Broadcom Shuts Down VMware’s Partner Connect, Transitions Existing Partners to By-Invitation-Only Advantage Partner Program

Broadcom’s US$61 billion acquisition of VMware was finalized in November 2023, with the immediate focus of enabling enterprise customers to create and modernize private and hybrid cloud environments. Broadcom announced its intention to invest significantly in VMware, with investments focusing on Research and Development (R&D) and accelerating the deployment of solutions through VMware partner professional services. However, on February 5, 2024, VMware’s Partner Connect ceased to exist.

In December, VMware resellers, distributors, and service providers were notified of the termination of Partner Connect, along with their incentives and status within the partner program. These partners were also told that they would be contacted in January to learn if they would be invited to Broadcom’s Advantage Partner Program. Reports have suggested that to be invited, a minimum of US$500,000 per year in VMware revenue is needed. Broadcom is also terminating the Cloud Service Providers program, where smaller/niche Mobile Service Providers (MSPs) and service providers offer multi-tenanted VMware-based cloud services.

Broadcom has sold VMware’s End-User Computing (EUC) business to KKR, making the EUC division a standalone business unit, while also announcing the end of general availability of the free version of the vSphere (ESXi 7.x and 8.x) Hypervisor. Although the free version of ESXi was intended to allow for experimentation and testing, it served as a good foundation for computing professionals to do some testing and eventually deploy solutions into a production environment, kickstarting the professional journey in deploying VMware’s virtualization solutions.

Most of the announcements by Broadcom will have minimal impact on VMware’s larger partners. These partners have invested time and resources into building an expansive VMware practice, contributing a significant amount of revenue and Broadcom will continue to support its large, revenue-generating partners. The transition into a subscription-based business, ending support for perpetual licenses for VMware products is another step in ensuring that partners remain profitable as the technology landscape increasingly moves toward a subscription-based consumption model.

Broadcom also intends to consolidate VMware’s 5G, Software-Defined Wide Area Network (SD-WAN), Secure Access Service Edge (SASE), and edge compute solutions into a single platform called Software-Defined Edge (SDE). This will impact Broadcom’s relationship with Communications Service Providers (CSPs), as this can be seen with Broadcom scaling down in terms of its support for CSPs, which is the opposite of VMware’s strategy, pre-acquisition. For enterprises, there might be challenges in terms of existing partnerships, as this decision will invariably result in further changes in the channel partner ecosystem, ultimately breeding confusion and disillusionment.

Broadcom is trying to immediately accelerate revenue growth, focusing on channel partners and go-to-market routes that can drive and deliver significant revenue, i.e., the bigger/larger global channel players. This will affect VMware customers who depend on region-based or industry-specific channel partners that might not have the expertise/customer base of larger partners. For these customers, it will not be easy to migrate to another service provider in such a short time, potentially ending up going direct to one of the global system integrators or any of the cloud hyperscalers.

The transition to Broadcom’s Advantage Partner Program allows Broadcom to focus on supporting a smaller channel, enabling a deeper partner enablement strategy that brings greater profitability opportunities. By moving to the Advantage Partner Program, VMware partners will now enjoy a net margin model with discounts disclosed upfront, streamlined pricing on VMware solutions, predictable partner profitability and deal protection, a single partner portal for all partner resources, and increased resourcing and support through a redesigned internal sales structure.

While the knee-jerk reaction from partners would be to leave the VMware ecosystem and partner with the likes of Nutanix, this should only be done after serious and careful consideration, especially for well-entrenched partners of VMware that have built a long-standing business on the back of VMware’s success. This is especially true if the customers are heavy users of VMware solutions, it will be very difficult to convince these customers to move away from VMware considering the amount of investment and resources that have been spent. Customers are already grappling with the implications of the change in software licenses. Partners do not want to be left in the scenario where a customer moves to another VMware partner for all their virtualization needs.

The shift to Broadcom’s Advantage Partner Program essentially means accessibility and inclusivity of smaller channel partners and managed services providers will cease. These smaller partners will have to carefully assess and pivot toward other areas, including working with the “competition” such as Nutanix, Citrix, Red Hat, or Microsoft. Customers of small channel partners will also have a decision to make in terms of staying on the VMware platform, which will mean finding a new partner that can help navigate the new changes and uncertainties around the new VMware or trusting the existing partner and moving away from VMware to another platform.

ABI Research foresees a mix of both the above scenarios happening. However, the likelihood of a complete exit from the VMware platform is highly unlikely, especially for large enterprises running thousands of hypervisors in a production environment. From a Broadcom perspective, it has decided to make the painful changes early, instead of a long drawn-out process that might potentially take years. The main reason for this is the need to quickly reduce expenses and the promise of doubling VMware’s Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) within 3 years. Time will tell if this strategy proves to be a brilliant financial move or a watershed moment for VMware partners and customers.