Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

twitter.com

Post reply on HN
Print view View original

101–110 of 134 posts

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

#101

Post by mamonster »

badcppdev wrote: post #81
alephnerd wrote: post #25

Earlier quoted context omitted.

Why? Margins matter, not just dollars alone. If you spend 75 cents to earn a dollar on one customer and can spend 25 cents to earn a dollar on another customer, you'd be dumb not to take customer 2.

It's a SAAS product why not take both customers. Don't leave breadcrumbs to feed your competitors. It seems nobody can believe your assertion that a company would deliberately fire a profitable customer by quoting an x12 contract increase. There's no point asking me to talk to people in my business. You're going to have to point to publicly accessible resources.

Tl; dr thing you should keep in mind(and this will happen to every SaaS): 1.5 mio in revenue per employee.

Your SaaS vendor will hike prices or fire people until they get to this number. Why ? Because VC/Wall Street told them that if they want a Meta/Apple/Microsoft like valuation or a good upround they need to hit this key metric.

Over the next 2-3 years every SaaS that is priced by some sort of market(so not passion projects/ projects run by guys who don't look at comparables) will at least try to hit the above metric. Whether that is massively laying off people(ring any bells?) or massively hiking pricing depends on the product in consideration.

The era of "profitable customer" is over. Now it's all about how profitable he is, and 1.5 mio in revenue per employee is the benchmark.

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

#102

Post by nunez »

alephnerd wrote: post #13
jsmith99 wrote: post #9

Earlier quoted context omitted.

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

its kind of like AWS. with them, some customers are spending $20M+/month, while others (me) spend close to zero.

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

#104

Post by alephnerd »

brazzy wrote: post #75
alephnerd wrote: post #11

Earlier quoted context omitted.

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

> With the level of revenue VMWare had, it's realistic to assume mean deal size is in the 8-9 digit range. 8 million is quite close to the low end of 8 digits. And at the high end of 8 digits, your assumption woud already mean they have only a few hundred customers in total, which is about as far from "realistic" as can be.

> only a few hundred customers in total, which is about as far from "realistic" as can be

That tends to be good enough for a PL within a larger organization, which VMWare is now.

Zscaler uses the same strategy and PANW is transitioning to as well.

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

#105

Post by Rastonbury »

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 work in enterprise saas as well and I can't imagine how bad this customer must be that they can break pricing unless VMware runs really low margins vs the industry. There must be other things as well

8m is 0.6% of their revenue, and they grew in revenue 4% from 2022 to 2023[1]. Losing 0.5% kinda hurts when they are growing that slowly. That 8m can't be that easily magicked out of existing customers or the freed up resources supporting that customer they fired. I know nothing about their business or financials however

[1]https://finance.yahoo.com/news/vmware-reports-fourth-quarter...

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

#106

Post by alephnerd »

nunez wrote: post #102
alephnerd wrote: post #13

Earlier quoted context omitted.

> 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

its kind of like AWS. with them, some customers are spending $20M+/month, while others (me) spend close to zero.

Pretty much, though AWS doesn't use direct sales to bring in lower revenue tier customers whereas VMWare did.

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

#107

Post by throwawaymanbot »

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…

[dead]

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

#109

Post by alephnerd »

Rastonbury wrote: post #105
alephnerd wrote: post #11

Earlier quoted context omitted.

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 work in enterprise saas as well and I can't imagine how bad this customer must be that they can break pricing unless VMware runs really low margins vs the industry. There must be other things as well 8m is 0.6% of their revenue, and they grew in revenue 4% from 2022 to 2023[1]. Losing 0.5% kinda hurts when they are growing that slowly. That 8m can't be that easily magicked out of existing customers or the freed up…

> There must be other things as well

My hunch is an Account Team gave a heavily discounted deal to land an upper market customer in order to meet quarterly commitments or get a nice commission.

The customer ended up accepting the $100M price-point as well (https://twitter.com/cioontherun/status/1761882689886433742), so they were clearly mis-tiered. If you can afford (what I assume is) a multi-year contract with a 9 figure TCV, you are generating 9 or 10 figures in revenue.

I've heard of similar shenanigans down the grapevine at w/ Cisco and Dell EMC and absolutely wouldn't be surprised if a similar thing happened at VMWare.

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

#110

Post by alephnerd »

itsdrewmiller wrote: post #96
alephnerd wrote: post #92

Earlier quoted context omitted.

That's not how the average should be calculated. It should be: (Contract_1_yearly+...+Contract_n_yearly)/num_contracts Anyhow the customer signed the deal ( https://twitter.com/cioontherun/status/1761882689886433742 ), implying they were underpaying and had the capacity to pay the true rate.

That’s going to get you basically the same number unless you think most of those 400k customers do not have contracts for some reason? My revenue-based approach would undercount in-year bookings but your approach would undercount NRR which I suspect is nontrivial for VMWare (but I haven’t checked). Also just to be clear I agree with your initial comment - there are lots of reasons even big customers can be worth repr…

After having some caffeine percolate in my veins, I see your point and agree!
Post reply on HN