Incremental improvements from VMware at Explore 2023 ahead of the Broadcom acquisition

VMware recently held its annual Explore customer event (previously known as VMworld). The conference is an opportunity to present new product releases and make big announcements. With the Broadcom acquisition only two months away, what can we learn about the future of the company from the keynote sessions?

Background

Broadcom announced it was acquiring VMware for $61 billion back in May 2022. With around 40% ownership, Michael Dell would be the biggest winner in one of the largest takeovers in IT industry since Dell himself pounced on EMC Corporation.

The acquisition has produced many column inches of discussion, most of which isn’t positive. Broadcom’s strategy for acquired assets is to focus on extracting value, either through increasing revenue or reducing costs. As we mentioned in this post, the target for earnings is to grow from $4.7 billion to $8.5 billion over three years. That means almost doubling income compared to FY2023 figures, which could be achieved by halving the R&D and Sales & Marketing spend (VMware has spent roughly $3 billion on R&D and $4 billion on Sales & Marketing per annum over the last three years, respectively).

Announcements

With that in mind, what was announced at VMware Explore in August 2023? First of all, we didn’t see any radical moves compared to previous years. The alignment of vSphere releases to VMworld/Explore events is long gone. However, Explore 2022 did see the release of vSphere 8, while the subscription-based products were announced a couple of months before the show.

The impact of COVID undoubtedly had an effect on the release schedule of products, with difficult working practices and online-only events for 2020 and 2021. In the 2023 calendar, VMware also has regional events in addition to the two main shows in the US and Europe. As a result, announcements tend to be staggered more across the year.

What we did see from the show was mainly extensions and enhancements of existing products.

vSAN Max – disaggregated HCI storage (which itself is an oxymoron), built on the technology from the acquisition of Datrium.
NSX+ – formerly Project Northstar, software-defined networking delivered as a SaaS offering.
vSphere+ lifecycle management – enhancements to the operational management of vSphere at scale, with automated and simplified upgrade paths.
Tanzu Application Engine – business-focused packaging of applications in the Tanzu ecosystem.
Tanzu enhancements – CloudHealth, Insights, Guardrails, Transformer; operational enhancements to improve cost saving, deploy automation with governance, migration assistance into Tanzu and root cause analysis tools.
Edge Cloud Orchestrator – rebranding of SASE Orchestrator for management of edge computing infrastructure.

However, there was some new stuff focused on AI (this year’s en vogue technology trend). VMware announced an integrated AI solution with NVIDIA (VMware Private AI Foundation with NVIDIA) and reference architectures for open-source solutions (VMware Private AI Reference Architecture for Open Source). In parallel to the use of AI in the productivity sphere (such as Microsoft Copilot), VMware announced Intelligent Assist to simplify automation and deployments with VMware Tanzu, Workspace ONE and NSX+.

Lock-in

I have an issue with the sprawl of applications created by VMware. While the initial platform solutions established a foundation for virtual servers and operational management, the degree of complexity introduced over the last few years has created a confusing mix of interdependent software that attempts to merge on-premises with the public cloud.

Each new set of solutions appears to solve a problem that doesn’t really exist. The result is significant licence sprawl and cost inflation to deliver application services.

How did we get here?

Public Cloud

The public cloud has represented the greatest existential threat to on-premises infrastructure vendors that we’ve ever experienced. Until the emergence of the public cloud, most IT battles were with the various factions of solutions providers looking to sell end-to-end hardware and partner software.

The public cloud has transformed and lowered the barriers to adoption for infrastructure, a process VMware itself delivered in the early 2000s, by disrupting the server market and fuelling the adoption of Windows and Linux.

In the modern IT world, businesses don’t need or depend on on-premises infrastructure. Today’s IT organisations can build in the public cloud and never deploy physical infrastructure. So, vendors like VMware need to either deliver solutions that the cloud can’t replicate or build solutions that integrate the cloud in such a way that makes separation from the VMware ecosystem almost impossible.

An example of this strategy is vSAN Max. vSAN was sold on the initial premise of eliminating centralised storage that was perceived to be expensive to own and operate. In reality, shared storage offers significant amounts of functionality that can’t be replicated in an HCI model. vSAN Max brings us back full circle from HCI to shared storage infrastructure. So, was the original message incorrect, or was vSAN a way of extending the reach of VMware products and taking business from storage vendors?

The Architect’s View®

The announcements from VMware Explore 2023 are both incremental and opportunist. All infrastructure vendors are looking for an AI story, which is what VMware has given us. At the same time, the remaining announcements extend or enhance the current portfolio with further products to try and buy.

Back at the top of this article, we highlighted that VMware/Broadcom could follow two strategies; the first to increase revenue, the second to cut costs. This year’s announcements reflect the revenue strategy, with many new incremental solutions (and the AI opportunity). In just under 60 days’ time, we will find out what the cost-cutting process will entail.

There’s been a glimpse of the future already, with information leaking out of VMware, as reported in this article on The Register. Operational back-end optimisation is expected, similarly for the sales and marketing teams, which will potentially save millions of dollars reasonably easily.

The biggest unknown we can see is what happens with the product portfolio. Feature sprawl is a big VMware problem. Will Broadcom rationalise it in order to save money in R&D? We think so. The question to answer is to what extent will cuts take place. We can see a scenario where Broadcom cuts the least profitable business solutions and focuses on the core infrastructure. This means EUC and Tanzu could be at risk. We also think that some VMware capabilities could be moved outside of the core products and integrated with existing Broadcom solutions as part of a rationalisation/optimisation strategy.

Whatever happens, the VMware we knew from its peak in the mid-2010s is probably going to be a distant memory in another five years’ time. In the short term, we would recommend caution in building dependencies on any new VMware solutions, until the long-term Broadcom strategy is clear.

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