Is VMware Losing Customers with Broadcom Buy Imminent? Surveys Say Yes

Is VMware losing customers?

As the 25-year-old virtualization and cloud computing company anticipates new ownership by the end of next month, two new surveys indicate the answer is a resounding yes.

On Tuesday, cloud integrator ShapeBlue and data center software provider VergeIO released separate data citing end-user uncertainty around the imminent Broadcom–VMware combination.

Both companies’ customers fear VMware pricing will soar with Broadcom in charge, and they predict Broadcom will push VMware only to focus on large organizations. Accordingly, the prospect of VMware losing customers to alternative cloud offerings looks like a real possibility.

Why Is VMware Losing Customers? ‘Lock-In,’ ‘Pricing Strategy’

In fact, ShapeBlue, a London-based channel partner, says migrations off of VMware account for 50% of its new Apache CloudStack projects.

ShapeBlue’s Giles Sirett

“In the last few months, we have seen massive interest in Apache CloudStack as an enabler for people to remove their VMware lock-in,” said Giles Sirett, CEO of ShapeBlue. “[T]he situation with VMware currently accounts for more than half of those projects.”

Over at VergeIO, 87% of respondents to a company survey say they are researching different infrastructure options so they can leave VMware.

VergeIO’s George Crump

“Even before the Broadcom acquisition, customers have had concerns about VMware’s pricing strategy and pace of development,” said George Crump, chief marketing officer at VergeIO. “VMware has built its offering through a series of technology acquisitions, resulting in a solution that is bloated, complex and expensive.”

(Be aware, though, that as channel partners guide customers, VergeIO may not be the end-all-be-all for VMware migrations. As analyst firm Architecting IT noted earlier this month, VergeIO doesn’t support or allow any external storage. This can complicate efforts for IT departments that have invested heavily in shared storage for VMware, wrote author Chris Evans.)

More than three quarters – 84% – of VergeIO’s respondents said they are concerned about VMware’s costs, both current and future. The renewals and licensing agreements they’re seeing require commitments to year-over-year spending increases, VergeIO found. That’s creating more distress among users, the company said.

Organizations Seeking VMware Alternatives

The “situation,” Sirett mentioned is, of course, the pending, $61 billion acquisition of VMware by Broadcom — a chipmaker. Broadcom intends to use the deal to branch out into cloud computing but organizations (and many channel partners) seem wary.

For one thing, end users don’t seem to trust that Broadcom won’t steer VMware’s pricing and licensing structures higher, despite CEO Hock Tan’s assertions to the contrary. Here’s what he wrote in a December 2022 blog: “…to be clear, we intend to continue serving customers of all sizes. VMware has a robust partner ecosystem that we will build upon to help us serve even the smallest companies.”

Even so, organizations appear to expect VMware costs to rise once Broadcom is running the show. Indeed, the results of a ShapeBlue survey from August showed that 52% or organizations adopting Apache CloudStack did so to move off of VMware. The activity soared compared to a year earlier, when just 8% of respondents were looking to reduce reliance on VMware.

“For obvious reasons, organizations are worried now about their long-term dependency on VMware,” Sirett said. “Apache Cloudstack isn’t a like-for-like replacement, but adds a translation layer between VMware and other tooling. … [I]t then gives organizations the ability to seamlessly move workloads to alternative hypervisors.”

Using alternative vendors could save organizations 69% in recurring licensing and maintenance costs, ShapeBlue says.

A Mixed Bag of Insight

On the flip side of these developments, not everyone seems to see VMware losing customers. For instance, SeaCrest Wealth Management recently boosted its VMware holdings. The investment firm said in a second-quarter filing with the Securities and Exchange Commission that it increased its stake in the vendor by nearly 78%.

VMware’s recent earnings, meanwhile, deliver a mixed bag of insight about the state of its customer rolls. In the United States, its revenue dropped nearly 2% in the second quarter. Lower revenue generally points to less consumption. Sales from services and software maintenance also went down, while professional services revenue grew. So did total license and subscription and SaaS revenue, though that could have stemmed from the addition of end users within organizations rather than from net-new customers. Upcoming third-quarter financial results may shed more light on whether VMware losing customers is becoming a trend.

That information should come right around the time Broadcom anticipates closing the VMware purchase on Oct. 30. To that point, the last regulatory hurdle it must jump comes from China. After that, what happens remains anyone’s guess. Many insiders predict Broadcom will enact mass, non-engineer layoffs at VMware as it seeks to bring the company back from its “failed” position. Analysts tell various media outlets that Broadcom looks more to them like a private equity firm looking for sticky installed bases that will bolster free cash flow than a technology company seeking to future-proof its strategy.

If one or both of those observations comes to fruition, ShapeBlue and VergeIO survey respondents could be on the right track.