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Can confirm a current Broadcom VMware customer went from $8M renewal to $100M

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Re: Can confirm a current Broadcom VMware customer went from $8M renewal to $100M

#11

Post by alephnerd »

biorach wrote: post #8
alephnerd wrote: post #7

This is basically a polite way to fire a customer. You don't want to sell to everyone - you need to make sure the cost of retention+support is significantly less than what they are paying. If a customer is too troublesome or spending too little (for a company like VMWare, a $8m contract is on the smaller end) this is the politest way to fire them. It sounds like this customer is a legal firm, which makes sense - they…

$8m doesn't cover retention (what retention?) and support? Not sure that makes sense.

Absolutely.

When you reach VMWare size ($13.5 BILLION in revenue in FY 23), $8M is chump change.

The margins on support might not make sense.

With the level of revenue VMWare had, it's realistic to assume mean deal size is in the 8-9 digit range.

> what retention

TAMs, CSMs, constant PFRs, constant escalations, etc

Re: Can confirm a current Broadcom VMware customer went from $8M renewal to $100M

#12

Post by wjnc »

alephnerd wrote: post #7

This is basically a polite way to fire a customer. You don't want to sell to everyone - you need to make sure the cost of retention+support is significantly less than what they are paying. If a customer is too troublesome or spending too little (for a company like VMWare, a $8m contract is on the smaller end) this is the politest way to fire them. It sounds like this customer is a legal firm, which makes sense - they…

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.

Re: Can confirm a current Broadcom VMware customer went from $8M renewal to $100M

#13

Post by alephnerd »

jsmith99 wrote: post #9
alephnerd wrote: post #7

This is basically a polite way to fire a customer. You don't want to sell to everyone - you need to make sure the cost of retention+support is significantly less than what they are paying. If a customer is too troublesome or spending too little (for a company like VMWare, a $8m contract is on the smaller end) this is the politest way to fire them. It sounds like this customer is a legal firm, which makes sense - they…

Is $8m small for a VMware contract? Surely if you’re big enough at some point it becomes cheaper to put something together in house - surely this point is far before spending $100m a year?

> Is $8m small for a VMware contract

Absolutely.

For an Enterprise SaaS generate $13.5B in revenue in FY23, you can realistically assume mean deal size is mid-upper 8 or low 9 figures.

Everyone and I mean everyone is using them

Re: Can confirm a current Broadcom VMware customer went from $8M renewal to $100M

#14

Post by alephnerd »

wjnc wrote: post #12
alephnerd wrote: post #7

This is basically a polite way to fire a customer. You don't want to sell to everyone - you need to make sure the cost of retention+support is significantly less than what they are paying. If a customer is too troublesome or spending too little (for a company like VMWare, a $8m contract is on the smaller end) this is the politest way to fire them. It sounds like this customer is a legal firm, which makes sense - they…

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…

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).

Re: Can confirm a current Broadcom VMware customer went from $8M renewal to $100M

#16

Post by siod »

alephnerd wrote: post #7

This is basically a polite way to fire a customer. You don't want to sell to everyone - you need to make sure the cost of retention+support is significantly less than what they are paying. If a customer is too troublesome or spending too little (for a company like VMWare, a $8m contract is on the smaller end) this is the politest way to fire them. It sounds like this customer is a legal firm, which makes sense - they…

There is nothing polite about this, it's predatory behaviour. If you can't make a 8m saas contract work your then company is broken.

Re: Can confirm a current Broadcom VMware customer went from $8M renewal to $100M

#17

Post by jraph »

alephnerd wrote: post #11
biorach wrote: post #8

Earlier quoted context omitted.

$8m doesn't cover retention (what retention?) and support? Not sure that makes sense.

Absolutely. When you reach VMWare size ($13.5 BILLION in revenue in FY 23), $8M is chump change. The margins on support might not make sense. With the level of revenue VMWare had, it's realistic to assume mean deal size is in the 8-9 digit range. > what retention TAMs, CSMs, constant PFRs, constant escalations, etc

I don't understand.

I can understand VMWare doesn't want to keep doing this, but with $8M, assuming a 100k annual salary, you can dedicate 80 full time employees to this customer yearly.

I understand 8M is nothing next to 13.5B, but that can't be unprofitable, can it? Or the contract is too low.

Re: Can confirm a current Broadcom VMware customer went from $8M renewal to $100M

#18

Post by danpalmer »

nodeman7 wrote: post #4

Cant wait to watch VMware die a slow death

Is there that much negativity towards VMWare? I got the impression they were generally liked by users? Still enterprise software, but good stuff, and not awful about their licencing like some other companies?

Re: Can confirm a current Broadcom VMware customer went from $8M renewal to $100M

#19

Post by AshamedCaptain »

alephnerd wrote: post #7

This is basically a polite way to fire a customer. You don't want to sell to everyone - you need to make sure the cost of retention+support is significantly less than what they are paying. If a customer is too troublesome or spending too little (for a company like VMWare, a $8m contract is on the smaller end) this is the politest way to fire them. It sounds like this customer is a legal firm, which makes sense - they…

I have seen companies that would refuse to serve customers that had not been growing as expected. Literally. Bogles my mind.
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