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VMware partners should have a "back up plan" in place in case things go south after its US$61 billion acquisition by Broadcom, an analyst has warned.
Rumoured last week and confirmed days later, the mega deal is anticipated to provide “enterprise customers an expanded platform of critical infrastructure solutions”, according to the chip maker.
Speaking to ARN, Gartner VP analyst Michael Warrilow said that partners need to take caution around making decisions based on the acquisition, even going as far to recommend having a back-up plan if things go south.
“They’ve got to take stock of what their investments in VMware are, get commitments that the roadmaps won't change and commitments that there won't be this massive jump in pricing, and also to make contingency which will be really difficult for these customers to get off VMware,” he said.
“Even if that's just a back of the pocket contingency plan, it speaks to the to the disruption that would happen if if Broadcom don't do this properly.”
For example, Warrilow said the acquisition will see VMware “aggressively” shift to a subscription-based model, which he forecasts will hurt resellers.
Rajesh Muru, principal analyst at research firm GlobalData, noted that the acquisition will give VMware access to Broadcom’s 35,000-strong partner network, as well as drive its security business.
“Market challenges for CISO’s around ‘wants and needs’ and delivering business value will require Broadcom to ensure the most optimal partner model supports VMware’s cyber security portfolio,” he said.
Additionally, the mix of a primarily hardware business like Broadcom and VMware’s software-based services has some scratching their heads, with Drake claiming the announcement has “already raised questions about the acquisition on grounds that Broadcom and VMware are an unusual fit”.
“Key questions about the acquisition relate to the nature of the process by which VMware will be integrated with Broadcom’s software division and the extent to which Broadcom might change or even dispose of existing VMware solutions, or alter the relationship dynamics between VMware and its customers or partners,” he said.
“Broadcom plans to integrate VMware into its existing software division, which will operate under the VMware brand. Thereafter, VMware will account for around half of Broadcom’s software business.”
However, any future drives towards improving profitability could also come at the cost of employee headcount.
“Broadcom’s plan to boost VMware’s profitability appears to point to the likelihood of redundancies,” said Chris Drake, principal analyst of global IT technology and software at GlobalData.
“Even the prospect of redundancies is enough cause employees to question their futures within an organisation. Other VMware employees may choose to leave in response to changing work conditions and processes.”
Warrilow agreed with Drake’s prediction, viewing the redundancies as taking place in its sales force and back office, which he said were “the classic kind of things that you do when the big fish buys another big fish”.
Such a move would not be surprising, as Broadcom has made redundancies at local levels in the past with its acquisitions, at both CA Technologies in November 2018 and Symantec in November 2019, just months after the companies were acquired in July 2018 and August 2019, respectively.
Meanwhile, Warrilow said that from a reseller perspective, Symantec and CA Technologies are likely to fall under the VMware partner umbrella.
“It'd be interesting to see how it plays out in the hardware side of things. Obviously Broadcom's [in the] semiconductor [market], there are some things VMware have been working on – they've always been around hardware optimisation,” he said.
"They've been working with Arm chips, but also there's some work that VMware has been having with smartNICs [smart network interface card] in particular that might be a point of synergy.
“There is Symantec Security, of course, and CA has management and VMware have both of those; it all gets wrapped up under a VMware brand is the way Broadcom are going to play it.”
