It looks a lot like VMware just lost a 24,000-VM customer
theregister.com
theregister.com
If you hike your prices by 10-15x, you only need 6-10% of customers to stay to maintain your revenue, reduce costs and massively increase profit margins!
According to the Cambridge dictionary, there are a couple of variants depending on your dialect:
- "to make something else seem better or more attractive when combining with it" - e.g. "Strawberries and cream complement each other perfectly."
- "to help make something or someone more complete or effective" - e.g. "She used photographs to complement the text of the news story. "
The only way I can make any sense of your words is to assume you're trying to argue that two competing but interchangeable services "complement" each other when used simultaneously because that might allow a customer to mitigate risk in a similar fashion to a multi-cloud setup. That's a pretty big jump to make from what you've actually said though and would really need further explanation for anyone to understand.
Substitute goods have negatively correlated demand, while complementary ones have demand that positively correlate. A simple criterion, at least in theory. You will buy more ketchup when you buy more franks, but you will buy fewer hot dogs.
And it's also close enough to the MBA definition of complement (of "commoditize your complement" fame).
Classic VM hosting is a dead end anyway. Customers are shifting to the hyperscalers wherever they can, if only to reduce the headcount of their IT departments due to acounting wizardry making it worth it for the stonk markets even if the cloud costs more in the end.
And then, there aren't that many alternatives to VMware, and none of them (bar OpenStack) as comprehensive.
As long as Broadcom manages to squeeze enough out of the large customers who are vendor-locked too hard over the next 3-5 years, it'll be worth the money for them, and chances are the gamble pays off, with a small trail of extremely large customers paying for a decade until they can get their internal chaos sorted out to migrate off.
Another more cynical thought is that this is a way of increasing revenue and profit quickly so the share price rises quickly. You get your options and bonus and leave before the rest of the customers leave.
What does that mean?
Everyone and everything is replaceable. The question is if it’s worth it.
It's like blackmail. If you pay up, how do you know another one isn't coming the next year?
But... Oracle stays in business, so what do I know.
VMWare made at most $13.4B.
Even with severe churn, VMWare would make around $12.8-13B.
VMWare is just a BU now, not a company, and the economics of managing "just another product line" is different from a company with a flagship product
As I've mentioned before on HN, the math is different and it makes sense to up prices and only concentrate on F1000s at that size.
> Pinning all your revenue on a much smaller customer base means losing one or two of them has a huge impact
Large customers are sticky. You can't migrate your hypervisor or cloud provider overnight. These are multi-year projects.
Also, it's better to target a smaller base of high paying customers instead of a large base of low paying customers because every sales motion and support ticket is an opportunity cost and a financial cost.
Yes, but that scale, everything is an multi-year effort. The contracts likely as well. That doesn't mean, it's not going to happen.
And it's not like all has to happen in one go.
So before you were all in VMware, and that vendor is practically promising to hike up the prices to make you bleed.
What are you gonna do?
I'd rather start early to have a migration path, even if it is just for negotiation purposes. And if it's someone who has the resources to that, it's large customers.
All vendors do this - you can't escape it. This is why companies began leaving for the Cloud - sure it's upfront more expensive, but the negotiations are not as protracted.
On-prem doesn't give you flexibility, and leaves you open to getting arm twisted by vendors. Similar stuff happens in cloud ofc, but it's easier to implement a multi-cloud strategy than a multi-hypervisor strategy.
I don't get your point here: if you mean the public cloud, it's the synonym of vendor lock-in now.
Haven't worked yet with IBM, but if they are of equal level, then I'd rather avoid them.
But since you say IBM, they have IBM Cloud Manager, and through Redhat also an Openstack offer, and with Openshift a K8S offer. Various vendors offer either or both.
There are also companies which operate internal cloud providers for other companies. Various public cloud providers offer you to operate your datacenter with their API in-hose.
Yes, it comes with their hardware, but guess what, in three years chances are half of your hardware is deprecated and has been replaced anyway.
Yes, all that requires effort. Considerable effort. But it is a one-time effort (i.e. fixed costs) compared to a X-fold increase of licensing costs. So, you look at the ROI, consider the risk of having that degree of exposure, and guess what...
To reiterate: It doesn't have to be all in one go, it doesn't mean it has to be all of it. Maybe some of your payload will always stay on vmware, but thinking you can ask the big companies for 20x the license costs, and expect 20x the revenue is rather odd.
You may guess, where I know that from.
In VM's case it is not that long really. It really depends how much priority you put into it.
It is. You have teams critical apps running and you do not want to cause downtime for customers (internal or external).
I've seen this saga happen dozens of times and it is a very delicate and intricate process that requires a lot of planning.
A failed migration can become news, for example - https://www.bloomberg.com/news/articles/2023-11-15/ubs-says-...
A company that is not staffed to migrate all its servers in less than 3 months is not staffed to have the most minimum level of IT security.
Hypervisor migrations? Complete DC migrations? If you are doing that every single quarter you are doing something VERY wrong (or you should migrate to the cloud).
The infra has to be setup to support downtime of systems (not all at once obviously).
The existing VMs had not been updated or rebooted in years. Several had 1200+ day uptimes! These systems were accessible from the Internet and regularly used by customers for an important, highly specialized product. The only reason they were even bothering was they had failed some security scan and nobody there could even understand how to use SSH.
The minimum level of IT security is apparently barely anything.
F1000 can have sticker price shocks and sensitivity too, especially if you happen to raise your prices soon after other events that might have made them look into cost savings...
They were, and I'm guessing still are, also very resistant to SaaS / IaaS plays, for a lot of (arguably) good reasons, and I'm not sure what they'd go with as an alternative. OpenShift? Raw dog some DIY docker clusters?
I don't know where exactly in spending bracket my current $DAYJOB fits, but I did hear both about negotiating prices with Broadcom and grumbles of looking for replacement including accelerating movement to AWS where possible.
Down from the $13.4B -- that's not 'severe churn' you're describing there, it implies only a few percent drop in revenue. We've yet to see if that's the likely outcome here, but touchy-feely sentiment suggests that it'll be worse than that.
> Large customers are sticky.
Isn't TFA a precise counter-point to that assumption?
Companies do not churn 100% customers.
Most cases "severe churn" is counted as 80-100% NRR as customers are on multiyear contracts that are much more expensive to break than they are to wait out.
> Isn't TFA a precise counter-point to that assumption?
The customer was already a Nutanix customer, so the hard work was already done.
Basically, this customer was using BOTH Nutanix and VMWare internally (I am VERY surprised how the previous CFO did not get fired for something like that), and because they already had the Nutanix knowhow and licenses, migrated fully to it.
For reference, this article was written by the Register journo who was at Nutanix .NEXT (Nutanix's corporate conference).
Why do you think that? Not putting all of your eggs into a single vendor basket seems like a solid plan - if anything the Broadcom/VMware disaster supports it.
Have you ever seen Nutanix's pricebook as well as VMWare's?
Spending 2x on hypervisors is dumb because now you need 2x the headcount on SMEs because you'll need both a Nutanix and VMware SME, as well as 2x the contract negotiations, and the money you are spending on both could have been better spend improving your product or hiring more people to sell your product.
It's a bad use of capital. At the end of the day, Infra is a cost center. It's something used to keep the lights on, but doesn't expand your TAM.
Also, the contract negotiations you mentioned work much better if the competitor is already well present in your company.
Multi-cloud is different from on-prem related stuff like multi-hypervisors, because there are multiple billing methods, the muscle to migrate is much better built in the industry, and your cloud costs can be placed within R&D (which traditionally gets way more leeway due to tax benefits) whereas any IT Infra spend will inevitably fall under the Finance&IT budget.
There are different expectations depending on the kind of bucket you are spending from.
The amount of capital you have to spend in the R&D bucket is much larger than the Finance&IT bucket and who you report to (CTO vs CFO) is different.
Indeed it is and while CFOs may not completely understand the technology they do understand risk and if the CTO has flagged "single vendor" as a risk then the CFO will go with that.
It always make me smile how fast people on the Internet would fire CFOs without knowing the context of the situation. (Not to mention that this case proves the guy was right.)
Could be they acquired another company that ran the other one. We see this with our customers all the time. They acquire a competitor, slap their name all over it, but we still have to treat them like effectively two separate customers for ages.
You've said 'severe churn is 80-100% NRR' in one message, but in another that 'severe churn' would involve only a difference from 13.4b down to 12.8 - 13.0b (vmware / broadcom revenue).
You've said that it's foolish to have two hypervisors in play in an org, because then you're doubling up on SMEs for hypervisor infrastructure.
Computershare's revenue last FY was 3.2b -- and as per TFA they were running 24,000 VMware VMs (one can only speculate on the Nutanix VM count) -- so it seems reasonable that they'd have sufficient baseload of SMEs to split across two technologies without sending the company under. Given their YoY revenue increase from the previous year, it evidently wasn't a constraint.
You've said that multi-cloud is different (more acceptable / forgivable) to multi-hypervisor for three reasons:
a) different billing mechanisms
b) migration is baked into cloud services
c) cloud budgets come under R&D rather than finance / IT
You have not addressed that multi-cloud has the same two problems you accuse multi-hypervisor of suffering - a requirement for multiple sets of differently skilled SMEs, and 2x contract negotiations.
I can assure you first hand than not only F1000 but also F100 consider migrating away from companies that introduce sudden price hikes counting on inertia. It's not a question of "if", only "when".
I think they overestimated their market power. I have 2 years left on my main ELA. I have budget to spend 5x to exit. My spend will go from 8 figures to under $1M.
Personally, I resisted the visceral “fuck you” emotional response. But it’s one of the rare times when the quick take is correct. The reality is VMWare is dead and is too risky to keep in place. The smart move is not to play.
It's so much better business not to be an asshole. I really don't understand how people can't internalize this.
Many vendors confuse inertia for stickiness. Large customers are slow. But like super tanker they are very hard to course correct once you send them one. Course you don’t like.
You no longer have customers, you have hostages.
Some scenario's this assumption is reasonable though (say Netflix subscribers).
You have 5 types of accounts:
- Strategic: F500s or very well known startups
- Enterprise: F1000s
- Mid-Market: Companies below $1B a year in revenue
- Federal: Federal Government
- Channel/Reseller: For companies that are too small, you have a MSP sell for you because you can't be bothered to sell to them.
Strategics, Enterprises, and Fed will always get good deals and will always have protracted conversations, as these are accounts spending 7-9 figures.
Mid-market and below will always have a bad time because they ain't spending enough.
We're businesses, not your friends. We'll try to help, but at the end of the day, we want to get paid as well.
Customer service is becoming truly extinct.
You aren't. They go to resellers or other large vendors (eg. this example of going from VMWare to Nutanix)
Open Source competitors (NOT open core companies) do not provide the SLAs on support needed if SHTF.
Nope. Tech forward mid-markets (eg. every single tech startup) are all cloud first, and the legacy mid-markets will go thru MSPs and Resellers to buy these products.
No one likes IT spend. It's a cost center.
This is a massive invite for competing businesses to offer the same service 20% cheaper, and still make lots of money.
They will lose reputation and reference customers.
If you start celebrating your new pricing structure with just a 90% customer loss in Y1, you're in for a nasty shock in Ys 2-5.
That's before you factor in the shift of mindshare to alternatives. Pointing this thing at ultra-large customers means everyone else is using and training on something else.
Good move, and plenty more like this will happen.
But like I've said before, the winners will be Nutanix, Citrix, and other existing enterprise infra vendors - not Proxmox. And companies like Broadcom are fine with that because market segmentation is a thing.
(Also I hate hate HATE The Register's tone - so happy I'm not a PMM who has to wine and dine them at RSA or Re:Inforce.
The moment RSA and these holdover 90s blog cartels like Register and DarkReading die, discourse in the space can become so much better.
Practitioner lead conferences like Bsides and practitioner blogs are superior to these kinds of rags that are written in conjunction with vendors)
Corporate speak is better?
Look at all the sponsored content they have from ZTE, as well as all the Nutanix specific articles because of Nutanix .NEXT
Snark is fine if you are evenhanded by being snarky about everyone, but it ain't great if you're clearly picking and choosing and deciding to take money from vendors.
It’s not the great site it was in the 90s anymore when it was fair, balanced and fun, along with having accurate news.
Mike McGee was a legend.
I find the snark refreshing compared to all the corporate drones using their carefully worded lawsuit-proof, passive-voice, non-committal, lawyer-vetted style.
You must work in a very, very sane environment - for most of us this is literally a breath of fresh air.
They are not snarky and they very gladly work with corporates as well. They are just writing in some weird pissy tone.
Look at all the sponsored content they have from ZTE, as well as all the Nutanix specific articles because of Nutanix .NEXT
Snark is fine if you are evenhanded by being snarky about everyone, but it ain't great if you're clearly picking and choosing and deciding to take money from vendors.
I'd like snark, but I'd rather hear that from an actual practitioner, not one of the several tech "journalists" we'd wine and dine when I was still working for vendors.
It's just one aesthetic over another. The corporate-style is made to win over those naive to think their slick editing and wordsmithing means that they're objective about their reporting ("so professional! Real journalists!"). The snarky/edgy style is made to win over those naive enough to think that because they're "rebels" then they must be objective unlike those corporate stuck-up types.
It's Windows vs Mac for journalism, thats all.
You ain't bursting my bubble. I've wined and dined DarkReading, SDxCentral, etc.
At least they aren't being mean while selling access.
This is why I said read practioners personal blogs and stuff, not these kinds of corporate journals.
The fact that it publishes in a low-brow, combative style in an industry that is (historically, anyways) mostly educated is part of the "joke", especially has most other tech press at the time it was created in the 1990s had conflict of interest relationships with tech companies (mostly relying on the same companies for advertising) - which is why the tagline is "biting the hand that feeds IT". It's easy to forget that most tech news sources were overwhelmingly uncritical to even bad tech. For those of us who had to actually deal with it, it was refreshing to know other people hated <insert vender product here>. For a good while in the 1990s (before it could stand on its own) it was a site written by people who actually worked with products from the tech companies (with their sales people) and could comment if they were going downhill or got screwed by pricing changes.
Is it possibly outdated and tiring now? Sure (it stopped being a daily news source for me around 2010), but it helps to understand the history and why it is or was popular.
They are now owned by press wire publishers and corporate conference owners, and as companies have increasingly moved away from both these options, the tone has become increasingly uneven.
Look at how much RSA flamed Palo Alto Networks for deciding to quit RSA and how Register never uses snark in the articles it writes with CEOs, leadership, or companies who invite Register to their conferences.
It's basically an attempt at extortion, not the truth. The practitioners who are technical don't write for these rags. And most of the Register's (and at all their parent companies publications) are non-technical journalists for whom this is a dayjob which they'll inevitably leave to become a Comm Marketer at a Vendor like the dozens I've worked with.
> especially has most other tech press at the time it was created in the 1990s had conflict of interest relationships with tech companies
So does The Register. I've literally wined and dined their writers at RSA years ago.
The fact they may preferentially apply the snark based on "extortion" isn't great, but at least they are SOME voice, and like comedy some snarky sarcasm is often much more incisive that (shockingly) fluff.
And considering the gushing amound of shadow-sponsored fluff in other magazines, aka the flip side of your alleged "extortion". If anything, the non-snark is an honest signal to an informed reader.
They aren't though. They are also marketing bs. If you work at a vendor, go slack your content marketing team for a coffee chat to understand how it works.
This is the managing company for The Register [0]. We'd work with AMs at Situation Publishing to be looped to the right magazine (Register, Next Platform, Blocks and Files, etc) and could complain to them if we gave enough business to them.
As I mentioned earlier, the register isn't on my radar anymore and obviously sold out. In your original post, you had a hate-on with their tone, but it was their tone that (originally) made them refreshing. The discourse without it would be have reporting on corporate release announcements and various reviews by people who don't use the products day-to-day in their actual job.
Snarky tones about Larry Ellison needing yacht money or referencing whether a good or useful IBM product was worth having to deal with their aggressive sales people was the indications that the writers (again at one time) got or understood the industry.
Of course, that's not sustainable as a business model...
Anyways, my main point is that it's not the tone that's the issue, it's the publication industry for reasons that you stated.
What is a good move? Maybe I misunderstand what you are saying, but I thought the main lesson from the whole VMware fiasco would be that IT departments would not rely on a single vendor/hypervisor in the future. This consolidation just increases their dependence on Nutanix, does it not?
Infra is a cost center at the end of the day.
> I thought the main lesson from the whole VMware fiasco would be that IT departments would not rely on a single vendor/hypervisor in the future
Can you justify spending 2x your hypervisor budget when that same pot of money could be used to hire more engineers who make the product the company is selling?
And it certainly makes sense in the short term to spend the money on the product instead of on infrastructre. I just wonder about the long term in the context of how we do business. Because on the one hand you have management pushing topics like "risk management" where I have to take responsibility for the most trivial of things in day-to-day operations. And then there is the hypervisor issue where "risk management" goes out of the window and we happily rely on a single hypervisor that could (from one day to the next, more or less) upend all our business.
That said, these are questions that are very organization dependent.
Accepting the risk doesn't mean 'going out the window'.
(I'm thinking about MSFT who maintained a small Windows team when the majority effort went to OS/2 back in the 80s)
It can be all of the above though. I work in higher education and Proxmox is the only option we are seriously considering right now.
Higher Ed is in a weird place where budgets are small but the personnel are fairly adept, so depending on the size you guys could actually be a good fit for deploying and managing a FOSS offering like Proxmox.
But higher ed is weird for the reasons you mention.
To elaborate a bit: before commercialization, universities were a huge part of the early internet, and they invested heavily in datacenters and connectivity at a time when "the cloud" didn't exist.
They also have weird cost models and paying for power/cooling is sometimes done in a way that IT doesn't even account for that burden at all.
So to a large degree, shutting down on-prem stuff to move to "the cloud" has never made financial sense for unis, and they've always had to adapt to whatever datacenter tech has been required over the long decades.
That means they're staffed with people who never forgot how to run workloads directly on the metal, and aren't afraid to build it themselves rather than just move to a vendor. When it comes to the VMWare / Broadcom situation, "once bitten, twice shy" is going to be in the back of their minds - they know they'll be around for decades to come, and nobody wants to have to migrate early due to another rug pull.
Their whole business is based on computer sharing. There's a lot of microservices to make it happen.
All that said, lots of customers definitely had similar experiences; it's all over /r/vmware. Broadcom is not joking about wanting to cull the herd here.
It's a submarine article from Nutanix .NEXT who seemed to have done a media buy with The Register.
I've always detested that kind of underhanded vendor tactic, and am honestly happy that giants like ZScaler and Palo Alto Networks are moving away from the conferences+trade rag GTM and moving towards either direct sales or more targeted usergroups+conferences (eg. BSides).
> Broadcom is not joking about wanting to cull the herd here
Yep! Niklesh did the same thing to turn around PANW, and imo VMWare kinda needs it. The products are good, but it seemed like a lot of shenanigans were happening at the AE level.
I've heard down the grapevine that there's a significant shift towards cloud security now, which I think is something VMWare really needed to do - they had the right products, but became addicted to on-prem cash cows.
Either become a PANW or become a Rackspace.
Also, at least a few years ago(hope it's not still the case), a lot of their services were a bunch of open source poorly stitched together with bash, and their poor abstraction over it was leaking heavily. Their APIs were also very poor (I mean, VMware's are objectively complete shit, but at least they cover almost everything; Nutanix had major gaps in API coverage).
Oh, and they're very expensive.
I've heard stories that it's usually low cost to enter, but when you want more CPU/storage it's ungodly expensive.
Even the initial quote for three hosts was ridiculous for the CPUs offered.
And storage, a few years ago they were trying to convince us that their cache is soo good, you should use spinning disks with some SSD cache. Of course they wouldn't provide any concrete numbers, and even with hybrid storage and subpar CPUs, they were a decent chunk more expensive than traditional servers with better CPUs and a dedicated full flash SAN.
Add to that the subpar (even in their demos!) software with lacking APIs, and it just seemed extremely weird to see them getting business.
Vmware sponsored? the plugin where Nutanix made everything go through their web UI or some new convergence product they purchased.
We just wanted APIs for everything, no UI. Nutanix failed hard.
my comment is mostly around their financial performance. it was not too long ago they were facing some headwinds, and giving the market concerns they could be sold off. Going from those concerns, to now having substantial growth, can cause some pain points for a company
It would not surprise me that soon Broadcom will realize they purchased a dead company, because according to my contacts at Nutanix the OP is not an edge case and small and large companies are migrating from VMWare to Nutanix and/or other solutions such as OpenStack in droves.
... yeah. I like El Reg, but... come on. ONE THOUSAND MEGAPERCENT vs unnamed rival.
Nutanix has an in-house cassandra fork I believe, I wonder if they are weasel wording some linear scaling.
Just the fact that less people will know or care about vmware and just start playing with proxmox and not ESX.