4 ms·

It is the most shitty (and stupid) way possible to act though. Old price x 12 is not in good faith. Contracts are based on good faith. Give them a rationale, gi

by wjnc 3y ago

It is the most shitty (and stupid) way possible to act though. Old price x 12 is not in good faith. Contracts are based on good faith. Give them a rationale, give them a deadline 24 months hence and a fair price increase. Dare to say no to individual customers. Any customer should now start planning for the end of their Broadcom VMWare-contract. If they do not act in good faith to a random customer, why would they to you? Large company contract management is based on trust. This might cost Broadcom a lot more than a few individual customers that they were planning on 'letting go'. I work at a company that got sold by another company with an indefinite LTA (long term agreement) in place. Former owner did not honor the LTA, but at least was transparant and timely about it. We got two years to sever several key processes. We will end up severing all ties, since the business risk of leaving open ends without the LTA is too big for my risk appetite. Fool me once. And that's our business consequence of not honoring an LTA even when the former owner severed the ties in good faith. If the buy-in is not there for both parties to the contract, then there is no ongoing relationship.

alephnerd 3y ago
This is how I know you haven't been on an enterprise account team. The strategy you described has no upside for the vendor (in this case Broadcom VMWare).
- mschuster91 3y ago
  > The strategy you described has no upside for the vendor (in this case Broadcom VMWare). It has. Product/brand trust matters... the most obvious example being Google, who have had an extremely hard time getting their stuff to be actually used as they have shown time and time again that even if you're the biggest game publishers on this rock, you won't be able to rely on Google keeping up their end of any deal.
  - alephnerd 3y ago
    > Product/brand trust matters At Enterprise SaaS level it does not. You do not have an individual purchaser - the deal will be vetted by committee for 1-3 quarters. > most obvious example being Google, who have had an extremely hard time getting their stuff to be actually used Extremely hard disagree. GCP does well in enterprise/strategic accounts where a customer in some way competes with Amazon (which is around 20-30% of the F1000) and also doesn't have a significant Windows presence (minimizing the need for Azure+MS Support)
    - deleted 3y ago
      [deleted]
- michaelt 3y ago
  > The strategy you described has no upside for the vendor (in this case Broadcom VMWare). The upside is you don't scare off other customers when they hear reports of a 12x price increase. Right now, in response to this post, VMWare's biggest customers will be drawing up plans for if they need to walk away at the next contract renewal. And they'll want those plans to be extremely credible - it's worth spending $5 million trialling and integrating a competing system, if it stops your $50m contract turning into a $150m contract.
  - alephnerd 3y ago
    As I said in my comment - you can safely assume mean contract value is in the mid 8 or low 9 digits at a company the size of VMWare. If this scares away customers spending less than that, good for them. It doesn't make a dent when a F1000 is spending tens of millions a year on VMware and purchase by committee and will get sweetheart deals by being strategic accounts.
    - itsdrewmiller 3y ago
      VMWare has 400k customers and 13.4b revenue according to google, which means their average customer is around 335k.
      - alephnerd 3y ago
        That's not how the average should be calculated. It should be: (Contract_1_yearly+...+Contract_n_yearly)/num_contracts Anyhow the customer signed the deal (https://twitter.com/cioontherun/status/1761882689886433742 https://twitter.com/cioontherun/status/1761882689886433742), implying they were underpaying and had the capacity to pay the true rate.
        itsdrewmiller 3y ago
        That’s going to get you basically the same number unless you think most of those 400k customers do not have contracts for some reason? My revenue-based approach would undercount in-year bookings but your approach would undercount NRR which I suspect is nontrivial for VMWare (but I haven’t checked). Also just to be clear I agree with your initial comment - there are lots of reasons even big customers can be worth repricing based on their true costs and strategic relevance. And at less than 0.1% of revenue VMWare can certainly afford to risk it.
lordnacho 3y ago
What's not good faith about this? "Your custom won't work for us unless we get 100M" Chances are this is not actually surprising for this customer. There's probably been a lot of talk between the sides, a lot of expectations that weren't met both ways. What you're describing at your own company seems to be that same thing, no? Relationship wasn't going well, and it's gotta end somehow. Now that's not to say this should be normalized, it shouldn't. But there needs to be some way to say "hmm, it doesn't make sense for us, business wise"
- alephnerd 3y ago
  ^^^^^ exactly this!
lynx23 3y ago
Wait, IANAL, but... If contracts were based on good faith, why do you actually need contracts? I highly doubt what you wrote. To put too much trust/faith in a bussiness partner seems like a good way to kill your bussiness.
- alephnerd 3y ago
  This seems to be a renegotiation occuring at renewal time.
- ThunderSizzle 3y ago
  Negotiations should be based on good faith from both parties. If a party attempts to negotiate in bad faith, it becomes very clear and ruins the relationship. And people enter into unfair contracts regularly without realizing it or understanding it.
red-iron-pine 3y ago
> Give them a rationale, give them a deadline 24 months hence and a fair price increase consider that, for shitty, demanding customers, the 'fair price' may be 12x more. $8M probably doesn't justify the effort, and they may well use $10M+ in support, resources, or potential liability. Good faith in the contract is expecting to give something in the contract and then meaning it. They will give good support -- for 100M.

by wjnc 3y ago

alephnerd 3y ago

This is how I know you haven't been on an enterprise account team. The strategy you described has no upside for the vendor (in this case Broadcom VMWare).

mschuster91 3y ago
> The strategy you described has no upside for the vendor (in this case Broadcom VMWare). It has. Product/brand trust matters... the most obvious example being Google, who have had an extremely hard time getting their stuff to be actually used as they have shown time and time again that even if you're the biggest game publishers on this rock, you won't be able to rely on Google keeping up their end of any deal.
- alephnerd 3y ago
  > Product/brand trust matters At Enterprise SaaS level it does not. You do not have an individual purchaser - the deal will be vetted by committee for 1-3 quarters. > most obvious example being Google, who have had an extremely hard time getting their stuff to be actually used Extremely hard disagree. GCP does well in enterprise/strategic accounts where a customer in some way competes with Amazon (which is around 20-30% of the F1000) and also doesn't have a significant Windows presence (minimizing the need for Azure+MS Support)
  - deleted 3y ago
    [deleted]
michaelt 3y ago
> The strategy you described has no upside for the vendor (in this case Broadcom VMWare). The upside is you don't scare off other customers when they hear reports of a 12x price increase. Right now, in response to this post, VMWare's biggest customers will be drawing up plans for if they need to walk away at the next contract renewal. And they'll want those plans to be extremely credible - it's worth spending $5 million trialling and integrating a competing system, if it stops your $50m contract turning into a $150m contract.
- alephnerd 3y ago
  As I said in my comment - you can safely assume mean contract value is in the mid 8 or low 9 digits at a company the size of VMWare. If this scares away customers spending less than that, good for them. It doesn't make a dent when a F1000 is spending tens of millions a year on VMware and purchase by committee and will get sweetheart deals by being strategic accounts.
  - itsdrewmiller 3y ago
    VMWare has 400k customers and 13.4b revenue according to google, which means their average customer is around 335k.
    - alephnerd 3y ago
      That's not how the average should be calculated. It should be: (Contract_1_yearly+...+Contract_n_yearly)/num_contracts Anyhow the customer signed the deal (https://twitter.com/cioontherun/status/1761882689886433742 https://twitter.com/cioontherun/status/1761882689886433742), implying they were underpaying and had the capacity to pay the true rate.
      - itsdrewmiller 3y ago
        That’s going to get you basically the same number unless you think most of those 400k customers do not have contracts for some reason? My revenue-based approach would undercount in-year bookings but your approach would undercount NRR which I suspect is nontrivial for VMWare (but I haven’t checked). Also just to be clear I agree with your initial comment - there are lots of reasons even big customers can be worth repricing based on their true costs and strategic relevance. And at less than 0.1% of revenue VMWare can certainly afford to risk it.

lordnacho 3y ago

What's not good faith about this? "Your custom won't work for us unless we get 100M" Chances are this is not actually surprising for this customer. There's probably been a lot of talk between the sides, a lot of expectations that weren't met both ways. What you're describing at your own company seems to be that same thing, no? Relationship wasn't going well, and it's gotta end somehow. Now that's not to say this should be normalized, it shouldn't. But there needs to be some way to say "hmm, it doesn't make sense for us, business wise"

alephnerd 3y ago
^^^^^ exactly this!

lynx23 3y ago

Wait, IANAL, but... If contracts were based on good faith, why do you actually need contracts? I highly doubt what you wrote. To put too much trust/faith in a bussiness partner seems like a good way to kill your bussiness.

alephnerd 3y ago
This seems to be a renegotiation occuring at renewal time.
ThunderSizzle 3y ago
Negotiations should be based on good faith from both parties. If a party attempts to negotiate in bad faith, it becomes very clear and ruins the relationship. And people enter into unfair contracts regularly without realizing it or understanding it.

red-iron-pine 3y ago

> Give them a rationale, give them a deadline 24 months hence and a fair price increase consider that, for shitty, demanding customers, the 'fair price' may be 12x more. $8M probably doesn't justify the effort, and they may well use $10M+ in support, resources, or potential liability. Good faith in the contract is expecting to give something in the contract and then meaning it. They will give good support -- for 100M.