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It looks a lot like VMware just lost a 24,000-VM customer

theregister.com

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Re: It looks a lot like VMware just lost a 24,000-VM customer

#21

Post by alephnerd »

pmx wrote: post #5
helsinkiandrew wrote: post #4

> Steve McDowell, chief analyst at NAND research, told The Register that VMware by Broadcom is “laser focused on high-revenue, high-margin business” and has priced its wares “just below the pain threshold for customers they care about.” If you hike your prices by 10-15x, you only need 6-10% of customers to stay to maintain your revenue, reduce costs and massively increase profit margins!

This massively increases risk too, right? Pinning all your revenue on a much smaller customer base means losing one or two of them has a huge impact!

Broadcom makes $35B a year in revenue.

VMWare made at most $13.4B.

Even with severe churn, VMWare would make around $12.8-13B.

VMWare is just a BU now, not a company, and the economics of managing "just another product line" is different from a company with a flagship product

As I've mentioned before on HN, the math is different and it makes sense to up prices and only concentrate on F1000s at that size.

> Pinning all your revenue on a much smaller customer base means losing one or two of them has a huge impact

Large customers are sticky. You can't migrate your hypervisor or cloud provider overnight. These are multi-year projects.

Also, it's better to target a smaller base of high paying customers instead of a large base of low paying customers because every sales motion and support ticket is an opportunity cost and a financial cost.

Re: It looks a lot like VMware just lost a 24,000-VM customer

#23

Post by generic92034 »

cjk2 wrote: post #20
pmx wrote: post #5

Earlier quoted context omitted.

This massively increases risk too, right? Pinning all your revenue on a much smaller customer base means losing one or two of them has a huge impact!

I remember my father doing this one. He was an SME support company. With two clients. He cranked the price up 4x and said ”we’ve got them by the balls” . They both opened a tender process and shot him and he was bankrupt 6 months later.

> They both opened a tender process and shot him

What does that mean?

Re: It looks a lot like VMware just lost a 24,000-VM customer

#24

Post by cjk2 »

generic92034 wrote: post #23
cjk2 wrote: post #20

Earlier quoted context omitted.

I remember my father doing this one. He was an SME support company. With two clients. He cranked the price up 4x and said ”we’ve got them by the balls” . They both opened a tender process and shot him and he was bankrupt 6 months later.

> They both opened a tender process and shot him What does that mean?

They approached multiple vendors for quotations who undercut him vastly. So he didn’t get the business.

Re: It looks a lot like VMware just lost a 24,000-VM customer

#26

Post by gr4vityWall »

nottorp wrote: post #7
alephnerd wrote: post #2

> he found the IT department using two hypervisors: Nutanix AHV, and ... VMware. The CTO felt two hypervisors was one too many and considered a consolidation Good move, and plenty more like this will happen. But like I've said before, the winners will be Nutanix, Citrix, and other existing enterprise infra vendors - not Proxmox. And companies like Broadcom are fine with that because market segmentation is a thing. (A…

You hate they're speaking as (very snarky) humans? Corporate speak is better?

Non-snarky humans are better than both.

Re: It looks a lot like VMware just lost a 24,000-VM customer

#27

Post by alephnerd »

tda wrote: post #9
sthuck wrote: post #6

Earlier quoted context omitted.

A lot less sales and cuatomer support people

except that customers that pay 10x have different expectations. They will have a dedicated account manager, SLA's with very short response times, etc

^^^ This

Re: It looks a lot like VMware just lost a 24,000-VM customer

#28

Post by rexreed »

helsinkiandrew wrote: post #19
pmx wrote: post #5

Earlier quoted context omitted.

This massively increases risk too, right? Pinning all your revenue on a much smaller customer base means losing one or two of them has a huge impact!

Yes, but I guess you get to know the customers better and make sure the product fits them very well, or atleast better than the competitors. Another more cynical thought is that this is a way of increasing revenue and profit quickly so the share price rises quickly. You get your options and bonus and leave before the rest of the customers leave.

Your second cynical answer is the correct one. It's always about the shareholder and never about the customer at Broadcom. Remember Computer Associates (CA)? Yeah, they're now Broadcom. That pattern of acquire - consolidate - turn the screws on the customer DNA / culture is very strong in Broadcom.

Re: It looks a lot like VMware just lost a 24,000-VM customer

#29

Post by averageRoyalty »

avidphantasm wrote: post #10

I admit to not understanding or caring about the full scope of Computershare’s business (side note: that’s a dumbass name), but having been forced to suffer their software when working for a former company, it boggles my mind that they need 24,000 VMWare VMs, in addition to a bunch of Nutanix VMs.

It was a very reasonable name in 1978 when they started, as they provide stock and share services for companies via computers - something uncommon in that time.

Re: It looks a lot like VMware just lost a 24,000-VM customer

#30

Post by rapsey »

cjk2 wrote: post #20
pmx wrote: post #5

Earlier quoted context omitted.

This massively increases risk too, right? Pinning all your revenue on a much smaller customer base means losing one or two of them has a huge impact!

I remember my father doing this one. He was an SME support company. With two clients. He cranked the price up 4x and said ”we’ve got them by the balls” . They both opened a tender process and shot him and he was bankrupt 6 months later.

I'm guessing those examples are legion. Always treat your costumers and partners with respect. Another famous example is BeOS thinking they have Apple by the balls to be the basis for OSX. Demanded an outrageous price, Apple just used a BSD.
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