Killing VMware
computerworld.com
computerworld.com
Execs do mergers simply because stock price go brrrrr, which is what their bonuses are about. When the projected gains will fail to materialize and the acquisition mismanagement will be laid bare, they'll be somewhere else anyway.
Occasionally it's because the acquired company is really on its last leg, and they're trying to cash in by leaving some sucker to hold the bag. Also occasionally, because the acquiring company has been given a bunch of money and they have to show that they're serious about growth, so they'll just buy anything and anyone even tangentially related to their business.
These are the sympathetic explanations. The unsympathetic ones involve security fraud and anticompetitive behavior; but, of course, those would be wrong for anyone to allege. No honest exec would ever accept under-the-table payments, or a promise of future windfall or lucrative job, to greenlight a takeover by a rival; we all know execs are honourable people.
Horrible way of doing business, not sure why it’s allowed, but it works. Just barely better than corporate raiders.
Either way it does not feel like this strategy will open new lines of revenue for them.
VMware had $13B in revenue in 2023. I expect the average customer's cost to double over the next 24 months - so put that at $26B doing nothing beyond increasing costs (and forcing customers into a subscription with products they don't need or want). Then cut all sales staff, R&D, and gut support. They will have paid off their investment in under 5 years. That's not even including the sale of end-user compute which is predicted to go for $4b.
>Either way it does not feel like this strategy will open new lines of revenue for them.
I guess that depends on what you mean by "opening up new lines of revenue". It is already opening up a subscription line of revenue they have not had previously - they've dumped all perpetual vmware licenses and are forcing everyone to subscriptions.
If you mean taking the VMware product and adding new features to increase the revenue stream of the existing customer base via an expanded product: of course not. They aren't interested in improving the product, they are interested in milking every last penny out of it at the lowest possible overhead. Why do you think the ink was barely dry on the deal and they already killed ESXi free edition, and all perpetual licenses?
All the folks at the top typically win on their options/etc, they don't care, they got paid.
Essentially this is broadcom turning a cash cow into a milk truck for a handful of large megacorps that cannot evolve past a dead product and will pay handsomely for licenses without question. No one but VMware administrators legitimately consider esx for virtualization, instead the market is cloud providers or onprem kvm/cockpit/proxmox/lvs/anything else open source that doesn't bleed quarterly earnings dry for a chance to spin up a SQL server.
And for good reason. ESX is by far the most performant hypervisor out there and it's dead easy to use.
It's cool and great to have the best product, but if the "only" edge is that if you spend a million bucks on license, you save 10s or 100s of K in hw expenses, the business proposition is actually not that great.
I get that the whole ESX ecosystem has a lot going for it, but as some of the VM loads are getting more and more dumbed down, being the one with most features and some more percent better perf is not going to win out in the end, as I see it.
Also, you get support with those millions. That's a requirement for these kinds of companies as well.
That said, I agree that there are many shops that will migrate to something like Ryzen, throw KVM on that and call it a day (or do what I did and use Graviton spot instances for anything stateful and small Graviton Lambdas for the rest). Those suckers are fast.
And that's before we touch software-defined networking a la NSX and virtualized storage a la vSAN. NSX, ESX and vSAN work together to provide near-line-rate networking and networked storage performance with a really nicely packaged frontend. Yes, you can use paravirt-io and ceph and get nearly there, but it's "nearly" and setting this up has a significantly higher skill bar for sysadmins. That alone is a dealbreaker for small shops that aren't tech forward.
IT departments that use Horizon with instant clones and have several compute clusters with AutoHA, DRS and NZX, a sprinkle of vSAN etc. etc. etc. will take a week just to translate all of what they need to do to Proxmox terms - and then a month to figure out if Proxmox or XCP-NG can even do all that.
But if the 10x price increase is actually typically, they might actually look into it. Will still take years to migrate.
Maybe in a few years. I know that if I was working there, I would be trying to close as much of that gap as possible while the migration opportunities are still around.
When I was doing these migrations for side work I was shocked at how basic most of these VMware shops were. Some terraform and a couple of bash scripts is usually enough to lay off the entire VMware team (3-10 people). Made absolutely no sense the amount of money some of these companies were spending and how little work the infra guys were doing for like, 100 servers.
This one time I got a call from the owner wondering when we’d start billing, turns out their AWS bill was so cheap it didn’t even hit finance that it was their new infrastructure cost, and the dude was just in shock at how incompetent his old team was, he was surrounded by “the cloud is a scam” people for years so he never thought that they were just full of shit.
Nothing I’ve said is wrong, either. It’s almost entirely affecting the small shops who don’t have resources. Big buys are renewing contracts and calling it a day because VMware caters to them.