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I found this rather odd: > “We used to pay for VMware software one month in arrears,” he said. “With Broadcom we had to pay a year in advance with a two-year c

by amluto 2y ago

I found this rather odd: > “We used to pay for VMware software one month in arrears,” he said. “With Broadcom we had to pay a year in advance with a two-year contract.” If your goal is to extract every possible cent from your existing customers, why would you also switch them from net 30 to requiring partial prepayment? VMware wants money in general but should not have a cash flow problem, and forcing a monster early payment seems like it will force customers to notice an immediate problem and make a choice instead of allowing themselves to be slowly and steadily ripped off. If I were a pointy-haired CEO committed to the multiply-pricing-by-five strategy, I would do my best to sweeten the deal: offer generous payment terms, give nice-sounding discounts for up front commitments, give very large discounts for nodes that haven’t yet been leased to a customer, etc.

shepardrtc 2y ago
Either their sales team absolutely screwed this up, or they just don't want to bother with the VMware platform anymore. Maybe both?
- nyrikki 2y ago
  Broadcom aspires to the Oracle model, they said as much when they bought VMware.
diggan 2y ago
Perhaps similar strategy as spammers employ today? Where they try to filter away people quickly who wouldn't fall for it when they need it to. So do something slightly outrageous today, so you filter away the ones that won't stick around for the future more outrageous changes.
nolok 2y ago
Because they have twelve thousands vms and are themselves a provider that can't afford to have downtime for its customers. So the thinking here was probably "there is no way they can refuse to sign right now and destroy their business in the process, so we might as well take the cake and also force them to stay after so they don't leave in 11 months and 29 days". Turns out that thinking is wrong for that specific customers, but for how many did it work ?
- tgv 2y ago
  Indeed, a sales rep might have dreamed of an extra big bonus.
  - rkagerer 2y ago
    That's not sales it's extortion
    - xbmcuser 2y ago
      VMware was taken over by a company whose business model is extortion. Ie take over a company with customer that have few or little alternatives then keep jacking up prices as high as they can.
    - malux85 2y ago
      No it’s “vendor lock-in” Wait no you’re right, they are practically synonyms.
    - bhouston 2y ago
      For the sales guys involved it looked like a massive payday for him, one he could brag about for years.
      - luma 2y ago
        The guy's name is "Hock Tan", it goes all the way to the top. Greedy billionaire trying to squeeze the entire on-prem datacenter industry. Every single one of my VMware customers is either in the process of migrating off or developing the plan to do so. At least one of them would be in Broadcom's list of 600 key accounts that Broadcom thought they could turn the screws on. They somehow seem to have forgotten that MS had just bought a chunk of that org and instead of paying VMware, they are now exiting a few dozen datacenters to move everything to the cloud. This org was highly cloud-resistant (for a handful of good reasons), but VMware forced their hand at exactly the wrong time. I believe this course of action for VMware is going to be taught in business schools in the future.
ratg13 2y ago
In my experience, VMWare attempts to force this model on everyone using tactics like not giving quotes until the very last minute, forcing buyers into a "take it or leave it" decision.. thinking (rightly so) that it will work in their favor most of the time. It takes a lot of balls for a company to "leave it" right as their contract is expiring, and speaks to talent and experience on the customer side to be able to stand up to bullying, and be able to pull off such a large migration.
- dylan604 2y ago
  But it's also a great negotiating tactic for the buyer not the seller. This seller has been chasing this buyer for however much time, and then at the last second walks away from the deal. I've had the price of a car drop drastically by doing this. I can't imagine a software sales person and its managers not budging and just letting the deal walk away either.
  - hdhdbebd 2y ago
    But it's highly unlikely the buyer will walk away if their core business already depends on the product you licensed to them
    - protimewaster 2y ago
      Now that there's a high profile example of it happening, though, it might become both more common and more of a negotiation tool for customers. This company has shown that it can be done, and now both Broadcomm and their customers know it, and each knows that the other knows it. Sure, it's still a lot of effort, but, at this point, even if Broadcomm can get somebody to sign up for another year, that gives the customer a year to plan on how to jump ship next time around. And it looks like the number of people with expertise on migrating from VMWare is skyrocketing, so companies should be able to hire a team to do it...
ToucanLoucan 2y ago
The lock in is strong with their product and they know it. Migrating hypervisors is a long and arduous process for any medium-to-small business, and I speak from experience: it took our small team about 2 months to move off of VMware about a decade ago, also because the price of support was simply unhinged from our perspective. They would be fools to not expect high attrition of smaller clients, but big businesses and government customers aren't going to change, or at least not nearly to the tune that smaller ones would, and a smaller pool of larger customers paying a higher price probably works pretty well to keep revenues up while letting them slash support staff without too much of a reduction in quality for those that are left. It was clear to me from the beginning that this price hike wasn't about cash flow, not particularly. Broadcom doesn't want vmware wasting money supporting small fish.
KingOfCoders 2y ago
I had my license cost from another large company YoY increase 10x (hefty amount). Reason was new sales manager who wanted to shake max money. They make revenue and then move on.

by amluto 2y ago

shepardrtc 2y ago

Either their sales team absolutely screwed this up, or they just don't want to bother with the VMware platform anymore. Maybe both?

nyrikki 2y ago
Broadcom aspires to the Oracle model, they said as much when they bought VMware.

diggan 2y ago

Perhaps similar strategy as spammers employ today? Where they try to filter away people quickly who wouldn't fall for it when they need it to. So do something slightly outrageous today, so you filter away the ones that won't stick around for the future more outrageous changes.

nolok 2y ago

Because they have twelve thousands vms and are themselves a provider that can't afford to have downtime for its customers. So the thinking here was probably "there is no way they can refuse to sign right now and destroy their business in the process, so we might as well take the cake and also force them to stay after so they don't leave in 11 months and 29 days". Turns out that thinking is wrong for that specific customers, but for how many did it work ?

tgv 2y ago
Indeed, a sales rep might have dreamed of an extra big bonus.
- rkagerer 2y ago
  That's not sales it's extortion
  - xbmcuser 2y ago
    VMware was taken over by a company whose business model is extortion. Ie take over a company with customer that have few or little alternatives then keep jacking up prices as high as they can.
  - malux85 2y ago
    No it’s “vendor lock-in” Wait no you’re right, they are practically synonyms.
  - bhouston 2y ago
    For the sales guys involved it looked like a massive payday for him, one he could brag about for years.
    - luma 2y ago
      The guy's name is "Hock Tan", it goes all the way to the top. Greedy billionaire trying to squeeze the entire on-prem datacenter industry. Every single one of my VMware customers is either in the process of migrating off or developing the plan to do so. At least one of them would be in Broadcom's list of 600 key accounts that Broadcom thought they could turn the screws on. They somehow seem to have forgotten that MS had just bought a chunk of that org and instead of paying VMware, they are now exiting a few dozen datacenters to move everything to the cloud. This org was highly cloud-resistant (for a handful of good reasons), but VMware forced their hand at exactly the wrong time. I believe this course of action for VMware is going to be taught in business schools in the future.

ratg13 2y ago

In my experience, VMWare attempts to force this model on everyone using tactics like not giving quotes until the very last minute, forcing buyers into a "take it or leave it" decision.. thinking (rightly so) that it will work in their favor most of the time. It takes a lot of balls for a company to "leave it" right as their contract is expiring, and speaks to talent and experience on the customer side to be able to stand up to bullying, and be able to pull off such a large migration.

dylan604 2y ago
But it's also a great negotiating tactic for the buyer not the seller. This seller has been chasing this buyer for however much time, and then at the last second walks away from the deal. I've had the price of a car drop drastically by doing this. I can't imagine a software sales person and its managers not budging and just letting the deal walk away either.
- hdhdbebd 2y ago
  But it's highly unlikely the buyer will walk away if their core business already depends on the product you licensed to them
  - protimewaster 2y ago
    Now that there's a high profile example of it happening, though, it might become both more common and more of a negotiation tool for customers. This company has shown that it can be done, and now both Broadcomm and their customers know it, and each knows that the other knows it. Sure, it's still a lot of effort, but, at this point, even if Broadcomm can get somebody to sign up for another year, that gives the customer a year to plan on how to jump ship next time around. And it looks like the number of people with expertise on migrating from VMWare is skyrocketing, so companies should be able to hire a team to do it...

ToucanLoucan 2y ago

The lock in is strong with their product and they know it. Migrating hypervisors is a long and arduous process for any medium-to-small business, and I speak from experience: it took our small team about 2 months to move off of VMware about a decade ago, also because the price of support was simply unhinged from our perspective. They would be fools to not expect high attrition of smaller clients, but big businesses and government customers aren't going to change, or at least not nearly to the tune that smaller ones would, and a smaller pool of larger customers paying a higher price probably works pretty well to keep revenues up while letting them slash support staff without too much of a reduction in quality for those that are left. It was clear to me from the beginning that this price hike wasn't about cash flow, not particularly. Broadcom doesn't want vmware wasting money supporting small fish.

KingOfCoders 2y ago

I had my license cost from another large company YoY increase 10x (hefty amount). Reason was new sales manager who wanted to shake max money. They make revenue and then move on.