Opinion – Broadcom’s VMware Strategy: Trapping Customers for Short Term Gains?

Broadcom’s acquisition of VMware for $61 billion has prompted questions about what Broadcom plans to do with the virtualization giant’s impressive 300,000+ customer base. According to a recent analysis based on Broadcom’s investor day remarks, their strategy appears focused on maximizing short-term financial gains rather than serving the long-term needs of VMware’s diverse customers. Here are some of the concerning signs:

  • Broadcom plans to focus only on the top 600 “strategic” enterprise accounts that will have difficulty switching away from VMware due to complex IT environments. 
  • For these locked-in customers, Broadcom can get away with slashing R&D to only invest in features needed by the top 600, ignoring the broader customer base.
  • Similarly, sales and marketing costs will be cut dramatically since the captive top 600 require less convincing to stay.
  • Broadcom openly admits they will let services and features for smaller VMware customers “trail off” over time as they are deprioritized. 
  • This approach allows Broadcom to rapidly increase its margins and earnings from VMware through significant cost reductions.
  • But it achieves short-term financial bumps by exploiting VMware’s market position, not through innovation or serving customer needs.

Broadcom seems focused on trapping VMware customers into technical dependencies they can’t quickly exit to cut costs and raise prices aggressively. This strategy may please Broadcom shareholders temporarily but could badly neglect VMware’s long tail of smaller customers.

The analysis raises real concerns about whether Broadcom views VMware primarily as a way to extract revenue rather than serving customers for the long haul. Hopefully, Broadcom will take steps to reassure VMware’s diverse customer base that their needs will remain a priority, not just short-term profits.