*On May 26, 2022, Broadcom said that after purchasing VMware with us $61billion, VMware "will quickly change from permanent license to subscription mode". This * was expressed by Tom Krause, President of Broadcom software group, at the Broadcom earnings conference call on Thursday.
Within three years after the transaction is concluded, VMware will increase the estimated EBITDA of Broadcom by about $8.5 billion - a considerable increase given that VMware's current EBITDA is about $4.7 billion.
At that time, someone asked him how the semiconductor giant planned to achieve this expected goal: subscription is the solution.
Krause has also repeatedly said that Broadcom intends to devote itself to the key product portfolio of VMware, and is glad to acquire sales organizations and channel relationships, so that Broadcom can obtain a market breadth that it can not reach at present.
The sales work of Broadcom on the road of excellence and expertise reflects its concept: CA technologies performs best when it focuses on the global top 500 companies through direct relationship.
Krause said that after the acquisition of Symantec's enterprise products, Broadcom decided to pay attention to those large global companies again - which can explain why Symantec's marketing work has become less eye-catching after the acquisition. Small customers feel that they have been neglected, and some small customers have begun to look for new suppliers.
Obviously, this scene is unlikely to be repeated in VMware.
Krause and chenfuyang, CEO of Broadcom, both said that Broadcom plans to operate more than 300000 VMware customers. Obviously, it will be transformed into a subscription based licensing model in the next few years.
Chenfuyang said, "we will ensure that VMware's huge customer base is well supported. This is the business foundation on which our future development depends." This job is specifically assigned to channel partners.
Chenfuyang said: "we don't want to leave the channel, we want to embrace the channel."
Chenfuyang added: "frankly speaking, the goal is the same whether it is a permanent license or a subscription. In a sense, we are redesigning the contract from a permanent license to a subscription. Due to the change of licensing mode, VMware may also encounter the dilemma of slow growth in the short term."
Krause said that Broadcom was willing to accept that the profit of VMware was lower than the expectation of Guanqun and Symantec, and the R & D sector benefited from this. The software leader promised to make continuous investment and innovation in VMware's core infrastructure products (i.e. vSphere, vsan, vrealize and NSX), which are the long-term focus of Broadcom.
Chenfuyang and Krause spoke highly of VMware's sales team, but the Broadcom slide material announcing the acquisition mentioned that "through prudent investment in the market and paying attention to existing customers, the efficiency of the sales and marketing departments will be improved". In combination with Broadcom's plan to integrate back office functions and the company's policy of controlling general and administrative expenses to 1% of revenue, it is obvious that VMware's payroll will be partially reduced.
Chenfuyang also said that the acquisition of VMware would mean that Broadcom would obtain another 1000 or so major customers. He added that this virtualization software giant would enable Broadcom to help those users manage the entire application life cycle from development to long-term use.
In the short term, chenfuyang expects that VMware's product portfolio will help companies with complex IT systems update and transform applications, and make it easier to consider public cloud migration.
However, since the major customers of Broadcom are often highly regulated entities, chenfuyang believes that the private cloud is still a huge opportunity for VMware.
Chenfuyang also said that Guanqun technology's developer tools will complement VMware's Tanzu product portfolio, which may make it more attractive to developers or more important to developers of more than 1500 large global companies that Broadcom wants to win over.
Michael warriow, vice president of infrastructure software research at Gartner, who closely follows VMware, said that the research firm's advice to customers was "proceed with caution".
Warrilow said that customers need commitment from Broadcom in terms of VMware price and product roadmap, because Broadcom has a precedent of raising the price of the products of the acquired company.
"Don't think it's business as usual," warrilow said
He also suggested that VMware customers begin to develop contingency plans for emergencies.
He also suggested that customers considering VMware's Tanzu cloud native application development portfolio should "stop" exploring the portfolio until they can better understand Broadcom's intentions.
Tanzu is a powerful tool for VMware to expand its attraction from infrastructure management to other fields. Therefore, if customers' interest is suspended or weakened, it is not good news for Broadcom.
Customers may also try their best to oppose the radical move of Broadcom to transform to subscription, because this change rarely leads to price reduction, and some users have very good reasons to prefer permanent license. VMware's products have been considered very expensive. Your company may already have a quotation from the challenger of virtual machine management program in your inbox. The Challenger wants to know whether it is time to consider adopting more aggressive marketing measures.