VMware/Broadcom: Gartner advises negotiating license prices before purchasing

Gartner and S&P reported customer concerns over Broadcom’s acquisition of VMware. The brakes on change and price increases are highlighted and one of the companies advises clients, especially the smallest, to negotiate prices before concluding the deal.

On May 26, the semiconductor supplier confirmed that it had reached an agreement to acquire VMware in a deal worth approximately $ 61 billion in stock and cash, subject to closing conditions. , including regulatory and shareholder approval. The agreement includes a “go-shop” clause that gives VMware the opportunity to consider alternative proposals from other parties until July 5. But in the event of retention and approval, the acquisition must end at the end of January 2023. Initial feedback from customers was somewhat negative and they were afraid of increasing license prices.

These insights were analyzed by analyst firms S&P Global Market Intelligence and Gartner. For its part, S&P surveyed VMware customers and found that 44% of them had a neutral view of the operation, while 40% expressed negative feelings. One of the reasons given by S&P for this reaction was “the potential impact on the terms and conditions of software licenses”. But in reality, when customers have to respond “Why do you have a negative feeling about this agreement? 24% of respondents had a negative view of either company before the announcement, while 15% believed that product innovation was limited Third, 12% say the companies are not compatible with each other.

S&P Global Market Intelligence survey of VMware users. (Credit: S&P)

Gartner pays close attention to future price increases

Gartner’s analyst team’s thoughts on the deal are focused on likely price increases and how best to avoid them. In a document titled “Quick Answer: How Should VMware Customers Prepare for the Acquisition of Broadcom?” “, the group writes as well” after CA Technologies and Symantec’s acquisitions of Broadcom, many customers complained to Gartner of dramatic cost increases during renewals, with limited flexibility for in negotiations “.

Analysts also see “an influx of medium -sized and smaller customers looking to move elsewhere due to unusual price increases and support challenges.” In fact, the company advises current VMware customers to lock in prices earned for a long time with the company before the acquisition agreement ends. “Adjust negotiation practices and ask VMware to write down specific provisions before making meaningful or strategic financial investments,” the document says, or “negotiate exit clauses in future multi-years. on contract. ” Gartner also offers customers to track current alternative solutions as needed.

A double-edged vision

Gartner and S&P see some positives in this acquisition, however. The first talks were about enhanced co-engineering in Broadcom’s current portfolio, leading to improvements in product integration. The research firm also talks about continued heavy investment in VSAN, NSX and vSphere products as Broadcom seeks to focus more on the hybrid cloud. The S&P study includes a positive point defended by one user: Broadcom could be the perfect owner for VMware, because if other enterprise computing giants took the lead in virtualization, it would be difficult to maintain that status. of “Switzerland of the cloud” that VMware wants.

Broadcom executives said it continues to invest in key VMware products and it sees the VMware partner community as providing opportunities and possibilities that it cannot meet at present. Broadcom’s indifference to small customers and price increases have cast doubt on what will happen after the deal closes. A taking that must be followed with attention therefore.

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