6 ms·

Broadcoms policy seems to be to aim for the larger customers where a 10x price rise for a suite of products isn't an issue. Charging 10x the price to 10% of yo

Broadcoms policy seems to be to aim for the larger customers where a 10x price rise for a suite of products isn't an issue. Charging 10x the price to 10% of your customers isn't necessarily a bad strategy for a business. 6 months ago on HN: https://news.ycombinator.com/item?id=40452260 https://news.ycombinator.com/item?id=40452260 > Steve McDowell, chief analyst at NAND research, told The Register that VMware by Broadcom is “laser focused on high-revenue, high-margin business” and has priced its wares “just below the pain threshold for customers they care about.”

onei 2y ago
But does it not make you more vulnerable to competitors? Losing one of your few big customers will hurt regardless, but it likely hurts less if you have a pool of SMBs to act as a buffer.
- HPsquared 2y ago
  In the long term, sure. They might just be strip mining it.
- tvink 2y ago
  In terms of competition it's really the same. Whether you fight with a team of 1 for 5 businesses or a team of 10 for 1 business that is 50x bigger, on average as long as you have equal competition in each segment you walk away with the same. But you get very different customers, for better or worse. A segment of a customer base is hardly a buffer, if you underserve them they will leave, and you will have wasted effort making an inclusive sales and support process to them.
  - acdha 2y ago
    That makes not losing those customers more critical: if you lose one of the 50 smaller businesses, your revenue is barely affected; if you lose that 50x whale, you’re out of a job especially given how hard it is to find another one of that size. This shows up especially in the context of hiring: for a generation, there have been a ton of people who learn VMware at businesses of all sizes and your large shop can reliably hire them. Shutting down smaller sales affects that directly and because the smaller places are going to do something else it means that the people who move up to a bigger place are going to have direct firsthand experience contradicting what the VMware sales people are saying about how risky it is not to use their software.
gampleman 2y ago
This doesn't sound exactly like a small customer, with 20000 virtual servers on 3000 physical ones isn't exactly a tiny deployment.
- JOnAgain 2y ago
  It’s definitely going to be on the small side.
  - mrweasel 2y ago
    My first reaction was that you're wrong, but you're probably correct in that large scale VMware installations are much larger than 3000 servers. The small side is going to be a large set of customers, probably the majority. There are tons of VMware installation that are 3 - 20 physical server, more so than 10.000 server installations. Right now Broadcom is telling those customers, and those with 500, or 1000 servers, that they can take their business elsewhere. Broadcom is much happier to milk the top 5% of customers, compared to servicing the "bottom" 95%. Broadcom seems to be cutting of to large a chunk of customers. They also are preventing new large customers from coming in. No one starts out with 10.000 physical servers and no one wants to switch a growing 5000 server datacenter from HyperV, KVM or Nutanix to VMware.
    - jerf 2y ago
      In this case you're probably better off thinking of these things in roughly logarithmic terms rather than absolute. By the time you're up to 20,000 servers, you are going to have roughly the same issues to solve as a 10,000 server install and a 30,000 server install. In absolute terms there may be VMWare installations that seem much bigger, but in logarithmic terms there aren't that many more classes above them, and they get rarified quickly. The same ways that you're telling this customer to get stuffed are going to be affecting even the bigger guys in a way that you can't necessarily compare the experience of this customer to the "10 VMs on one server" customers. It's risky to do that. I'm not sure there's as much differentiation in the market to be exploited as Broadcom thinks. Even their larger customers are not just going to sit there and take it... they're just going to move more slowly. But at that scale, VM migrations have a very natural granularity to them; you move them one at a time. You don't need to drop VMWare next quarter; you can just begin your migration project and move away at a pace of your choosing. But then again, Broadcom may well be explicitly viewing this internally as "we no longer have a competitive product, there is either no way to differentiate it again or we're not willing or able to invest in what it would take, and so the game is just to milk all the money we can out of this", in which case this is pretty close to what I'd expect to see. Where I personally sit in their customer base now, VMs are a commodity and I've got no reason to pay for them anymore. That's been true for a while. I'm speaking here just as A Guy, not as an employee of anyone, but I would expect that this reality has been slowly but surely crawling up the market from where I sit at the bottom. (This is just discussion, not "disagreement".)
secondcoming 2y ago
VMWare Workstation is now free, and VMWare Player has been discontinued. I'm not sure yet what the catch may be.
- ghaff 2y ago
  The desktop is mostly a pretty uninteresting space in general. Virtual desktops never really took off (which VMware was into at one point) and desktop virtualization is generally a commodity for the relatively few people who use it.
newsclues 2y ago
not smart if you make it hard to use and learn and the next generation of technologists gain experience and familiarity with other solutions and improve them to be superior products.
- alemanek 2y ago
  Bold of you to assume Broadcom cares about long term sustainability. From what I have seen they are just a PE firm pretending to be a tech company. They will bleed the customers who can’t move fast enough. Burn it to the ground to get every last dollar.
csomar 2y ago
Unless they have a monopoly on the tech, that's not how the free market works. Raising your prices x10 without having a government mandated monopoly, is a great incentive to create competitors.
- ChrisRR 2y ago
  And so what? Companies coming in to fill the gap of the market you're leaving isn't a concern
  - bluGill 2y ago
    They then make their product good and convice your customers they are good enough for less. They don't eken have to be better, just go enough.
red_admiral 2y ago
There is a famous story about business in the UK when some sales manager at Coca Cola raised the price by a small amount for JD Wetherspoons, one of the largest chains of cheap pubs across the country. The manager must have felt very smug about the extra revenue they'd bring in, from a small change that the client could easily absorb and could hardly moan about. What else could they do, move to Pepsi? They did exactly that, and the sales manager was fired over losing one of the biggest clients and the loss of revenue that came with it. One needs to be very, very careful about both the pain threshold and the "** you, I'm moving my business elsewhere" threshold.
- helsinkiandrew 2y ago
  I would guess the plan for the larger companies is to sell a whole suite of products around the VMware: management, ops, auditing etc, plus take very good care of their niche requirements so moving becomes a much more expensive proposition
- ta1243 2y ago
  Sure, it's a gamble. But if Broadcom increases price 10-fold and loses half the customers by revenue over the next couple of years, that reflects in their bonus and they can then move on. The customers might have a plan to move off vmware by 2027, but continue to pay the money until then. Come the 2027 renewal the execs that made the massive bonuses for increasing revenue have left and then when the company says they aren't renewing it's the next generation dealing with the problems, and then they just reach for the three-envelopes. This really is on the companies that choose a single supplier. If you had two providers, then shifting doesn't take a 3 year program, it's just a policy change to prefer Provider B rather than Provider A.
  - plagiarist 2y ago
    There really needs to be a different mode of compensation that forces the C-suite to prioritize long-term company success.
    - smugma 2y ago
jijji 2y ago
i never understood, even 15 years ago, why people still use vmware when so many open source (i.e. virtualbox) systems existed at the time. The fact that Broadcom buys it out and then 10x the price on people is just even more reason to move to open source. As noted in the article, the open source solutions are 2x faster anyway, so they customers can realize a 2x increase in slices per server.
- bluGill 2y ago
  Vmware is better by our performance tests. Still is better but not 10x the price better.
- dessimus 2y ago
  The ones staying with VMware, permanently or near term, are likely using products for which there are not good replacements. The open source alternatives can do what ESXi does sure, but its progressively more difficult to replicate VSAN (including stretched clusters) and NSX-T (with distributed firewalling) without bringing in multiple vendors that will all point at each other when there is a problem.
- gosub100 2y ago
  Because they dumb it down, you pay more for VMware but then you can hire cheaper, less educated people to run it.
- guappa 2y ago
  virtualbox is buggy and it's not open source.
  - mdaniel 2y ago
    The VirtualBox extension is not open source, but VirtualBox is GPLv3: https://www.virtualbox.org/svn/vbox/trunk/COPYING https://www.virtualbox.org/svn/vbox/trunk/COPYING I can't speak to your buggy claim since I don't know which feature you are complaining about, and if it's part of the extensions then the "many eyes, shallow bugs" does not apply
- 2y ago
philjohn 2y ago
A less charitable (but I'd argue, likely more correct on balance of probabilities) is they're aiming for the larger customers who are so entrenched in their use of the VMWare product stack that they can't feasibly migrate without taking a huge one-time hit to their balance sheets.
kotaKat 2y ago
Hell, AT&T just settled with Broadcom. Five bucks says they stay right where they are. Hock Tan knows what he’s doing to force the big players to pay and extort them to the nines. https://www.ciodive.com/news/broadcom-att-vmware-settlement-licensing-support-lawsuit/733763/ https://www.ciodive.com/news/broadcom-att-vmware-settlement-...

onei 2y ago

But does it not make you more vulnerable to competitors? Losing one of your few big customers will hurt regardless, but it likely hurts less if you have a pool of SMBs to act as a buffer.

HPsquared 2y ago
In the long term, sure. They might just be strip mining it.
tvink 2y ago
In terms of competition it's really the same. Whether you fight with a team of 1 for 5 businesses or a team of 10 for 1 business that is 50x bigger, on average as long as you have equal competition in each segment you walk away with the same. But you get very different customers, for better or worse. A segment of a customer base is hardly a buffer, if you underserve them they will leave, and you will have wasted effort making an inclusive sales and support process to them.
- acdha 2y ago
  That makes not losing those customers more critical: if you lose one of the 50 smaller businesses, your revenue is barely affected; if you lose that 50x whale, you’re out of a job especially given how hard it is to find another one of that size. This shows up especially in the context of hiring: for a generation, there have been a ton of people who learn VMware at businesses of all sizes and your large shop can reliably hire them. Shutting down smaller sales affects that directly and because the smaller places are going to do something else it means that the people who move up to a bigger place are going to have direct firsthand experience contradicting what the VMware sales people are saying about how risky it is not to use their software.

gampleman 2y ago

This doesn't sound exactly like a small customer, with 20000 virtual servers on 3000 physical ones isn't exactly a tiny deployment.

JOnAgain 2y ago
It’s definitely going to be on the small side.
- mrweasel 2y ago
  My first reaction was that you're wrong, but you're probably correct in that large scale VMware installations are much larger than 3000 servers. The small side is going to be a large set of customers, probably the majority. There are tons of VMware installation that are 3 - 20 physical server, more so than 10.000 server installations. Right now Broadcom is telling those customers, and those with 500, or 1000 servers, that they can take their business elsewhere. Broadcom is much happier to milk the top 5% of customers, compared to servicing the "bottom" 95%. Broadcom seems to be cutting of to large a chunk of customers. They also are preventing new large customers from coming in. No one starts out with 10.000 physical servers and no one wants to switch a growing 5000 server datacenter from HyperV, KVM or Nutanix to VMware.
  - jerf 2y ago
    In this case you're probably better off thinking of these things in roughly logarithmic terms rather than absolute. By the time you're up to 20,000 servers, you are going to have roughly the same issues to solve as a 10,000 server install and a 30,000 server install. In absolute terms there may be VMWare installations that seem much bigger, but in logarithmic terms there aren't that many more classes above them, and they get rarified quickly. The same ways that you're telling this customer to get stuffed are going to be affecting even the bigger guys in a way that you can't necessarily compare the experience of this customer to the "10 VMs on one server" customers. It's risky to do that. I'm not sure there's as much differentiation in the market to be exploited as Broadcom thinks. Even their larger customers are not just going to sit there and take it... they're just going to move more slowly. But at that scale, VM migrations have a very natural granularity to them; you move them one at a time. You don't need to drop VMWare next quarter; you can just begin your migration project and move away at a pace of your choosing. But then again, Broadcom may well be explicitly viewing this internally as "we no longer have a competitive product, there is either no way to differentiate it again or we're not willing or able to invest in what it would take, and so the game is just to milk all the money we can out of this", in which case this is pretty close to what I'd expect to see. Where I personally sit in their customer base now, VMs are a commodity and I've got no reason to pay for them anymore. That's been true for a while. I'm speaking here just as A Guy, not as an employee of anyone, but I would expect that this reality has been slowly but surely crawling up the market from where I sit at the bottom. (This is just discussion, not "disagreement".)

secondcoming 2y ago

VMWare Workstation is now free, and VMWare Player has been discontinued. I'm not sure yet what the catch may be.

ghaff 2y ago
The desktop is mostly a pretty uninteresting space in general. Virtual desktops never really took off (which VMware was into at one point) and desktop virtualization is generally a commodity for the relatively few people who use it.

newsclues 2y ago

not smart if you make it hard to use and learn and the next generation of technologists gain experience and familiarity with other solutions and improve them to be superior products.

alemanek 2y ago
Bold of you to assume Broadcom cares about long term sustainability. From what I have seen they are just a PE firm pretending to be a tech company. They will bleed the customers who can’t move fast enough. Burn it to the ground to get every last dollar.

csomar 2y ago

Unless they have a monopoly on the tech, that's not how the free market works. Raising your prices x10 without having a government mandated monopoly, is a great incentive to create competitors.

ChrisRR 2y ago
And so what? Companies coming in to fill the gap of the market you're leaving isn't a concern
- bluGill 2y ago
  They then make their product good and convice your customers they are good enough for less. They don't eken have to be better, just go enough.

red_admiral 2y ago

There is a famous story about business in the UK when some sales manager at Coca Cola raised the price by a small amount for JD Wetherspoons, one of the largest chains of cheap pubs across the country. The manager must have felt very smug about the extra revenue they'd bring in, from a small change that the client could easily absorb and could hardly moan about. What else could they do, move to Pepsi? They did exactly that, and the sales manager was fired over losing one of the biggest clients and the loss of revenue that came with it. One needs to be very, very careful about both the pain threshold and the "** you, I'm moving my business elsewhere" threshold.

helsinkiandrew 2y ago
I would guess the plan for the larger companies is to sell a whole suite of products around the VMware: management, ops, auditing etc, plus take very good care of their niche requirements so moving becomes a much more expensive proposition
ta1243 2y ago
Sure, it's a gamble. But if Broadcom increases price 10-fold and loses half the customers by revenue over the next couple of years, that reflects in their bonus and they can then move on. The customers might have a plan to move off vmware by 2027, but continue to pay the money until then. Come the 2027 renewal the execs that made the massive bonuses for increasing revenue have left and then when the company says they aren't renewing it's the next generation dealing with the problems, and then they just reach for the three-envelopes. This really is on the companies that choose a single supplier. If you had two providers, then shifting doesn't take a 3 year program, it's just a policy change to prefer Provider B rather than Provider A.
- plagiarist 2y ago
  There really needs to be a different mode of compensation that forces the C-suite to prioritize long-term company success.
  - smugma 2y ago

jijji 2y ago

i never understood, even 15 years ago, why people still use vmware when so many open source (i.e. virtualbox) systems existed at the time. The fact that Broadcom buys it out and then 10x the price on people is just even more reason to move to open source. As noted in the article, the open source solutions are 2x faster anyway, so they customers can realize a 2x increase in slices per server.

bluGill 2y ago
Vmware is better by our performance tests. Still is better but not 10x the price better.
dessimus 2y ago
The ones staying with VMware, permanently or near term, are likely using products for which there are not good replacements. The open source alternatives can do what ESXi does sure, but its progressively more difficult to replicate VSAN (including stretched clusters) and NSX-T (with distributed firewalling) without bringing in multiple vendors that will all point at each other when there is a problem.
gosub100 2y ago
Because they dumb it down, you pay more for VMware but then you can hire cheaper, less educated people to run it.
guappa 2y ago
virtualbox is buggy and it's not open source.
- mdaniel 2y ago
  The VirtualBox extension is not open source, but VirtualBox is GPLv3: https://www.virtualbox.org/svn/vbox/trunk/COPYING https://www.virtualbox.org/svn/vbox/trunk/COPYING I can't speak to your buggy claim since I don't know which feature you are complaining about, and if it's part of the extensions then the "many eyes, shallow bugs" does not apply
2y ago

philjohn 2y ago

A less charitable (but I'd argue, likely more correct on balance of probabilities) is they're aiming for the larger customers who are so entrenched in their use of the VMWare product stack that they can't feasibly migrate without taking a huge one-time hit to their balance sheets.

kotaKat 2y ago

Hell, AT&T just settled with Broadcom. Five bucks says they stay right where they are. Hock Tan knows what he’s doing to force the big players to pay and extort them to the nines. https://www.ciodive.com/news/broadcom-att-vmware-settlement-licensing-support-lawsuit/733763/ https://www.ciodive.com/news/broadcom-att-vmware-settlement-...