VMware CEO defends Broadcom deal

When Broadcom confirmed its $61bn acquisition of VMware following market speculation in May 2022, several industry watchers wondered what the mega deal would mean for the virtualisation pioneer and its customers.

After all, many enterprises have come to rely on VMware’s software to run their mission-critical applications and manage their infrastructure, not only in private cloud datacentres but also on public clouds such as Amazon Web Services.

One sceptic pointed out that Broadcom’s acquisition playbook saw CA and Symantec customers facing “massive price hikes, worsening support, and stalled development”, while another was uncertain whether Broadcom would continue investing in VMware products beyond core technologies such as vSphere, VSAN and NSX.

In an interview with Computer Weekly in Singapore, VMware CEO Raghu Raghuram addressed concerns over the impending acquisition and what customers can expect from Broadcom, the evolution of VMware’s cloud strategy and opportunities in the Asia-Pacific region. Here are his answers to our questions.

There are VMware users who are concerned about how the Broadcom acquisition will pan out and the future of their VMware investments. What would you say to those customers to alleviate their concerns?

Raghu Raghuram: As you can imagine, I’ve been talking to many customers in the last two months. My message has been to look at the reasons why Broadcom has made the acquisition, which is the strength of our product portfolio, all of the infrastructure software category, the breadth of our customer base and the centrality of our software in our customers’ cloud infrastructure stack.

They acquired VMware to obviously build and grow the company. They also have a history of investing in R&D. Historically, Broadcom’s investments in R&D have outpaced even the growth of their total revenue. That’s sort of a proof point that they want to work on acquiring engineering-centric companies and invest in growing them. That’s what customers can expect after the closure of the acquisition.

Some analysts have claimed that Broadcom’s acquisition strategy in the past does not showcase an innovation-focused mindset. Following the acquisition, will VMware continue innovating in areas that matter to all customers, whether in hybrid cloud, Kubernetes or security, and not just the most profitable customers?

Raghuram: I think the perception that Broadcom does not invest in innovation is not borne out by facts. They started small as Avago and then they acquired Broadcom, the merchant silicon company that was known for its innovation. They’re continuing to invest pretty heavily in semiconductor innovation in things like wireless technologies, and the world’s smart device companies use Broadcom for various components. All of that would not be possible if the technology was a laggard. So I think if you look at the entirety of Broadcom’s portfolio, you will see a lot of innovation.

The principal reason they are acquiring VMware, besides the strength of our portfolio, is the fact that they want to be leaders in infrastructure software and have the richest portfolio of software in infrastructure and management. That’s really what they’re trying to build as a software organisation.

If you saw the announcements that came alongside the acquisition, what they’ve done is, they’re rebranding their software division as VMware and rolling in some of their existing software assets into VMware. So, they are creating VMware as a broad portfolio of assets that can service all customers, not just the biggest customers. They understand that the customer base of VMware is very different from that of CA or Symantec, which had only a few hundred customers. And so, they are going to follow a different approach in this case once the acquisition closes.

VMware has been fleshing out its cloud strategy over the years. We spoke about that, including Tanzu, the last time we met in Singapore. Can you give me an update on the strategy and how it is resonating with customers? What do you think VMware can do better?

Raghuram: We are advocating for customers to take the cloud smart approach. If you think about the entirety of digital transformation, you’ve got all types of applications. Customers obviously want to build new cloud-native applications. They want to modernise existing applications and sometimes replatform VM [virtual machine]-based applications into containers. They also have mission-critical back-office and mid-office applications that they sometimes want to leave unchanged, but connected up to the new applications they’re building.

So, it’s a very rich landscape, and they want to build applications at the edge. Some applications might be on the private cloud, while others might be in one particular public cloud, sometimes on cloud-native architecture and sometimes on VMware architecture. What we provide is the choice for customers to look at the application and deliver it to the right location on the right cloud with the right architecture. That really is the distinguishing aspect of our portfolio.

You talked about Tanzu, which is for customers that are building and operating cloud-native applications on public cloud architecture. If they want to take existing applications and move them to the cloud, especially business-critical applications that are sitting in VMs, they use a VMware-based infrastructure stack in the public cloud or on-premise.

They understand that the customer base of VMware is very different than that of CA or Symantec, which had only a few hundred customers. And so, they are going to follow a different approach in this case once the acquisition closes

They are also building new applications which are either container-based or VM-based and distributing them to the edge of the network as well. So that’s how we are executing that cloud strategy. We call this cloud smart, and customers use our products because it’s the fastest and cheapest way to achieve their business goals. That’s our value proposition to the customer. The latest developments are the continuing development of Tanzu, the VMware Cloud stack, and the edge compute stack. You are going to hear more about each of these at our user conference this month.

There have been some observations that in terms of market share, the Tanzu Application Platform still pales in comparison to OpenShift. What are your thoughts on that?

Raghuram: If you think about Tanzu portfolio, there are different elements to it. There is the Tanzu Kubernetes distribution, which is very widely distributed, potentially more so than OpenShift. If you look at Tanzu Mission Control, which is a management product, OpenShift does not have such a product.

If you look at the Tanzu Application Platform, which accelerates the path from code to production for developers and helps organisations do effective DevSecOps, that’s a new product that came about only in the first quarter this year. And so, that certainly has fewer customers than OpenShift.

OpenShift has been present for maybe about six or seven years, so it’s been around longer but it’s also an architecture that’s more dated, whereas the VMware architecture is more modular. So, depending on which product you compare, you have a different answer.

Since we’re talking about the competitive landscape, I’m sure you know Nutanix and Red Hat have an ongoing partnership to deliver open hybrid multicloud solutions, even before the Broadcom acquisition was announced. I understand that they’re getting more calls from VMware customers who are exploring options. What are your thoughts on that?

Raghuram: In a competitive market, any time one of your competitors has something big happening, it’s the job of people like Nutanix to go in and try to say: ‘Look, you should not be a VMware [customer]’. But the reality is, customers make long-term choices. They don’t suddenly decide overnight that this is not for me.

So, they absolutely are going to be bombarded with promotions and advertisements from everybody in the industry, but they recognise VMware’s track record and the superiority of VMware solutions. So far, we have not seen any customer say anything other than they’re very committed to VMware.

When I thought about the potential synergies between VMware and Broadcom, Project Monterey came to mind because it’s an initiative that will clearly benefit from the coming together of Broadcom and VMware. What sorts of collaboration do you see on that front?

Raghuram: Broadcom today does not have a smartNIC and so our collaboration on Monterey is with all the other vendors and it’s going really well. As you know, we’ve been working on it for nearly two years now and we expect to get it into production in the near future.

In the long term, like I said earlier, Broadcom has been an innovator in semiconductor technology in merchant silicon, ASICs [application-specific integrated circuits] and those sorts of things. We have been an innovator in software, so I’m sure there will be opportunities for collaboration between our software and systems engineers and Broadcom’s semiconductor engineers. You can look forward to some exciting new collaborations once the acquisition closes.

I think you mentioned once that you enjoy traveling to Asia, because it’s such a dynamic region. I’m sure you see a thriving tech ecosystem and a lot of innovations being driven by a lot of cloud-native unicorns like Bukalapak in Indonesia. Many of these companies don’t really talk much about VMware, to be honest. Are you going after those customers at all?

Raghuram: We are very focused on enterprise customers, by and large. And our value proposition is to combine the rigorous requirements of enterprise with the capabilities of the cloud. That is our sweet spot. Having said that, we do serve cloud native customers, but the vast majority of our business is enterprise-centric.

Where do you see growth coming from in the Asia-Pacific region? What are the sweet spots for VMware geographically?

Raghuram: Like you pointed out, it’s a very dynamic region, and different parts of the region are investing in different things. For example, we see a lot of interest in application modernisation, cloud acceleration and the hybrid workforce across the region. As for individual countries, Singapore has done a lot of work on things like the private cloud in the past. They’re moving to public cloud based on our solutions, and specifically Tanzu. In Japan, they have done a lot with cloud and end-user technologies in the past and they’re continuing to grow. So, every country has its own, I would say, uniqueness.