Broadcom’s integration of VMware has admittedly ruffled feathers across the cloud ecosystem, but executives claim the moves were necessary for the vendor to remain a growing competitor in the market and set it up for long-term success.

Prashanth Shenoy, VP of cloud platform, infrastructure and solutions marketing at VMware, told SDxCentral that the past several months have indeed been a sometimes painful whirlwind both for VMware internally and for its customers. This has included a complete overhaul of VMware’s operational model, platform offerings and its focus going forward.

“With change comes challenges in terms of confusion, because when the pace of change and the amount of change is drastic, there's obviously a definite confusion or challenge when we don't communicate and articulate things in a broad amplified and consistent manner,” Shenoy admitted.

However, he added that these changes were necessary and a long-time coming.

“In the previous world, this would have taken us three to four years to make that change,” Shenoy said. “I joined VMware two years back and we tried this a few times, and we didn't execute on that. So, for me, I was very glad to have made this business model transformation, portfolio transformation, route market transformation, all in a matter of months.”

VMware’s simplification Shenoy joined VMware in mid-2022, coming on board three months after Broadcom announced its intentions to purchase VMware. Shenoy spent the previous 22 years in various management and executive roles at Cisco.

That change and timing provides Shenoy with a unique perspective on VMware’s ongoing transition, especially in terms of VMware streamlining its product portfolio. This includes a specific focus going forward on the updated VMware Cloud Foundation (VCF).

“I come from Cisco, and I thought Cisco was a pretty complex machine to work with and then I came to VMware and it took me six months to understand the different offers, suites, bundles, pricing, etc., that we had. And frankly, I still didn't understand for six months,” Shenoy said.

This resulted in VMware taking a “very hard look, we really focused on what the customers actually use, and deploy and want from us,” Shenoy said, adding that those large enterprise accounts wanted “an alternative or an extension of public cloud environments.”

“They want a private cloud infrastructure that has the agility, that has the developer experience of a public cloud, but has the security, the resiliency and the performance of a private cloud,” Shenoy said of the VCF updates. “How do we bring it together in a single, consistent infrastructure stack that they can deploy and buy once and deploy anywhere, including as a managed service.”

Broadcom CEO Hock Tan has already stated that VCF “is our platform for innovation going forward. It’s the solution that will help us address the business outcomes our customers have expressed to me directly as their most critical priorities.”

Tan told investors during Broadcom’s recent earnings call that the pricing changes will drive new revenue growth.

VMware does continue to offer its updated vSphere platform, which Shenoy explained is “for the broader mid-tier, small data centers that just want to virtualize compute infrastructure with some good operations to manage that infrastructure.” However, Tan has stated that vSphere is also positioned as a stepping stone toward VCF.

“Revenue from VMware will grow double-digit sequentially quarter-over-quarter through the rest of the fiscal year. This is simply a result of our strategy with VMware,” Tan said during the earnings call. “We are focused on upselling customers, particularly those who are already running their compute workloads with vSphere virtualization tools, to upgrade to VMware Cloud Foundation.”

Pricing and distribution changes Tan’s economic focus is understandable. Broadcom spent $69 billion to acquire VMware and its outstanding debt and Tan has a history of squeezing revenues from Broadcom’s acquisitions.

As such, one of Tan’s first moves after the deal closed was to migrate VMware away from its legacy of perpetual licensing to its new model of a subscription service. This move has drawn consternation from the market, with analysts noting considerable confusion from enterprises that have spent years deeply embedding VMware technology into their operations using a perpetual licensing model.

Shenoy countered that the move “provides true flexibility and investment protection for our customers who buy the license once and deploy it where you want, and then the next day you can take it to a managed service provider of your choice – who we support – and then deploy it as a managed service without having to pay for the VCF pod.”

But, Shenoy also admits that explaining this pricing change has been a challenge.

“A lot of our customers were on perpetual licenses and when they move to a subscription, the pricing is going to be different because perpetual licenses were mainly providing us renewal and support costs, which is a very different cost structure in an opex model compared to a core subscription price,” Shenoy explained. “So, the price change and the price increase that our customers feel is mainly because of that apples-to-oranges comparison. I was paying support on my perpetual now I'm paying the value of the license that has built-in support and it's a subscription based on a yearly basis. So that's kind of the price change that they're seeing.”

Shenoy did admit that VMware’s rivals have jumped on this pricing change in an attempt to lure customers, but added that VMware is focused on “articulating the value to our customers.”

“It's going to be a lot more fruitful than having a knife battle with our competitors,” Shenoy said of those efforts.

VMware is also working through a new distribution model for those services. Broadcom last month unveiled the VMware Cloud Service Provider (VCSP) program, which is targeted at allowing cloud providers and third-party resellers to offer and run the VCF platform.

Shenoy said this program when combined with the license portability will allow those large hyperscalers to offer the full VMware stack on top of their cloud or managed service offerings “and differentiate to their value-added services.” VMware will also continue to rely on the smaller third-party resellers to help extend that reach toward smaller markets.

“Resellers are the ones that will help us scale through the long tail of our customers as well as work with our other partners to provide our software,” Shenoy said. “All of those are going to be extremely crucial not only for us as a company but more importantly for our customers to have that choice with flexibility and options.”