History of Product Packaging and Price Increases following a Merger or Acquisition of a Leading IT Company
It is a story that anyone who has been in technology for a while knows all too well. Innovative company has an outstanding “first act” selling hundreds of millions to billions in revenue with a widely adopted technology that people and businesses depend on. After years or decades of record revenue and employee growth, the once exceptional financial results become stagnant and then the process to find the “sequel” to continue to meet investor or Wall Street expectations begins.
Historically once business stagnation is realized and evident in disappointing sales data, the next step to return to past glory is often through an acquisition of a competitor or complementary technology. The goal with this strategy is to leverage the existing installation customer base and convert users which should drive net new revenue. Another possibility is a sale of the company where most likely the new combined entity will start cutting employees and raising prices to be profitable. Although the eventual outcome is uncertain and often seems to mean less product R&D, and a decline in the quality of technical support with delayed responsiveness.
If this blog post reads negative to VMware that is not the intention. VMware has been a valued partner to House of Brick for approximately twenty years, and our team continues to recommend vSphere as a preferred platform for enterprise Oracle, SQL Server, and other databases.
The Expected Changes with VMware Software Licensing and Costs
For years, VMware Corporation has been an example of the path followed by many other high-growth technology companies as the entity has been both acquired and spun off with EMC and Dell, and VMware has also made their own company acquisitions integrating many successful technologies such as AirWatch, Carbon Black, and Nicira. The Broadcom acquisition of VMware Corporation is scheduled to close on October 30, 2023, and many of the expected changes reported by Mark Haranas from CRN on May 26, 2022 are starting to take effect, “Broadcom to ‘Rapidly’ Shift VMware Software Licenses to Subscription.”
In this CRN article Broadcom CEO Hock Tan references that Broadcom will move VMware perpetual licenses to software-as-a-service (SaaS) with a goal to increase recurring revenue. The expectation from this change in license-type is it will help grow EBITDA with the eventual goal to almost double revenue within three years. Of course, to reach the goal of double-digit growth means most likely a combination of growing the recurring revenue and eliminating duplicative general and administrative functions. The pending job cuts were recently reported by Simon Sharwood from The Register on September 19, 2023 “VMware staff reportedly told job cuts may start before Broadcom acquisition.”
Although there were statements made at the time the Broadcom acquisition of VMware was announced about no product price increases, we are starting to hear from customers that the eventual move from perpetual licenses to subscriptions will require significantly more for the same products they are using today. Many House of Brick customers are sharing with us details from price quotes for new VMware purchases and renewal fees that are at least double from what they previously paid. House of Brick is not a VAR for VMware so we are reporting what we are hearing from customers versus what we would quote if we were an authorized reseller.
Again, we all know and expect price increases to happen with any major change in ownership for a technology company. Our approach at House of Brick has always been to work with customers to license software based on business-driven requirements for architecture, system reliability, availability, maximum performance, and efficiency, and to make sure customers are paying for software and hardware they need while preventing unnecessary spend.
House of Brick Approach and Services for Customers with the new Broadcom VMware
If you are a VMware customer that is concerned about the new licensing changes and associated cost increases, the House of Brick team can help with the following:
- Through our Professional Consulting Services, assess your current VMware environment for optimal architecture, including VM-sizing and consolidation strategies, server host hardware refreshes or modifications, introducing hybrid-cloud solution strategies, and evaluating options to leverage better leverage AWS for disaster recovery and backups.
- With our OpsCompass License Manager and Managed OpsCompass service, review your VMware perpetual licenses and eventual subscriptions, and track these entitlements in our OpsCompass License Manager, which is our continuous compliance SaaS platform for your Oracle and SQL Server databases as they are deployed both on-prem with VMware, AWS, and multi-cloud environments. Our Managed OpsCompass team can assist with monitoring and addressing issues with unlicensed feature utilization, inventory, cloud drift, and CIS/NIST compliance.
- Provide monthly environment support through our Managed Consulting Services for Oracle and SQL Server databases on VMware with environment health checks, performance tuning, patching and upgrades, and other as needed scheduled or unplanned technical support services.
The House of Brick team includes senior-level consultants with years of experience as VMware Systems Administrators, Cloud Architects, Oracle & SQL Server DBAs, and Executive Software License Consultants.
The ROI and Results from working with House of Brick
Prior to asking for a quote or executing a purchase from VMware or your VAR, you should engage House of Brick to assess your current server host environment and review your VMware licensing. The best way to avoid being impacted by software licensing changes and associated price increases is to make sure a consultant with both technical and licensing expertise first validates what you need to buy and can explain how the recommended solution will meet vendor software compliance.
House of Brick will make sure you are buying exactly what you need for your VMware environment versus what someone else may reference on a software quote without asking the right questions. Our services will provide a substantial ROI to offset any VMware price increases resulting from the upcoming Broadcom acquisition.