Our goal since the Broadcom/VMware acquisition was completed last November has been to help our customers move fast in their digital transformation to position themselves for success.
Even before the transaction was finalized, we had been listening to VMware’s customers. As we moved from transaction to integration, we began to translate customer thoughts into a comprehensive go-to-market strategy for VMware Cloud Foundation, or VCF. Early in this process, I concluded that the previous go-to-market model was too complex and costly for VMware and its customers. It demonstrated that all too often, as innovative companies expand, decisions are made incrementally, not holistically as part of a larger, comprehensive strategy.
Last month, I reflected on the first 100 days since we completed the acquisition, and I shared what I was hearing from customers. They want a simpler product and constant innovation with an eye toward security and resilience. There have been many questions about how we’re putting this feedback into action. Today, I want to clarify what we’re offering VMware customers and address those questions head on.
First, we remain steadfast in our decision to focus our resources on R&D, and continuing to develop a true, seamless private cloud experience for customers through VCF – one that is competitive with the public cloud. We are backing it up with billions of dollars in new investment to ensure its success. And, we have dramatically reduced the price of VCF to promote customer adoption.
This refreshed strategy to increase competition with the public cloud and promote customer adoption will result in changes for our customers and partners, and we have moved to implement them. These changes were designed to lead to an integrated VCF solution that will bring broader long-term benefits to our valued customers both in their own data centers and in the cloud with increased portability to move workloads among on-premise data centers and supported cloud providers. Those benefits will accrue, whether the customer is a global enterprise seeking to leverage its digital capabilities, or a government looking to utilize VMware innovation to advance regional digital sovereignty.
We are at a pivotal point in which infrastructure needs to scale and be resilient. That’s why we announced a simplified portfolio based on two core solutions – VCF and VMware vSphere Foundation, or VVF. VCF includes all compute, storage, networking, management, and support capabilities that deliver consistent infrastructure and operations across clouds, and comes at half the list price compared to past pricing. VVF is the alternative with enhanced compute, operational and management capabilities for customers who are not yet ready to take the plunge into a full-stack solution but need to manage across VMs and containers.
We know our customers have a lot of options, so we continue to innovate and adapt to be ever more relevant for them.
Second, we’re making changes to deliver consistent customer experiences.
One of the hot topics across customer and partner communities has been the changes to how we engage with cloud service providers. Broadcom will continue to create value within the VMware partner ecosystem, because partners are critical to our customers’ success and our own success. That said, Broadcom is updating and incorporating the VMware partner ecosystem into the Broadcom partner programs, which requires some adjustments.
The core principle for our new engagement with cloud providers is that end customers should have complete freedom to move their workloads from their own data centers to cloud providers, and between cloud providers. We are accomplishing this new engagement in two main ways:
Standardizing the metric for our pricing across cloud providers to per-core licensing – the same metric used in our end-customer licensing – and providing license portability for VCF. This ensures customers will not face any licensing mismatch as they move between providers, and will avoid switching and additional licensing costs. This licensing metric is also consistent across our entire ecosystem, which will enable customers to compare proposals from partners, and increase choice and competition.
Standardizing the technology stack for cloud providers on VCF. This ensures customers will enjoy the same technology and support experience across any VMware-supported cloud provider, and will remove technical barriers to customers moving from on-prem to cloud, switching their workloads from one cloud provider to another, or back to on-premise data centers, if their needs change.
This freedom for customers to move workloads will intensify competition between cloud providers, leading them to deliver greater value to end customers. The license portability feature we have added to VCF is key to this strategy. Google Cloud is the first hyperscaler to support VCF license portability and we expect other partner and hyperscaler clouds to follow with similar support.
We strongly believe this strategy will benefit our end customers. Given the need to set up the on-boarding process to accommodate our smallest cloud provider partners, and to help with the transition and ensure there is continuity of service for this partner group, we will expand the Broadcom Partner Advantage Premier Tier to accommodate any qualified, existing service provider and offer programmatic initial-year discounts for their existing installed base. In addition, smaller service provider partners who do not yet meet the Premier Tier criteria can take advantage of the ‘white label’ offers from Pinnacle and Premier Tier Service Providers. To ensure there is continuity of service for this smaller partner group, we will continue existing operations with this group under modified monthly billing arrangements until the white-label offers are available.
Third, VMware will complete its transition plan to a subscription model that provides access to the most recent version plus support for a fixed term. VMware began this transition since at least 2018, and was one of the last software companies to adopt this model.
Subscription licensing is the model all major enterprise software providers deploy today and ensures that customers have the latest and greatest in VCF while providing the kind of predictability needed to fuel continuous innovation for our customers.
The subscription model ends “upsell” practices that were common in the software industry before the subscription transition, such as branding incremental features as new higher editions of the same product or new add-on products. These practices do not represent true innovation in core products, and cause customer confusion and frustration about missing out on new features. Subscription licensing eliminates these incentives.
It is important to emphasize that nothing about the transition to subscription pricing affects our customers’ ability to use their existing perpetual licenses. Customers have the right to continue to use older vSphere versions they have previously licensed, and they can continue to receive maintenance and support by signing up for one of our subscription offerings.
To ensure that customers whose maintenance and support contracts have expired and choose to not continue on one of our subscription offerings are able to use perpetual licenses in a safe and secure fashion, we are announcing free access to zero-day security patches for supported versions of vSphere, and we’ll add other VMware products over time.
As we roll out this strategy, we continue to learn from our customers on how best to prepare them for success by ensuring they always have the transition time and support they need. In particular, the subscription pricing model does involve a change in the timing of customers’ expenditures and the balance of those expenditures between capital and operating spending. We heard that fast-moving change may require more time, so we have given support extensions to many customers who came up for renewal while these changes were rolling out. We have always been and remain ready to work with our customers on their specific concerns.
The evolution of VCF’s go-to-market strategy demonstrates that we’re listening to and helping our customers by continually making our products better for them, and represents our ongoing, active engagement with our customers and partners to deliver an integrated, simplified solution. We will continue to move fast, innovate, and evolve our go-to-market strategy for the long-term benefit of our customers.
About Hock Tan:
Broadcom
Hock Tan is Broadcom President, Chief Executive Officer and Director. He has held this position since March 2006. From September 2005 to January 2008, he served as chairman of the board of Integrated Device Technology. Prior to becoming chairman of IDT, Mr. Tan was the President and Chief Executive Officer of Integrated Circuit Systems from June 1999 to September 2005. Prior to ICS, Mr. Tan was Vice President of Finance with Commodore International from 1992 to 1994, and previously held senior management positions with PepsiCo and General Motors. Mr. Tan served as managing director of Pacven Investment, a venture capital fund in Singapore from 1988 to 1992, and served as managing director for Hume Industries in Malaysia from 1983 to 1988.
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