and plan strategically to navigate the changes brought by this acquisition.
Before diving into the industry reaction, impact, and what enterprise IT organizations can do to mitigate any risk or evaluate impacts, let us look at the history of both organizations:
Broadcom: Founded in 1961, known for semiconductors and enterprise software. Notable acquisitions include LSI, Emulex, Brocade, CA Technologies, and Symantec.
VMware: Founded in 1998, known for market-leading virtualization technology. Acquired by EMC in 2004, became a standalone company in 2022, and acquired by Broadcom in 2023.
When Broadcom announced the acquisition of VMware in 2023, the news quickly caused disruption for enterprise companies with significant VMware footprints. Shifting licensing models, increased costs, and new product bundles have driven executives responsible for large IT environments to quickly understand the technology and cost impacts. Many of these same executives have expressed concerns over Broadcom’s past M&A history and the legal challenges associated with such an acquisition.
Impact of Acquisition
As the true impact of the acquisition continues to shake out for enterprise IT organizations, there are several “known” changes that have already been realized by IT organizations. A few of these changes include:
A shift from perpetual licensing to subscription licensing
The simplification of product portfolios into bundles
Licensing changes from sockets to server cores, leading to increased costs or stranded capacity
Divestment of VMware’s End User Computing business and reorganization of security products under the Symantec business unit
Changes in reseller agreements and a preference for direct relationships with larger enterprises
Windval has been working to address these changes with many of our large enterprise clients. Our executive advisor and architecture teams have been helping client teams understand impact, get their arms around their current VMware footprint(s), and design future state environment(s) that balance infrastructure hosting requirements and cost management needs. One thing is clear, now is a very good time for IT leaders to reassess their infrastructure environments and seek opportunities to optimize for the new realities of a Broadcom/VMware world.
Options and Alternatives
For many VMware customers, the cost implications of the Broadcom acquisition are significant and have fundamentally changed the financial evaluations of virtualization performed in the past. So what options are there for those not interested in sticking with the status quo?
Recommendations
In addition to assessing current state environments, working through technical and cost considerations, and framing and optimized future state, what can IT leaders do? Based on our deep experience and firsthand knowledge of helping clients navigate this challenging path, Windval recommends the following:
Assess future infrastructure needs and alignment with the VMware technology stack
Consider the benefits of new product bundles and potential cost savings
Review VMware use cases and explore alternative solutions
Understand potential migration cost impacts and model future state scenarios
Perform detailed reviews of VMware product inventory and contract entitlements
Create a post-renewal strategy and engage key stakeholders early and often to discuss impact mitigation options
Throughout the process of addressing the above bullet points, Windval believes clients should emphasize compatibility, cost, performance, security, support, and other mitigation considerations. As noted before, now is a great time to evaluate your infrastructure strategy, benchmarking, existing reseller agreements, and conduct a deep financial analysis.
Windval recommendations can best be summarized by the following:
Getting Started
We understand the complexities of introducing transformational changes into large enterprise organizations. We know that embracing new strategies, frameworks, and operational models are especially challenging in large enterprises. The Windval team of executive advisors and technology experts welcome the opportunity to learn more about your environment and continue the discussion. If you are a large enterprise and existing VMware customer, time is of the essence to get your arms around your environment – we can help you do just that. We have a proven process to rapidly assess your environment, understand your infrastructure initiatives, evaluate your options, and design a strategic path forward to mitigate the impacts of your VMware environment.
Connect with us to begin evaluating your infrastructure hosting options and developing your strategy for navigating the risks introduced by the Broadcom acquisition of VMware. Based on what we see with our clients, waiting is not a good option.