VMware price hike forces Australian company with 24,000 virtual machines to jump ship

[Alfonso Maruccia]

WTF?! After acquiring VMware, Broadcom announced it was "laser-focused" on larger organizations with tolerable price increases and enticing service bundles. However, the IT conglomerate, led by Tan Hock Eng, may have miscalculated. At least one large company that previously used VMware's hypervisor found the price increases unacceptable, potentially leading to a loss of business for Broadcom.

Computershare is an Australian corporation that provides financial products to stock exchanges and investor services around the world. It was significantly involved with VMware virtualization technology before Broadcom acquired VMware. However, according to recent remarks by Computershare CTO Kevin O'Connor, the company will likely abandon VMware's hypervisor soon to focus exclusively on Nutanix products.

Speaking at a recent Nutanix Next conference in Barcelona, O'Connor said that Computershare's IT department had been using two different hypervisors for its VM-related workloads: Nutanix AHV and another product provided by a "well-known competitor," likely VMware. After assuming his role as CTO, he initially tried to consolidate to a single hypervisor, but the migration project was ultimately scrapped.

Things suddenly changed, O'Connor said, when he received a phone call from the vendor of the second hypervisor. This vendor was now "offering" a 10x to 15x price increase to use their product plus additional services, which persuaded O'Connor to push ahead with his original plan to exclusively use Nutanix.

Computershare is now in the midst of a massive IT service migration, moving 24,000 virtual machines from the "other" hypervisor to Nutanix AHV. According to O'Connor, the plan will likely be completed next year and will pay for itself in just a few months. The company will emerge from this migration "stronger and leaner," with costs lower than they were before the acquisition.

Although O'Connor did not mention Broadcom during his keynote, the US corporation has repeatedly expressed its intention to raise prices and make the entire VMware business a subscription-only affair. The VMware acquisition has already led to widespread layoffs and uncertainty about VMware's ability to stay afloat, while countless rumors circulate about large corporations (or even US government customers like the DoD) willing to let the VMware ship sink and take their VM and cloud needs elsewhere.

The only known fact is that VMware's powerful desktop hypervisors are now free for everyone, but Broadcom was never interested in this particular line of products to begin with. The corporation may have miscalculated VMware customers' willingness to endure outrageous cost increases just to access more VMware-related services and technologies.

Computershare's story could be just the beginning of a cascade that will ultimately bring the former leader in the virtualization business to its demise in the not-so-distant future.

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VMware price hike forces Australian company with 24,000 virtual machines to jump ship

 

[Theinsanegamer]

Hope Broadcomm takes a bath on VMware.

 

[Cheap Scotch]

We're a VMware customer, but by no means anywhere near this many servers. I think at last count, we're around 7500 or so. we're also halfway through a 3 year contract so another 1.5 before renewal. last I saw, the roadmap from leadership is showing a plan to eventually drop VMware as well, probably getting more into bed with microsoft and azure. surely we're not the only ones with this plan.

 

[maxxcool7421]

And yet .. the AVGO stock price is up 450% from 2020

 

[Jo3oG]

Small shop here ~200 VM's. Our price up roughly 50-60%. Our response was basically 'Haha FU'. Which surprisingly was a good negotiating tactic since they cut the price back down to almost even. Doesn't matter, its clear where they intend to go. We will send most workloads to AWS/Azure before next renewal. Age-out the underlying om-prem hosts and then we're done.

 

[toooooot]

So, Broadcom made a very expensive purchase. They spent a ton of money on it.
Then they thought, we just lost a lot of money that we wont get back any time
soon, we need to find for new ways to increase our profit.
Oh, let's raise the prices for the product our new company
makes?
But I think that if VM could raise prices without losing
customers, they would have done it already.
Good guy VM did not just keep prices low
for honest people to be able to afford
best VM products at prices below market.
Changing VM to subscription seems like a good business idea especially if companies go with it.
But it has to make sense. Broadcom seems to be too eager to start returning investments here and now.
Another thing I wondered was companies that had life time licenses. I wonder if they will be respected and receive updates like those are lifetime licenses. I won't be surprise if they graciously receive few years of updates and a royal discount of 15% of they switch to subscription model.

 

[KezGG]

We finished our migration to Azure a couple of years ago. It's been great, glad to not have to deal with this. Something like this will really convince others to migrate into the cloud and further impacting colocation businesses.

 

[RudyBob]

This is Australia they will give the contract to DEI

 

[J95qRP7]

This is Australia they will give the contract to DEI

What does this even mean?

 

[bandit8623]

And yet .. the AVGO stock price is up 450% from 2020

not for long at this rate

 

[human7]

So many companies doing that these days. But the reality is...

(not an exact quote, but close enough)

 

[Karlos95]

So many companies doing that these days. But the reality is...

(not an exact quote, but close enough)

Yep, exact reason I cut off Netflix. I borrow other people's streaming accounts with other services and if it isn't there and I really want to watch it, I'll just pirate it.

Everytime companies try to make more profits from doing less work, the more they lose customers. It's like they don't know how to compete any more, they think they have enough market share to do what they want. In reality, if people cannot afford it anymore, they'll tell you, "see you later".

 

[Shalimar]

So, Broadcom made a very expensive purchase. They spent a ton of money on it.
Then they thought, we just lost a lot of money that we wont get back any time
soon, we need to find for new ways to increase our profit.
Oh, let's raise the prices for the product our new company
makes?
But I think that if VM could raise prices without losing
customers, they would have done it already.
Good guy VM did not just keep prices low
for honest people to be able to afford
best VM products at prices below market.
Changing VM to subscription seems like a good business idea especially if companies go with it.
But it has to make sense. Broadcom seems to be too eager to start returning investments here and now.
Another thing I wondered was companies that had life time licenses. I wonder if they will be respected and receive updates like those are lifetime licenses. I won't be surprise if they graciously receive few years of updates and a royal discount of 15% of they switch to subscription model.

I've had a ton if smaller to med size cases I've helped dump VMware and several that had life time licenses being told they are lifetime of cut ver only then they need to pay $$$$$$ I've heard rumors of CALs already which I encourage!

 

[nitebird]

If you increase price 10x and lose half your customers, you're still ahead 400% in revenue. Unfortunately some companies choose to kill the goose.

 

[toooooot]

If you increase price 10x and lose half your customers, you're still ahead 400% in revenue. Unfortunately some companies choose to kill the goose.

The problem is it is not guaranteed the rest won't follow later.
It is actually worse than that. People remember. Those who will remember
very high price, will likely never come back. But companies managed by people.
People make mistake, a very strong desire to get back what they spent to buy VM
could make them a bit too greedy.

 

[Shalimar]

If you increase price 10x and lose half your customers, you're still ahead 400% in revenue. Unfortunately some companies choose to kill the goose.

True but fortunately they are loosing so many clients and having to quietly adjust pricing back for others that hey are loosing Broadcom is notoriously *****ic in such regards though and will fail fortunately

Much the same as some others

And since there are kickass alternatives to VMware there is no stranglehold left really

 

[RudyBob]

What does this even mean?

nothing to you

 

[brucek]

What does VMware do that other solutions can not (or can not readily catch up to)?

 

[nitebird]

The problem is it is not guaranteed the rest won't follow later.

That's what I mean by killing the goose you get a momentary bump in revenue but lose enough customers and the prices are forced down anyways resulting in less total revenue. I'm sure they did the math and think it won't happen, we'll see.

 

[axiomatic13]

What does this even mean?

It means he's bigoted.

 

[TheDreams]

We will send most workloads to AWS/Azure before next renewal.

We are in the middle of that very same move right now

 

[wiak]

The more customers the better, not fewer customers paying more, 15x more expensive, how the fck did they think that will work, buying a bread and the price is now 15x more