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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

#41

Post by rootlocus »

Ekaros wrote: post #23
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

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

That's what I don't get either. If they can shove off one of their top 1500 customers (probably much higher) and, as someone put it, "everyone is using them", that means unless you're one of the top few hundred customers, this can absolutely happen to you. Which is what people are upset about.

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

#42

Post by moondev »

RedShift1 wrote: post #26
amelius wrote: post #20

How much would it cost to build VMware from scratch?

You can absolutely build it for 100M $.

You can't really "build" VMware though. It's a proprietary hypervisor and ecosystem of interoperable products with tons of hardware vendor drivers. Building on KVM or even a new hypervisor would not get you 'VMware"

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

#44

Post by alephnerd »

bachmeier wrote: post #38
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…

Do you have information not in the link? I don't see anything related to your comment. > This is basically a polite way to fire a customer. I'll throw out that raising the price like this is also a strategy to increase profit. In the absence of a source for your claim, I'll go with that instead. > Is that $8m worth it if in aggregate you spending an equal amount of time on that account as you are on a $20-30m account…

> Do you have information not in the link

I do this for a living, first as a PM and now as a VC. These multiples are fairly common knowledge for anyone in Enterprise SaaS, and have have worked with accounts teams that have done this and have recommended similar strategies (at a smaller scale) to portfolio companies.

> the person making them needs to be fired, and fast. They should have considered that they could handle both accounts. Increasing the number of customers is called expansion.

I can expand the # of customers by selling 1,000 $1 contracts - that doesn't materially impact my company's financials.

You want to increase your (Revenue-COGS).

If you need to drop a needy customer to increase COGS because you have mistiered accounts caused by an account team targeting a hefty quarterly bonus (happens everywhere, and caused a big shitshow at a major cybersecurity startup recently that brought a federal investigation) so be it.

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

#46

Post by RedShift1 »

moondev wrote: post #42
RedShift1 wrote: post #26

Earlier quoted context omitted.

You can absolutely build it for 100M $.

You can't really "build" VMware though. It's a proprietary hypervisor and ecosystem of interoperable products with tons of hardware vendor drivers. Building on KVM or even a new hypervisor would not get you 'VMware"

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.

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

#47

Post by tgv »

Ekaros wrote: post #23
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

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

And 100M is only 135 customers...

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

#48

Post by biorach »

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

> The margins on support might not make sense.

Yeah, maybe. Without some real figures this is very speculative

> TAMs, CSMs, constant PFRs, constant escalations, etc

You seem to be assuming the customer takes up man-weeks or months of support and legal, not particularly typical for a repeat customer in that game - not sure how else you could account for the margin on $8m being completely eaten up

So... speculative and unconvincing

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

#49

Post by alephnerd »

rootlocus wrote: post #41
Ekaros wrote: post #23

Earlier quoted context omitted.

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

That's what I don't get either. If they can shove off one of their top 1500 customers (probably much higher) and, as someone put it, "everyone is using them", that means unless you're one of the top few hundred customers, this can absolutely happen to you. Which is what people are upset about.

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.

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

#50

Post by ThunderSizzle »

lynx23 wrote: post #35
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…

Wait, IANAL, but... If contracts were based on good faith, why do you actually need contracts? I highly doubt what you wrote. To put too much trust/faith in a bussiness partner seems like a good way to kill your bussiness.

Negotiations should be based on good faith from both parties. If a party attempts to negotiate in bad faith, it becomes very clear and ruins the relationship.

And people enter into unfair contracts regularly without realizing it or understanding it.

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