SA CIOs fear support, pricing changes after VMware takeover

Adrian Hinchcliffe
By Adrian Hinchcliffe
Johannesburg, 06 Feb 2024
Broadcom completed the $61 billion acquisition of VMware in November last year.
Broadcom completed the $61 billion acquisition of VMware in November last year.

VMware’s acquisition by Broadcom has created uncertainty with clients across the world.

Locally, the story is no different, as the outlook of South African chief information officers (CIOs) is mixed, according to a short poll conducted by ITWeb.

While coverage of the deal hasn’t made much of a splash in local tech media, of the nine surveyed CIOs, all were aware of the news that Broadcom had completed the $61 billion acquisition of VMware in November last year.

Eight respondents were running VMware solutions in their technology landscape, and of those, six categorised it as a “critical” part of their overall IT architecture.

Corporate takeovers are quite commonplace in the tech landscape, however, concern about the post-acquisition future of VMware results from previous acquisitions made by Broadcom, which include the $18.9 billion takeover of CA Technologies in 2018 and the $10.7 billion purchase of Symantec’s enterprise software business in 2019.

Both acquisitions were a diversification for Broadcom, which is largely known as a semiconductor business. And both acquisitions resulted in the retrenchment of staff members and subsequent hiving off parts of the respective businesses.

Concerning track record

Avsharn Bachoo, chief technology director at AfroCentric Group, says he had previously used solutions from Symantec and CA, and had experienced reduced levels of support following the Broadcom acquisitions.

He had also noticed a halt in R&D and product development. “Symantec and CA product support shifted from good to one of the worst I have seen in my 20 years as a CIO. I eventually changed products,” he says.

“Broadcom’s track record does have me concerned as everything suggests that this would be a major decline for VMware,” he added.

That sentiment wasn’t shared by all, however. The group CIO of a financial services player, who spoke to ITWeb on condition of anonymity, says: “Broadcom has previously acquired other slightly less critical vendors to our organisation without significant impact.”

He and other CIOs did, however, note concern about changes to support, licensing models, pricing structures and their impact on operating expenditure, as well as potential impact on products in future.

Any changes to pricing will further compound existing financial concerns about increasing cloud prices and unfavourable exchange rates, notes Kevin Wilson, general manager, IT services, group IT, Stefanutti Stocks.

Already, there are signs that change is afoot at VMware. Staff layoffs have taken place in various markets including the US, Australia and Ireland, and there have been significant changes at senior levels.

While further details are expected soon, pricing models are moving to subscription-based and the VMware partner programme has been restructured to exclude smaller partners, with Broadcom also directly taking over larger accounts.

More recently, former parent company Dell has reportedly terminated a distribution deal for VMware products.

Not all surveyed CIOs expressed negative sentiment about the acquisition, however. Some took a neutral stance, saying they will monitor the situation and assess what happens before acting.

Helen Constantinides, CIO of Avbob, says she has a “positive outlook on the potential impact of this acquisition”.

She characterises the acquisition price as a “significant commitment”, which suggests that there are “strategic plans in place to ensure the success of this venture”.

Given the uncertainty, alternatives were being considered by some. Bachoo says Veeam was a potential replacement for on-premises deployments, while hyperscalers’ virtual machine services were already used by his organisation.

He was one of the five respondents who admitted it would be “somewhat difficult” to replace the VMware products in use.

Mthoko Mncwabe, CIO, Airports Company South Africa (ACSA), says: “We have started our cloud implementation of some of the most important systems at ACSA; therefore, the risk to the business is less, but we still have a large basket of systems that require on-premise infrastructure and there are currently no plans to move away from VMware.”

“Watching brief”

The anonymous financial services group CIO says his organisation similarly wasn’t currently considering direct alternatives for on-premises infrastructure.

However, as workloads progressively shifted to hyperscale cloud, decisions would be made to remain with VMware or shift to the hyperscale providers’ virtualisation technology. These decisions would also be impacted by what was happening post-Broadcom acquisition.

Other CIOs expressed a similar “watching brief” stance.

Keeping VMware solutions for on-premise infrastructure seemed a popular solution, but as applications and workloads shifted to the cloud, this was seen as an area where reliance on VMware would be lessened.

Wilson says his situation reflected that of most enterprises, in that switching from VMware to competition was possible, but would be disruptive.