The new virtualization landscape
It's now official: VMware has been acquired by Broadcom for $61 billion. Yes, it was planned and not new, but since it has finally been announced, we wanted to discuss on the fallout of this acquisition, especially in a shifting market which is virtualization now.
🌦️ Broadcom: a mixed track record
Broadcom is a real juggernaut, this can be seen as good or bad, probably depending on your size as a customer. Just few examples in the last 5 years:
- CA Technologies: In 2018, Broadcom acquired CA Technologies for $19 billion. Shortly after the acquisition, Broadcom discontinued several popular CA products, including "Identity Manager", "Single Sign-On", and "SiteMinder". Broadcom also raised prices on other CA products.
- Symantec: In 2019, Broadcom acquired Symantec for $10.7 billion. As part of the acquisition, Broadcom announced plans to lay off 12,000 Symantec employees. They also said that it would discontinue some products, including "Endpoint Protection" and "Email Security".
- Imperva: In 2020, Broadcom acquired Imperva for $2.2 billion. Broadcom said that it would integrate Imperva's products into its own security portfolio. However, some Imperva customers were concerned that Broadcom would raise prices or discontinue products.
- Aruba Networks: In 2021, Broadcom acquired Aruba Networks for $40 billion. Broadcom said that it would integrate Aruba's products into its own networking portfolio. However, some Aruba customers were concerned that Broadcom would raise prices or discontinue Aruba products.
These are just a few examples of the negative impacts of Broadcom's acquisitions. It is important to note that not all of Broadcom's acquisitions have had negative impacts. For example, Broadcom's acquisition of Brocade in 2016 has been seen as a success. However, the acquisitions of CA Technologies, Symantec, Imperva, and Aruba Networks have raised concerns among some customers and industry analysts.
A specific focus
In a November 2021 investor day, Broadcom President Tom Krause (now CEO of Cloud Software Group) said that the company will focus on its top 600 customers. He said that these customers are "often in highly regulated industries, therefore risk-averse, and unlikely to change suppliers." Krause also said that Broadcom will invest in integrations and services aimed at these customers.
Here is a quote from the investor day presentation:
"We are totally focused on the priorities of these 600 strategic accounts. These organizations share a lot of heterogeneity and complexity. They are often in highly regulated industries, therefore risk-averse, and unlikely to change suppliers. We will invest in integrations and services aimed at these customers."
Broadcom's focus on its largest customers has raised concerns among some VMware's customers. They are worried that Broadcom will neglect smaller customers or even discontinue some VMware products that are not used by large enterprises.
It is still too early to say what the impact of Broadcom's acquisition of VMware will be. However, the concerns raised by Broadcom's focus on its largest customers suggests that it is important for VMware customers to be aware of the potential risks.
🌎 A Broader Industry Shift
Beyond the Broadcom-VMware deal, the virtualization market has witnessed other significant movements. Several major providers have undergone acquisitions or pivotal strategy changes, cumulatively amounting to over $100 billion in investments. Such large-scale consolidations suggest an unmistakable intent: investors and corporations are seeking returns, likely through increased margins achieved via various means, such as pricing adjustments or market segmentation.
Microsoft
Hyper-V will no longer be free after Windows Server 2019. In Windows Server 2022, Hyper-V is only available in the Datacenter and Standard editions. The Essentials edition does not include Hyper-V, pushing customers to get Azure Stack HCI, with a different pricing. In short, you'll have to pay to continue to use it.
RedHat/IBM
The acquisition of RedHat by IBM for $34 billion in 2018 brought notable changes, particularly the shift in focus from Red Hat Virtualization (RHV) to OpenShift. This transition, while significant, has raised concerns over the shift from VMs to containers and the learning curve involved.
This also triggered many (bad) changes on community related projects (like GlusterFS, oVirt and such). Not great.
Citrix/Cloud Software Group
Citrix, a key player in the origins of our XCP-ng virtualization platform, underwent a $16.5 billion acquisition by Vista Equity Partners and Evergreen Coast Capital Corp. This led to countless changes in the XenServer division, including branding and (lack of) strategic focus, which has impacted its position as a leading server virtualization solution.
In this rapidly changing landscape, these developments underscore the importance for businesses, both large and small, to stay informed and adaptable. As we continue to navigate these shifts, the need for reliable, cost-effective virtualization solutions becomes increasingly critical, a demand we at Vates are committed to fulfilling.
☁️ Leaving the Cloud: addressing a new trend
The shifting strategies of major players in the tech industry are primarily driven by their desire to capture the rapidly growing public cloud market. These U.S.-based companies, known for pursuing growth relentlessly, have found considerable success with this approach. This isn't a criticism but an observation of a strategy that works remarkably well for them.
But What About the Rest?
Interestingly, a growing number of businesses are scrutinizing the costs associated with public cloud services. They're finding that unless elasticity is a necessity, public cloud solutions can be significantly more expensive compared to managing a rack in a modern datacenter. We've demonstrated the viability of running a business independently of these services, particularly by leveraging open-source solutions.
Explore Vates’ path to self-hosting success and how open-source solutions have enabled us to achieve remarkable uptime, complete control over our data, and a blueprint for cost-effective, secure, and autonomous IT infrastructure:
Recent studies shed light on this trend, especially among smaller businesses:
70% of partners report seeing a shift in public cloud workloads back to private/on-premises data centers
Even larger businesses are reevaluating their cloud strategies. Consider the case of Basecamp, which had embraced cloud computing for over a decade, with its HEY platform being cloud-exclusive since its inception. After extensive experiences with Amazon’s and Google’s cloud services, and experimenting with various configurations including bare virtual machines and Kubernetes, Basecamp conducted a thorough cost-benefit analysis:
The result? A strategic shift that anticipates savings of $7 million over 5 years. Learn more about their decision here.
It's becoming increasingly clear that a one-size-fits-all approach to cloud services is no longer viable. Businesses, big and small, are seeking more tailored, cost-effective solutions - a trend that we at Vates are well-positioned to address with our innovative solutions.
🎯 Our strategy
The monumental $61 billion acquisition of VMware by Broadcom is a clear indicator of the sweeping changes reshaping the virtualization industry. This development, alongside the strategic shifts by Microsoft and IBM/RedHat, and the evolving trends in cloud computing, presents both challenges and opportunities. At Vates, we are in a perfect position to navigate this transformative landscape with our unique approach and solutions.
Recognized Expertise Amidst Industry Shifts
We're proud to be acknowledged as a key player in the virtualization industry, a recognition that becomes increasingly significant in the face of these industry-wide changes. Our inclusion in Gartner’s Market Guide for Server Virtualization for two consecutive years is a testament to our impact and growth in this evolving field.
Adapting to Market Dynamics
Our response to the market dynamics is multi-faceted. As companies like Microsoft pivot their Hyper-V offerings and IBM/RedHat focus on OpenShift, pushing businesses towards different pricing models and technologies, we remain steadfast in our mission to provide versatile and accessible virtualization solutions.
- Independence and Open Source Commitment: Our technological and financial independence from giants like RedHat, Microsoft, or VMware is a cornerstone of our strategy. Coupled with our commitment to open source, we offer a reliable and transparent alternative, especially vital in a market experiencing significant consolidation and change.
- Mastering Our Own Destiny: We're actively involved in upstream projects, demonstrating our capacity to adapt and innovate, crucial in a market where traditional players are redefining their strategies.
- Cost-Effectiveness Without Complexity: As licensing complexities increase with other providers, our focus is on delivering straightforward, all-inclusive solutions. Our bundle offers, encompassing everything from the core platform to backup solutions, provide a transparent, per-host pricing model, eliminating the traditional limitations based on sockets or cores.
Introducing Our Exclusive "Bundles"
We are thrilled to unveil our latest innovation: creating a new "packaged" offer with our entire stack. This groundbreaking initiative represents a significant leap in our offering, combining the power of the XCP-ng virtualization platform with the Xen Orchestra management & backup interface in a neatly packaged, yearly per-host pricing model.
These bundles, designed for simplicity and efficiency, cater to a wide array of infrastructures, from small-scale setups to large enterprises. Despite being not yet publicly available, they can be accessed directly through us. If you're interested in being among the first to leverage these new offers, we invite you to contact us directly for more information:
Conclusion: a vision for the future
The Broadcom-VMware deal, along with the shifts in strategies from Microsoft and IBM/RedHat, and the new cloud trends, mark a pivotal era in the virtualization industry. For Vates, these developments reinforce our commitment to providing accessible, robust, and user-centric virtualization solutions. Stay tuned for more updates as we continue to evolve and adapt in this ever-changing technological landscape.