VMware's shifts following Broadcom's acquisition – Insights for IT leaders

Broadcom, based in California, successfully concluded the $69 million acquisition of VMware in late 2023, overcoming a year-long struggle with antitrust regulators. Following this significant acquisition, Broadcom implemented substantial alterations to its subscription model and discontinued several product lines.

In December last year, Broadcom announced that it will end VMware’s perpetual license and transition to subscription model. With a perpetual license, customers get to use  a specific version of the software product indefinitely after making a one-time payment. This is unlike the subscription license where users pay regularly to access the software. “A dramatic simplification of our product portfolio that allows customers of all sizes to gain more value for their investments in VMware solutions. The portfolio simplification across all VMware by Broadcom divisions stems from customer and partner feedback over the years telling us our offers and go-to-market are too complex,” the company said in its blog.

To be sure, Broadcom spoke about the planned transition back in May 2022. Back then, Broadcom chief Hock Tan said that this transition would slow the revenue growth for VMware in near term but would follow with more rapid growth. “As part of Broadcom, our target is for VMware to contribute approximately $8.5 billion of EBITDA once we have fully integrated the company onto our platform,” Tan said at that time.

In the blog announcing the licensing model change, Broadcom reduced VMware Cloud Foundation division’s offerings (almost a thousand of them, as reported by Wall Street Journal) to just two primary offers: VMware Cloud Foundation, the new VMware vSphere Foundation. The newly introduced VMware vSphere Foundation ‘combines our full-featured server virtualization platform, vSphere with intelligent operations management’, the company said.

Further, Broadcom would also be ending its partner agreements with VMware resellers and service providers, ending VMware’s partner program and sales incentives. As reported by CRN on December 23, Broadcom will be transitioning VMware’s partner programs to the invitation-only Broadcom Advantage Partner Program to offer simplified bundled offerings and more opportunities for service revenues.

Before the acquisition was completed, Tan said that Broadcom will spend $2 billion a year on research and development at VMWare. Tan said that a part of the investment will also focus on accelerating the adoption of VMWare solutions by enterprises. 

As a Broadcom company, VMware is also undergoing workforce shuffle. Media reports suggest that Broadcom has laid off hundreds of VMware employees. The company, however, has not officially commented on the same. 

To be sure, data compiled from financial research platform VCCEdge, shows VMware has been on its own league with its local operations and if recent trends continue it will enter the billion-dollar revenue club in India on its own soon. Indeed, Broadcom’s overall India play could well already be in the $1-1.5 billion league this year.