VMware-Broadcom uncertainty rattles SA channel

Christopher Tredger
By Christopher Tredger, Portals editor
Johannesburg, 22 Feb 2024
Following Broadcom’s acquisition of VMware, there is still uncertainty in the South African IT channel.
Following Broadcom’s acquisition of VMware, there is still uncertainty in the South African IT channel.

Following Broadcom’s acquisition of VMware last year, there is still uncertainty among the South African IT channel.

While there has been some clarity from Broadcom about the partner programme, local VMware partners are still being left to speculate as to how the acquisition will impact their operations and the channel.

The partners that shared information with ITWeb acknowledged these are unsettling times.

As ITWeb reported in January, partners are unsure about future dealings with the company after Broadcom’s $61 billion deal to acquire VMware in November 2023 and the subsequent decision to transition the VMware partner programme to its “by-invitation-only Broadcom Advantage Partner Programme”.

Partners are also concerned over changes to operations, contracts, ease of doing business and future relations, as well as product and solution volume management.

In a blog post earlier this month, Broadcom channel head Cindy Loyd, vice-president of global partner and commercial sales, confirmed the company is inviting 18 000 “active” VMware resellers into its partner programme.

Loyd outlined the new features of the Broadcom Advantage Partner Programme, including a net margin model in which all discounts will systematically be disclosed up-front.

Changes also see streamlined pricing, according to which Broadcom has simplified pricing to four stock-keeping unit bundles: VMware Cloud Foundation, vSphere Foundation, vSphere Standard and vSphere Essential Plus.

“We gathered feedback from hundreds of partners globally, and the feedback was consistent. Solve channel conflict, re-evaluate profitability on renewals, incentivise long-term adoption of our products and simplify were key themes in your feedback. Based on that feedback, we evolved our Broadcom Advantage Partner programme to achieve much of what our partners asked for,” Loyd noted.

Andrew Cruise, CEO of South African VMware cloud operator and principal partner Routed, says Broadcom is inviting two tiers of partners – the top tier are Pinnacle partners, the second tier are Premier/Principal partners.

“Invitations to Pinnacle partners went out at the end of January, beginning February – and there are a couple in Sub-Saharan Africa. Premier partners are still waiting for the invitations,” says Cruise.

He explains that Broadcom has issued a request for information to all partners. According to Cruise, this has been misinterpreted as an “invitation” and says it is actually a validation process of the minimum requirements that have to be met.

Cruise notes there are 4 000-plus partners globally that can apply for inclusion in the new programme. To qualify, partners must tick specific boxes, including minimum spend conditions, tech conditions, and allocated sales and marketing resources.

He believes only 400 of the 4 000 will make it onto the programme, in addition to the 100 Pinnacle partners.

Cruise predicts the Sub-Saharan Africa region will likely only get four or five spots, because it is a smaller market compared to global counterparts.

However, he adds that Broadcom needs international coverage, including “obscure and smaller marketplaces”.

Wait and see

Louis Botha, practice manager: Hybrid IT Solutions and Strategy, Logicalis, notes there is concern in the market that the acquisition may have an adverse impact on the business interests of established customers. But he says the long-term impact might be “overblown at this stage”.

“We have been working with VMware for a long time and we will continue to use Broadcom-VMware solutions where they may prove to be advantageous and cost-effective for customers,” says Botha.

“This is especially true in the local South African context, where costs are escalating and customers are looking for savings.”

Botha notes that based on what the company is seeing in terms of pricing increases, some turbulence is expected in the local market. “We’re likely to see some long-term customers and partners pivoting away from Broadcom-VMware in the short-term, but the long-term impact remains to be seen.”

Jeff Ready, CEO and co-founder of Scale Computing, a US-based rival company to VMware, says there is always significant change when an acquisition of such magnitude takes place, but adds: “These changes have enabled us to attract VMware partners and customers seeking cost-effective alternatives.”

Ready suggests that much like the global VMware channel, South African partners are most likely scrambling to find alternative solutions with minimal interruption and cost.

“I believe IT shops that have been 100% VMware will look to a more hybrid vendor approach in the future, to prevent a repeat of this happening. The impact of Broadcom’s decision will be felt for a long time and will likely change how CIOs and CTOs look at building their technology platforms.”

Mark Walker, associate vice-president, Sub-Saharan Africa, at IDC, believes VMware renewals will suffer as alternative suppliers are considered, and concerns about licence rigidity add to this.

“Partners are concerned about not receiving the same commercial benefits, training and support as they did with VMware.

“Nutanix is looking like a significant beneficiary here, along with Cisco. Some estimates indicate there could be up to 20% loss of clients for Broadcom,” adds Walker.