Broadcom tells partner negotiating for charity 'VMware is not for everybody'

“The statement that came back to me from Broadcom was, ‘We appreciate that with these changes VMware is not for everybody,’” says Tom Smyth, head of technical solutions as Misco. “Everyone else can use it. Broadcom is not going to gear its decisions towards them anymore. … I can appreciate that. I can respect their decisions. It’s not something I would do personally.”

Scale Computing CEO Jeff Ready called out Broadcom for "profit harvesting" a hospital charity during his mainstage keynote at his recent partner show, a story so extraordinary CRN tracked down the solution provider at the heart of it to hear first-hand what happened.

"I saw one children's hospital that had their price increase," Ready told the crowd at the Platform 2024 show. "I was on with the partner who told me Broadcom told that particular customer after they asked for a reprieve because they were a nonprofit, they said, ‘I'm sorry, VMware is not for everyone.' That is just not how we view the world."

Since Broadcom closed its $69bn deal for VMware, the company has radically changed its go to market from products to pricing to partners. It has simplified its product SKUs by condensing them into bundles. Customers pay less per product but are forced to buy software they do not use. The rigid simplicity of the model is coming with no exceptions for education and charity, one partner said.

When we're talking about non-profits and charities, they have got to try to get hearts and minds of populace like ourselves to raise money for them," said Tom Smyth, the solution provider executive who tried to lessen one charity's sticker shock under Broadcom. "It's not as simple as a corporate client opening the checkbook a little wider to pay the bill. It has an actual impact on lives."

Smyth, head of technical solutions at UK-based solution provider Misco, said the hospital charity came to him with a bill that was expected to be eight times higher than the prior year due to the extra products it must take on with the new VMware bundles.

Smyth said he tried to lobby on behalf of the charity with a Broadcom representative during a face-to-face meeting with other solution providers at a distribution conference earlier this year.

"The statement that came back to me from Broadcom was, ‘We appreciate that with these changes VMware is not for everybody,'" he said.

"Everyone else can use it. Broadcom is not going to gear its decisions towards them anymore. If Nutanix or Scale is a better option for you as a business, it's not going to be any skin off their nose if they lose you as a customer. I can appreciate that. I can respect their decisions. It's not something I would do personally."

VMware had previously given educational and non-profit organisations a discount on product licenses, but that practice has stopped cold under Broadcom, Smyth said.

"It wasn't like Microsoft where they give it away to education, but it was something," he said.

Broadcom did not respond to an email seeking comment about the education discounts. The charity did decide to foot the bill.

"They have ended up needing to take VMware. They have had to ‘pay the ransom' in this scenario," Smyth said of the charity. "They have had a six to eight times price increase on their renewals."

VMware Cloud Foundation, which is now the flagship virtualisation product under Broadcom, bundles SKUs that had previously been spread across the suite. While this gives the hospital charity's data and workloads unmatched capabilities from the cloud to on-premises, as well as an array of enterprise-class features, it did cost multiples higher for the same infrastructure.

"As far as that customer is concerned ‘I spent five grand on this last year. I'm spending 40 grand on it this year,'" Smyth said. "I'd suggest that [small to medium enterprise] customers are not the beneficiaries of those simplicity gains, however, they are the recipient of the majority of the pain."

Broadcom had vowed not to raise VMware prices prior to its takeover of the company, which closed Nov. 22, but many customers' bills have risen, said Forrester principal analyst Tracy Woo.

"To put it simply—yes. We have seen anywhere between 3X to 8X to 10X changes in pricing," Woo told CRN. "The per-core charging is another way of masking that you are also responsible for paying for a lot of shelfware given their product SKU simplification."

The changes have VMware customers looking for alternatives as the fear of diminished support and innovation under Broadcom sets in, partners have said.

"Putting my corporate hat on, I understand why Broadcom has done what they've done," said Smyth. "They've paid $61bn for a train set and they're going to run the train set the way they want to. They've obviously set out their store looking at the top end of accounts. The problem the industry has had is the immediate rug pull."

A self-described "VMware fanboy," Smyth is now striking up tough conversations daily with customers about the higher cost of their virtualised infrastructure under Broadcom.

"The chaps at Scale and over at Nutanix, they don't need a marketing plan this year," he said.

While Misco is a VMware partner, it is "hypervisor-agnostic," and also partners with Nutanix. Smyth also raves about Scale Computing.

"If I'm honest Scale fits the SMB, SME customer base incredibly well. I love the guys at Scale. They're an engineering-led firm," he said. "They might not have the biggest marketing dollars, but from a product perspective it's bulletproof. The NPS scores tell it themselves. Working with the guys on projects, it's a dream."

Scale Computing has emerged as among the most prominent names partners mention when talking about alternatives with VMware customers, with good reason, said longtime partner Mark Essayian, president of KME Systems, a Lake Forest, California-based solution provider.

"What's good about Scale is their support keeps marketing's promise," he said. "Everyone has good marketing, right? At the end of the day, I have to look at all these marketing campaigns and salespeople, but then when we actually transact business, support understands how the product was sold and they keep that promise."