> 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!
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.
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 all your revenue on a much smaller customer base means losing one or two of them has a huge impact
Large customers are sticky. You can't migrate your hypervisor or cloud provider overnight. These are multi-year projects.
Also, it's better to target a smaller base of high paying customers instead of a large base of low paying customers because every sales motion and support ticket is an opportunity cost and a financial cost.
I remember my father doing this one. He was an SME support company. With two clients. He cranked the price up 4x and said ”we’ve got them by the balls”. They both opened a tender process and shot him and he was bankrupt 6 months later.
Yes, but I guess you get to know the customers better and make sure the product fits them very well, or atleast better than the competitors.
Another more cynical thought is that this is a way of increasing revenue and profit quickly so the share price rises quickly. You get your options and bonus and leave before the rest of the customers leave.
In this case, if you increase your price 10X and they don't leave you, there must be some deep technical reason why they cannot move even if they want to.
I used to work for an enterprise software vendor that had LOTS of customers, and losing a single customer was painful but didn’t really affect that much. I’m now at a much smaller company, and I feel like it’s noticeable in the stock price when we gain or lose a customer. Kinda scary, but exciting at the same time. No idea if it’s just my brain inventing patterns.
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?
But we're talking subscriptions so the drop-off is recurring. You will have customers who will burden the cost while they migrate and ditch you as soon as they're done.
If you start celebrating your new pricing structure with just a 90% customer loss in Y1, you're in for a nasty shock in Ys 2-5.
That's before you factor in the shift of mindshare to alternatives. Pointing this thing at ultra-large customers means everyone else is using and training on something else.
Similar to pmx's point, an implicit assumption in this (which is unlikely to be true in many scenario's) is that the there is a negligible spread in the distribution of revenue per customer. Imagine if you have one whale customer and a bunch of small fish, if you lose the whale in the change you won't maintain the same revenue.
Some scenario's this assumption is reasonable though (say Netflix subscribers).
> he found the IT department using two hypervisors: Nutanix AHV, and ... VMware. The CTO felt two hypervisors was one too many and considered a consolidation
Good move, and plenty more like this will happen.
But like I've said before, the winners will be Nutanix, Citrix, and other existing enterprise infra vendors - not Proxmox. And companies like Broadcom are fine with that because market segmentation is a thing.
(Also I hate hate HATE The Register's tone - so happy I'm not a PMM who has to wine and dine them at RSA or Re:Inforce.
The moment RSA and these holdover 90s blog cartels like Register and DarkReading die, discourse in the space can become so much better.
Practitioner lead conferences like Bsides and practitioner blogs are superior to these kinds of rags that are written in conjunction with vendors)
To be fair, the tone is supposed to be that way. It was designed as a UK-tabloid style IT news source, which have informal and opinionated tones (I don't know if it was originally done in jest or not).
The fact that it publishes in a low-brow, combative style in an industry that is (historically, anyways) mostly educated is part of the "joke", especially has most other tech press at the time it was created in the 1990s had conflict of interest relationships with tech companies (mostly relying on the same companies for advertising) - which is why the tagline is "biting the hand that feeds IT". It's easy to forget that most tech news sources were overwhelmingly uncritical to even bad tech. For those of us who had to actually deal with it, it was refreshing to know other people hated <insert vender product here>. For a good while in the 1990s (before it could stand on its own) it was a site written by people who actually worked with products from the tech companies (with their sales people) and could comment if they were going downhill or got screwed by pricing changes.
Is it possibly outdated and tiring now? Sure (it stopped being a daily news source for me around 2010), but it helps to understand the history and why it is or was popular.
The issue is these old school blogs aren't some random dudes eating ramen who love technology for the sake of technology anymore.
They are now owned by press wire publishers and corporate conference owners, and as companies have increasingly moved away from both these options, the tone has become increasingly uneven.
Look at how much RSA flamed Palo Alto Networks for deciding to quit RSA and how Register never uses snark in the articles it writes with CEOs, leadership, or companies who invite Register to their conferences.
It's basically an attempt at extortion, not the truth. The practitioners who are technical don't write for these rags. And most of the Register's (and at all their parent companies publications) are non-technical journalists for whom this is a dayjob which they'll inevitably leave to become a Comm Marketer at a Vendor like the dozens I've worked with.
> especially has most other tech press at the time it was created in the 1990s had conflict of interest relationships with tech companies
So does The Register. I've literally wined and dined their writers at RSA years ago.
I find the snark refreshing compared to all the corporate drones using their carefully worded lawsuit-proof, passive-voice, non-committal, lawyer-vetted style.
You must work in a very, very sane environment - for most of us this is literally a breath of fresh air.
They are not snarky and they very gladly work with corporates as well. They are just writing in some weird pissy tone.
Look at all the sponsored content they have from ZTE, as well as all the Nutanix specific articles because of Nutanix .NEXT
Snark is fine if you are evenhanded by being snarky about everyone, but it ain't great if you're clearly picking and choosing and deciding to take money from vendors.
I'd like snark, but I'd rather hear that from an actual practitioner, not one of the several tech "journalists" we'd wine and dine when I was still working for vendors.
Fair point. I was thinking solely from a Upper Market perspective.
Higher Ed is in a weird place where budgets are small but the personnel are fairly adept, so depending on the size you guys could actually be a good fit for deploying and managing a FOSS offering like Proxmox.
They are not snarky and they very gladly work with corporates as well.
Look at all the sponsored content they have from ZTE, as well as all the Nutanix specific articles because of Nutanix .NEXT
Snark is fine if you are evenhanded by being snarky about everyone, but it ain't great if you're clearly picking and choosing and deciding to take money from vendors.
> 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 engineers who make the product the company is selling?
I admit to not understanding or caring about the full scope of Computershare’s business (side note: that’s a dumbass name), but having been forced to suffer their software when working for a former company, it boggles my mind that they need 24,000 VMWare VMs, in addition to a bunch of Nutanix VMs.
It was a very reasonable name in 1978 when they started, as they provide stock and share services for companies via computers - something uncommon in that time.
I don't think I've ever seen to this degree such a misguided focus on short-term profit at the expense of driving away ALL future customers. At this point, who ever would even consider VMware for a new project or business? Vmware will exist only as long as their current customers exist. Being a VMware salesperson has to be a brutal job right now.
And you can bet that many of them are currently looking at removing or severely reducing their VMware dependance, maybe even decommissioning projects that are deemed unfeasible to move to another platform.
Yes. A 15% price hike is a little high, but could be expected in bigger businesses from time to time, a 15X price hike is something that the entire C-Suite now has to discuss. And what 15X new features are coming with it now?
There are lots of details missing. VMware had a crazy amount of product and support SKUs. It is possible that they were vastly underpaying relative to what they should have been licensed for. Also, 24k VMs is a lot but core count is what matters. They could have been running that compute with insane overprovisioning, and Broadcom generally wants customers with REALLY HIGH core counts. Finally, the new SKUs that Broadcom are pushing consolidate lots of products together that would have previously been purchased separately. If they were _only_ vSphere customers, the hike might have come from now needing to be NSX and vSAN customers against their will.
All that said, lots of customers definitely had similar experiences; it's all over /r/vmware. Broadcom is not joking about wanting to cull the herd here.
It's a submarine article from Nutanix .NEXT who seemed to have done a media buy with The Register.
I've always detested that kind of underhanded vendor tactic, and am honestly happy that giants like ZScaler and Palo Alto Networks are moving away from the conferences+trade rag GTM and moving towards either direct sales or more targeted usergroups+conferences (eg. BSides).
> Broadcom is not joking about wanting to cull the herd here
Yep! Niklesh did the same thing to turn around PANW, and imo VMWare kinda needs it. The products are good, but it seemed like a lot of shenanigans were happening at the AE level.
I've heard down the grapevine that there's a significant shift towards cloud security now, which I think is something VMWare really needed to do - they had the right products, but became addicted to on-prem cash cows.
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
They still force you into a specific hardware organisation (hyperconverged, disks are on the compute nodes and storage is distributed) which doesn't make sense for everyone's workloads.
Also, at least a few years ago(hope it's not still the case), a lot of their services were a bunch of open source poorly stitched together with bash, and their poor abstraction over it was leaking heavily. Their APIs were also very poor (I mean, VMware's are objectively complete shit, but at least they cover almost everything; Nutanix had major gaps in API coverage).
Readit News
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!
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 all your revenue on a much smaller customer base means losing one or two of them has a huge impact
Large customers are sticky. You can't migrate your hypervisor or cloud provider overnight. These are multi-year projects.
Also, it's better to target a smaller base of high paying customers instead of a large base of low paying customers because every sales motion and support ticket is an opportunity cost and a financial cost.
Another more cynical thought is that this is a way of increasing revenue and profit quickly so the share price rises quickly. You get your options and bonus and leave before the rest of the customers leave.
You no longer have customers, you have hostages.
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.
If you start celebrating your new pricing structure with just a 90% customer loss in Y1, you're in for a nasty shock in Ys 2-5.
That's before you factor in the shift of mindshare to alternatives. Pointing this thing at ultra-large customers means everyone else is using and training on something else.
Some scenario's this assumption is reasonable though (say Netflix subscribers).
They will lose reputation and reference customers.
This is a massive invite for competing businesses to offer the same service 20% cheaper, and still make lots of money.
Good move, and plenty more like this will happen.
But like I've said before, the winners will be Nutanix, Citrix, and other existing enterprise infra vendors - not Proxmox. And companies like Broadcom are fine with that because market segmentation is a thing.
(Also I hate hate HATE The Register's tone - so happy I'm not a PMM who has to wine and dine them at RSA or Re:Inforce.
The moment RSA and these holdover 90s blog cartels like Register and DarkReading die, discourse in the space can become so much better.
Practitioner lead conferences like Bsides and practitioner blogs are superior to these kinds of rags that are written in conjunction with vendors)
The fact that it publishes in a low-brow, combative style in an industry that is (historically, anyways) mostly educated is part of the "joke", especially has most other tech press at the time it was created in the 1990s had conflict of interest relationships with tech companies (mostly relying on the same companies for advertising) - which is why the tagline is "biting the hand that feeds IT". It's easy to forget that most tech news sources were overwhelmingly uncritical to even bad tech. For those of us who had to actually deal with it, it was refreshing to know other people hated <insert vender product here>. For a good while in the 1990s (before it could stand on its own) it was a site written by people who actually worked with products from the tech companies (with their sales people) and could comment if they were going downhill or got screwed by pricing changes.
Is it possibly outdated and tiring now? Sure (it stopped being a daily news source for me around 2010), but it helps to understand the history and why it is or was popular.
They are now owned by press wire publishers and corporate conference owners, and as companies have increasingly moved away from both these options, the tone has become increasingly uneven.
Look at how much RSA flamed Palo Alto Networks for deciding to quit RSA and how Register never uses snark in the articles it writes with CEOs, leadership, or companies who invite Register to their conferences.
It's basically an attempt at extortion, not the truth. The practitioners who are technical don't write for these rags. And most of the Register's (and at all their parent companies publications) are non-technical journalists for whom this is a dayjob which they'll inevitably leave to become a Comm Marketer at a Vendor like the dozens I've worked with.
> especially has most other tech press at the time it was created in the 1990s had conflict of interest relationships with tech companies
So does The Register. I've literally wined and dined their writers at RSA years ago.
I find the snark refreshing compared to all the corporate drones using their carefully worded lawsuit-proof, passive-voice, non-committal, lawyer-vetted style.
You must work in a very, very sane environment - for most of us this is literally a breath of fresh air.
They are not snarky and they very gladly work with corporates as well. They are just writing in some weird pissy tone.
Look at all the sponsored content they have from ZTE, as well as all the Nutanix specific articles because of Nutanix .NEXT
Snark is fine if you are evenhanded by being snarky about everyone, but it ain't great if you're clearly picking and choosing and deciding to take money from vendors.
I'd like snark, but I'd rather hear that from an actual practitioner, not one of the several tech "journalists" we'd wine and dine when I was still working for vendors.
It can be all of the above though. I work in higher education and Proxmox is the only option we are seriously considering right now.
Higher Ed is in a weird place where budgets are small but the personnel are fairly adept, so depending on the size you guys could actually be a good fit for deploying and managing a FOSS offering like Proxmox.
Corporate speak is better?
Look at all the sponsored content they have from ZTE, as well as all the Nutanix specific articles because of Nutanix .NEXT
Snark is fine if you are evenhanded by being snarky about everyone, but it ain't great if you're clearly picking and choosing and deciding to take money from vendors.
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?
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 engineers who make the product the company is selling?
Deleted Comment
Their whole business is based on computer sharing. There's a lot of microservices to make it happen.
All that said, lots of customers definitely had similar experiences; it's all over /r/vmware. Broadcom is not joking about wanting to cull the herd here.
It's a submarine article from Nutanix .NEXT who seemed to have done a media buy with The Register.
I've always detested that kind of underhanded vendor tactic, and am honestly happy that giants like ZScaler and Palo Alto Networks are moving away from the conferences+trade rag GTM and moving towards either direct sales or more targeted usergroups+conferences (eg. BSides).
> Broadcom is not joking about wanting to cull the herd here
Yep! Niklesh did the same thing to turn around PANW, and imo VMWare kinda needs it. The products are good, but it seemed like a lot of shenanigans were happening at the AE level.
I've heard down the grapevine that there's a significant shift towards cloud security now, which I think is something VMWare really needed to do - they had the right products, but became addicted to on-prem cash cows.
Either become a PANW or become a Rackspace.
Dead Comment
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
Also, at least a few years ago(hope it's not still the case), a lot of their services were a bunch of open source poorly stitched together with bash, and their poor abstraction over it was leaking heavily. Their APIs were also very poor (I mean, VMware's are objectively complete shit, but at least they cover almost everything; Nutanix had major gaps in API coverage).
Oh, and they're very expensive.