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

21–30 of 134 posts

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

#21

Post by lordnacho »

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…

What's not good faith about this? "Your custom won't work for us unless we get 100M"

Chances are this is not actually surprising for this customer. There's probably been a lot of talk between the sides, a lot of expectations that weren't met both ways.

What you're describing at your own company seems to be that same thing, no? Relationship wasn't going well, and it's gotta end somehow.

Now that's not to say this should be normalized, it shouldn't. But there needs to be some way to say "hmm, it doesn't make sense for us, business wise"

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

#22

Post by alephnerd »

jraph wrote: post #17
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 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.

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 up or piss off.

> that can't be unprofitable, can it

Nope.

> Or the contract is too low.

Exactly.

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

#23

Post by Ekaros »

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

13,5 billion is 1687 8 million customers... That is not actually that many...

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

#24

Post by baq »

jraph wrote: post #17
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 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.

taxes, margins, capex, etc. means you could do maybe 10. offshored to somewhere with competent people, 20-40 depending on location.

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

#25

Post by alephnerd »

AshamedCaptain wrote: post #19
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.

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.

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

#28

Post by mschuster91 »

alephnerd wrote: post #14
wjnc wrote: post #12

Earlier quoted context omitted.

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).

> The strategy you described has no upside for the vendor (in this case Broadcom VMWare).

It has. Product/brand trust matters... the most obvious example being Google, who have had an extremely hard time getting their stuff to be actually used as they have shown time and time again that even if you're the biggest game publishers on this rock, you won't be able to rely on Google keeping up their end of any deal.

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

#29

Post by Ekaros »

thriftwy wrote: post #3

That does sound line a Unity moment. I wonder if the execs really learn nothing, or they enjoy conjuring competition out of thin air.

Or has someone done some really weird math on this... First drive the prices up, exploits as much money as you can from whatever customers stick with you and then after those left, write off the entire thing somehow...

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

#30

Post by michaelt »

alephnerd wrote: post #14
wjnc wrote: post #12

Earlier quoted context omitted.

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).

> The strategy you described has no upside for the vendor (in this case Broadcom VMWare).

The upside is you don't scare off other customers when they hear reports of a 12x price increase.

Right now, in response to this post, VMWare's biggest customers will be drawing up plans for if they need to walk away at the next contract renewal. And they'll want those plans to be extremely credible - it's worth spending $5 million trialling and integrating a competing system, if it stops your $50m contract turning into a $150m contract.

Post reply on HN