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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

#51

Post by Jedd »

alephnerd wrote: post #21
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!

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 al…

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

Down from the $13.4B -- that's not 'severe churn' you're describing there, it implies only a few percent drop in revenue. We've yet to see if that's the likely outcome here, but touchy-feely sentiment suggests that it'll be worse than that.

> Large customers are sticky.

Isn't TFA a precise counter-point to that assumption?

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

#52

Post by alephnerd »

prmoustache wrote: post #49
alephnerd wrote: post #21

Earlier quoted context omitted.

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 al…

> Large customers are sticky. You can't migrate your hypervisor or cloud provider overnight. These are multi-year projects. In VM's case it is not that long really. It really depends how much priority you put into it.

> In VM's case it is not that long really

It is. You have teams critical apps running and you do not want to cause downtime for customers (internal or external).

I've seen this saga happen dozens of times and it is a very delicate and intricate process that requires a lot of planning.

A failed migration can become news, for example - https://www.bloomberg.com/news/articles/2023-11-15/ubs-says-...

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

#53

Post by alephnerd »

Jedd wrote: post #51
alephnerd wrote: post #21

Earlier quoted context omitted.

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 al…

> Even with severe churn, VMWare would make around $12.8-13B. Down from the $13.4B -- that's not 'severe churn' you're describing there, it implies only a few percent drop in revenue. We've yet to see if that's the likely outcome here, but touchy-feely sentiment suggests that it'll be worse than that. > Large customers are sticky. Isn't TFA a precise counter-point to that assumption?

> that's not 'severe churn'

Companies do not churn 100% customers.

Most cases "severe churn" is counted as 80-100% NRR as customers are on multiyear contracts that are much more expensive to break than they are to wait out.

> Isn't TFA a precise counter-point to that assumption?

The customer was already a Nutanix customer, so the hard work was already done.

Basically, this customer was using BOTH Nutanix and VMWare internally (I am VERY surprised how the previous CFO did not get fired for something like that), and because they already had the Nutanix knowhow and licenses, migrated fully to it.

For reference, this article was written by the Register journo who was at Nutanix .NEXT (Nutanix's corporate conference).

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

#54

Post by karmarepellent »

alephnerd wrote: post #43
karmarepellent wrote: post #37

Earlier quoted context omitted.

> Good move, and plenty more like this will happen. What is a good move? Maybe I misunderstand what you are saying, but I thought the main lesson from the whole VMware fiasco would be that IT departments would not rely on a single vendor/hypervisor in the future. This consolidation just increases their dependence on Nutanix, does it not?

Consolidation is a good move, because it minimizes your overhead from a team management and procurement management basis. Infra is a cost center at the end of the day. > I thought the main lesson from the whole VMware fiasco would be that IT departments would not rely on a single vendor/hypervisor in the future Can you justify spending 2x your hypervisor budget when that same pot of money could be used to hire more e…

You are absolutely right that consolidation minimizes overhead. I work in an IT department who relies on VMware and I certainly do not look forward to the prospect of updating all our tooling to work with multiple hypervisors. It works quite well as it is.

And it certainly makes sense in the short term to spend the money on the product instead of on infrastructre. I just wonder about the long term in the context of how we do business. Because on the one hand you have management pushing topics like "risk management" where I have to take responsibility for the most trivial of things in day-to-day operations. And then there is the hypervisor issue where "risk management" goes out of the window and we happily rely on a single hypervisor that could (from one day to the next, more or less) upend all our business.

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

#55

Post by alephnerd »

karmarepellent wrote: post #54
alephnerd wrote: post #43

Earlier quoted context omitted.

Consolidation is a good move, because it minimizes your overhead from a team management and procurement management basis. Infra is a cost center at the end of the day. > I thought the main lesson from the whole VMware fiasco would be that IT departments would not rely on a single vendor/hypervisor in the future Can you justify spending 2x your hypervisor budget when that same pot of money could be used to hire more e…

You are absolutely right that consolidation minimizes overhead. I work in an IT department who relies on VMware and I certainly do not look forward to the prospect of updating all our tooling to work with multiple hypervisors. It works quite well as it is. And it certainly makes sense in the short term to spend the money on the product instead of on infrastructre. I just wonder about the long term in the context of h…

Yep. It is a conundrum, and why a lot of my peers in F500s lead hybrid cloud or a multi-cloud migrations. This way you can auto-scale if needed within your cloud providers (which are easier to migrate from than on-prem due to better DevEx) or return back to on-prem if needed from a cost saving or infra standpoint.

That said, these are questions that are very organization dependent.

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

#56

Post by pch00 »

alephnerd wrote: post #53
Jedd wrote: post #51

Earlier quoted context omitted.

> Even with severe churn, VMWare would make around $12.8-13B. Down from the $13.4B -- that's not 'severe churn' you're describing there, it implies only a few percent drop in revenue. We've yet to see if that's the likely outcome here, but touchy-feely sentiment suggests that it'll be worse than that. > Large customers are sticky. Isn't TFA a precise counter-point to that assumption?

> that's not 'severe churn' Companies do not churn 100% customers. Most cases "severe churn" is counted as 80-100% NRR as customers are on multiyear contracts that are much more expensive to break than they are to wait out. > Isn't TFA a precise counter-point to that assumption? The customer was already a Nutanix customer, so the hard work was already done. Basically, this customer was using BOTH Nutanix and VMWare i…

> Basically, this customer was using BOTH Nutanix and VMWare internally (I am VERY surprised how the previous CFO did not get fired for something like that), and because they already had the Nutanix knowhow and licenses, migrated fully to it.

Why do you think that? Not putting all of your eggs into a single vendor basket seems like a solid plan - if anything the Broadcom/VMware disaster supports it.

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

#57

Post by spydum »

elygre wrote: post #25
spydum wrote: post #11

I just hope Nutanix can keep their act together, they've been given a gift.

As someone looking at nutanix: what are the issues?

mostly not making that comment from a technical perspective. I personally have not had technical issues with Nutanix, we use it as designed: hyperconverged infra in relatively large deployments.

my comment is mostly around their financial performance. it was not too long ago they were facing some headwinds, and giving the market concerns they could be sold off. Going from those concerns, to now having substantial growth, can cause some pain points for a company

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

#58

Post by alephnerd »

alpaca128 wrote: post #44
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!

Acquiring new customers would become quite difficult, though. If you increase prices to a point where everyone who can leave will leave, who in their right mind would choose your product and risk another price hike in the future?

All prospects are not the same.

You have 5 types of accounts:

- Strategic: F500s or very well known startups

- Enterprise: F1000s

- Mid-Market: Companies below $1B a year in revenue

- Federal: Federal Government

- Channel/Reseller: For companies that are too small, you have a MSP sell for you because you can't be bothered to sell to them.

Strategics, Enterprises, and Fed will always get good deals and will always have protracted conversations, as these are accounts spending 7-9 figures.

Mid-market and below will always have a bad time because they ain't spending enough.

We're businesses, not your friends. We'll try to help, but at the end of the day, we want to get paid as well.

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

#59

Post by smallnamespace »

dbspin wrote: post #8
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!

Also pretty much guarantees flight of your former customer base to close compliments - who then have improved revenue to bring their products closer in alignment to yours. You'd better have a hell of a moat to follow this strategy.

Tiny nitpick: complement means a good in an adjacent part of the supply chain (e.g. batteries and EVs are complements), you might have meant 'competitors'.
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