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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

#121

Post by alephnerd »

Sebb767 wrote: post #117
red-iron-pine wrote: post #100

Earlier quoted context omitted.

VMwares biggest customers will be getting deals apropriate to their offerings. It sounds like this was a (comparatively) PITA small-fry legal / law office.

> VMwares biggest customers will be getting deals apropriate to their offerings. Maybe I'm completely out-of-touch, but an 8M$ contract should be sufficient to get "appropriate deals"?

Companies like Walmart, Centurylink, AWS (via Equinix), and the DoD (via General Dynamics) use VMWare and most likely have contracts in the 9 figure range for a backbone service like VMWare

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

#122

Post by panick21_ »

vardump wrote: post #68
RedShift1 wrote: post #46

Earlier quoted context omitted.

For 100M $ you can buy Proxmox, start advertising, scoop up all the lower end VMware customers and fill in the feature gaps according to customer demand over time.

Can Proxmox do things like vMotion?

The whole Oxide computer company raised less then $100 million $ as far as I know. With that money and open source they build not only service that can do live migration, but also the computer to run the whole thing on top.

Sure that's not a UI and doesn't include a lot of other stuff that VMWare does, but it does illustrate what a gigantic amount of money 100 million $ actually.

The underlying open source tools are so good, if you have the money to have real engineering team and combine them in interesting way and to costumize them for your needs, 100 million $ seems like it would go a very, very long way.

Specially when we are talking 100 M$ every year or something like that.

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

#123

Post by mamonster »

alephnerd wrote: post #113
mamonster wrote: post #101

Earlier quoted context omitted.

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 passio…

While i agree in broad strokes, this isn't exactly related to upping revenue per employee. This sounds like a mis-tiering of an upper market or strategic account by an account team. That said, Margins and RPE are critical now. A lot of this is also because there are too many damn SaaSes now, and enterprise products bill monthly now as well. In 2013 the average was 8 SaaS products per company and in 2023 around 80 (I…

I think in this particular case you are probably right(you see much more experienced in actual enterprise sales), but I think my more general point is that these sorts of price hikes are what is priced into this business now.

VMware was bought at about 400k rev/employee, Broadcom was running at about 1.7mio per prior to that. Tan is essentially running a PE buyout shop that is listed, and he uses a lot of leverage. He might not get it to 1.5 mio but he wouldn't have bought it if he thought it could churn out anything less than like 1.2(over 6-7 years).

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

#124

Post by everforward »

ehvatum wrote: post #93
alephnerd wrote: post #49

Earlier quoted context omitted.

It's how companies work. I can guarantee for a fact that a F1000 will be spending 8-9 figures for a VMWare type product (I've worked on similar products as a PM). $8m is low. > Which is what people are upset about All that matters is purchasing committees are ok (not happy, not sad - just meh). All I see here is just IC engineers pouting.

> All that matters is purchasing committees are ok Large enterprise purchasing committees are foremost concerned with risk, you absolute dolt. The risk that price will jump 12x, requiring all kinds of scrambling, is fucking awful. I don’t know what planet you’re from, but you gotta stop acting like it’s this one.

And the risk they're most concerned with is the business ceasing to function.

I worked at a F500 that used VMWare; they'd probably pay a 12x subscription fee. Not because they want to, but because they started trying to get rid of their mainframe 30 years ago and 70 something percent of their business still relied on the mainframe last I was there a decade ago.

VMWare will likely go the same. It'll take them a year or two to PoC an alternative and get contracts signed, another 5 to move the low hanging fruit, and a decade to finish off the long tail of stuff that won't migrate easily.

We're talking migrating stuff running versions of Java that were EoLed a decade ago, using an app container (like Tomcat) that was also EoLed a decade ago, and trying to get that all working on a new infra stack.

And it's not just one of them, there are thousands of apps, many of which are outdated or have bizarre vendor requirements you'd likely never accept (like "we will not support you if you run this bog-standard Django app on a VM").

Stuff like this moves slooooowwww, especially at companies who only use tech to enhance their primary business (as opposed to tech being their primary business).

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

#125

Post by everforward »

jraph wrote: post #55
alephnerd wrote: post #22

Earlier quoted context omitted.

There are several flaws with your assumptions 1. "assuming a 100k annual salary" - the cost of salary is 1.75x stated wage, so in reality it's $175k 2. "you can dedicate 80 full time employees to this customer yearly" - you mean you need almost a hundred bodies per customers?!? In fact, this is a major reason to fire a customer. It means they are demanding and trying to outsource their entire org to you. Either pay u…

> 1. "assuming a 100k annual salary" - the cost of salary is 1.75x stated wage, so in reality it's $175k I know, this was ballpark thinking, it's not a fundamental flaw in my thinking. 100k with taxes is still a 60k salary and that's about what I was thinking. Not great everywhere, but still good in many locations. I also don't know how much support people are usually paid, and 200k is still 40 people. Now, indeed, I…

60k is likely very low for this kind of support. The people calling in are generally IT professionals that have issues a script won't solve.

When I worked with VMWare, it also wasn't uncommon for us to have support on site. If we were doing a big migration or had a significant issue, they'd send someone out for a week+.

They likely paid a premium to have support willing to travel for significant spans of time, plus now they're paying for hotels, daily stipends, etc.

Then you need labs for engineers to try to replicate problems, office space, general overhead like taxes and payroll providers, etc.

Then there's costs to the platform itself from some customers. E.g. small customers tend to be less homogenous. Every Fortune 500 has a SAN, many small companies don't. Now you need an "integrates with EMC" storage option for big companies, and an "integrates with everything else" option for small companies. Big companies want a service mesh, small companies want a billion different networking configurations, etc.

Basically big companies tend to resemble each other and view their differences as a competitive advantage they will pay their vendors to support so they can keep. Small customers diverge a lot, don't want to and/or can't afford to pay for the changes they need, and are generally more price-sensitive due to their ability and ability to switch vendors.

So simultaneously the small clients are profitable, but at a lower margin than bigger customers, and more willing to migrate away. Rather than taking a risk that they can do enough development to keep the small customers, they'd rather double down on the customers that can't switch, raise their margins, and cut their risk.

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

#126

Post by alephnerd »

mamonster wrote: post #123
alephnerd wrote: post #113

Earlier quoted context omitted.

While i agree in broad strokes, this isn't exactly related to upping revenue per employee. This sounds like a mis-tiering of an upper market or strategic account by an account team. That said, Margins and RPE are critical now. A lot of this is also because there are too many damn SaaSes now, and enterprise products bill monthly now as well. In 2013 the average was 8 SaaS products per company and in 2023 around 80 (I…

I think in this particular case you are probably right(you see much more experienced in actual enterprise sales), but I think my more general point is that these sorts of price hikes are what is priced into this business now. VMware was bought at about 400k rev/employee, Broadcom was running at about 1.7mio per prior to that. Tan is essentially running a PE buyout shop that is listed, and he uses a lot of leverage. H…

> these sorts of price hikes are what is priced into this business now

Pretty much.

> Tan is essentially running a PE buyout shop that is listed

I'd disagree on that. A PE play would severely underpay engineering and look for a short (2-3 year) turnaround by re-IPOing. Meanwhile, Broadcom tries to hold portfolio companies and pay AWS level salaries to hires.

Instead, Broadcom is using the same strategy that PANW and ZS are mimicking to own the F100 market.

There is severe vendor fatigue in the market, as various different apps are viewed as a massive cost inefficency and there is a very real chance of different apps becoming an attack vector (eg. Slack at Uber).

The only solution for this is vendor consolidation, as this

1. Limits the amount of RFPs you need to vet significantly

2. Narrow down any spending inefficiencies

3. Limits your attack vectors with a vendor breach or compliance overheads

This is why Niklesh Arora announced "Platformization" at PANW's earnings call a couple days ago, and is the same strategy Broadcom has been using for almost a decade, and what ZS+CRWD have started using as well.

This is a demand from F1000s now as well as institutional investors, and a massive reason why Broadcom's stock has gone from $40 to $1300 in a decade.

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

#127

Post by alephnerd »

solarkraft wrote: post #119
shrubble wrote: post #98

Earlier quoted context omitted.

This strategy works... until it doesn't. You may well be correct for the next 3-5 years; but after that those customers will leave and they won't come back. Ever. Tech is littered with the twittering ghosts of companies that had something "essential" and "irreplaceable". The strategy is "a retreat to the high end" and a self-serving re-definition of "who are customers are" and "what we do".

Yes. Mind share is important. Does VMWare have the best product or are they so popular because "that's what I know"? As smaller shops switch away (the Proxmox folks must be in a pretty good mood), the job market will be full of people who know the alternatives, but not VMWare products. And when "the real thing" is so incredibly expensive, why not switch to something comparable that your people already know?

An enterprise would switch to Citrix or Nutanix before Proxmox, as having on-call support is critical at that level

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

#128

Post by danpalmer »

rfoo wrote: post #31
danpalmer wrote: post #18

Earlier quoted context omitted.

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?

Until they were acquired by BRCM. Then oh well, you know, typical BRCM behaviors awaits.

Yeah I've heard horror stories about them. It was the VMWare bit specifically that surprised me though!
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