Why did Broadcom bought VMWare and why here Microsoft Azure?

Who’s who?

Before delving into the implications of the recent acquisition and merger of VMWare and Broadcom, let’s understand who’s who.

Firstly, Broadcom is a global chip manufacturer. We encounter this company’s products in modern technology. All Bluetooth, WiFi, a significant portion of modern smartphones, including Apple devices, utilize Broadcom’s products

The company’s killer feature is their communication chips, on which they earned “plenty of money”,  amassing substantial capital. As a result, the owners have free funds that they invest in expanding their marketplace.

For this reason, a few years ago, Broadcom acquired Symantec, a software provider for information security.

VMWare is a unique provider of virtualization systems for modern corporate IT infrastructure.

As a developer of IT infrastructure systems and someone involved daily in the reconstruction of corporate IT systems, I can confidently say that there isn’t an alternative to VMWare in the marketplace.

One might consider Microsoft Hyper-V as a competitor, but no. Hyper-V is a product for organizations whose business processes are deeply rooted and reliant on Microsoft products.

The alternative is open source, RedHat’s OpenStack solution. This solution is quite complex, as the entry process for engineers is several steps higher.

Recent years of VMWare

From the perspective of using VMWare, it has proven itself at the highest level for constructing corporate IT infrastructure. What made it convenient was that the virtualization system seamlessly connected with and complemented (and continues to complement) Amazon AWS. Especially in cases of migrating or modernizing corporate IT infrastructure into hybrid clouds, this proved to be advantageous. In our projects, we frequently utilized the integration of these two solutions. However, over the past few years, the company’s product line has been disappointing. A crisis in product development and research (R&D) has emerged: the latest products were well-announced, had significant potential, but fell short of expectations.

Particularly, high hopes were placed on the new product Tanzy, a “Kubernetes as a Service” solution within the VMWare ecosystem. Unfortunately, Tanzu proved to be nonviable under heavy loads.

However, the main reason isn’t in this

VMWare’s primary clients are medium and large enterprise organizations because VMWare products are quite expensive for small businesses. The global trends of the last 10 years involve restructuring one’s own IT infrastructure into cloud solutions. The average business no longer buys physical servers, as hosting with Hetzner or Amazon AWS is significantly more cost-effective. Even large organizations rarely build their data centers using the old system; instead, most are moving to the cloud. Since the fleet of physical equipment (servers and others) isn’t being updated, the software fleet is also not in a hurry to update.

Even today, in modern enterprise IT infrastructure using VMWare, I come across versions 5.5, although the current version is 8.0.

Technical directors aren’t in a hurry to buy new versions. Instead of updating the hardware and licenses, they most often decide to transfer the IT infrastructure (or its components) to the cloud.

The market share for VMWare products is becoming smaller and smaller.

Cloud providers such as Amazon AWS, Google Cloud, and Microsoft Azure are absorbing into the market. Microsoft, in particular, adopts an aggressive sales strategy and sells its service almost at a loss to get companies hooked on their ecosystem.

In the end, the mighty corporation VMWare didn’t withstand the competition, failed to adapt to new realities. The company’s leadership decision regarding the sale is probably the best scenario.

What is the future of virtualization systems from VMWare?

Over the next 2-3 years, the M&A process will take place. Since Broadcom is a large corporate machine (and VMWare isn’t a small startup either), significant changes will be seen in 2-3 years. Not earlier.

Then the changes, that we’ll feel, will begin to unfold. There will be employee attrition, changes in financial policies, and product integration. It isn’t excluded that some products will be closed, and their support suspended.

The same happened with Symantec: the main products that fit the strategy still exist, while support was stopped, and some products were closed.

I hope, that after the acquisition process, new products at the intersection of technologies will be launched. What exactly they will be – no one can say for sure at the moment.

What does this mean for the technical community and businesses?

Currently, the latest version is 8.0. In my opinion, version 9.0 will also be released and supported, but older versions (as mentioned earlier, 5.5) should be updated.

In the long term, I’d advise businesses to move towards cloud solutions, partially or fully migrating their IT infrastructure to the cloud.

Additionally, we can expect new products from Broadcom. The number of patents owned by VMWare is simply staggering, so it isn’t unlikely that this new leadership will have the freedom to develop and launch new solutions.

CTO at InDevLab

Dmytro Hanzhelo