How Broadcom’s VMware Acquisition is Affecting Channel Partners

Despite "simplifying" the partner program, Broadcom is making life anything but that for some partners.

acquisition

Channel partners are working through the anxieties that have emerged since Broadcom finalized a $69 billion deal to take over VMware in November 2023, with significant implications for companies invested in reselling the technology giant’s popular virtualization solutions.

A company blog post published on Feb. 7 revealed the depth of changes facing channel partners who have built their business selling products from VMware, which its new owner rebranded to VMware by Broadcom. In the blog, Cindy Loyd, vice president of global partner and commercial sales for VMware, assures businesses who resell or distribute their solutions that the updates reflect their calls for a “simplified” strategy.

However, some partners aren’t convinced that everyone will benefit from the new way forward.

High-revenue resellers and distributors in good standing shouldn’t worry about getting frozen out of the invite-only Broadcom Advantage Partner Program, one anonymous VMware partner said, after existing partners had their agreements canceled on Feb. 5 and were instructed to reapply to rejoin.

Uncertainties for Smaller Partners

“I think it’s very important for everyone to understand that for the small partners, this is going to be quite a challenging scenario,” they added, stating that the modifications will impact resellers generating under $500,000 in annual revenue from VMware products. “We can only hope that there will be a tier two program where the smaller ones can work with larger ones to get through.”

Under the revised Broadcom Advantage Partner Program, resellers and distributors face five key changes. These include a net margin model, streamlined pricing, de-cluttered access to tools and resources, enhanced support, and efforts to protect partner deals.

In the blog post, Loyd said the net margin model gives partners a clearer picture of their financial benefits, by providing transparent discount disclosures from the get-go. “You will now know exactly what you’re making on every deal, consistently across both new and renewal business,” she wrote.

Broadcom trimmed a bloated solutions list into four bundles that resellers can bring to their clients. Though Loyd framed the switch to the VMware Cloud Foundation, vSphere Foundation, vSphere Standard and vSphere Essentials Plus bundles as a positive step toward streamlined reseller pricing, Nutanix, a rival cloud computing company, questions the impact on end-user clients.

“Despite Broadcom statements that it would not focus on raising prices, we believe new bundling strategies will drive up effective prices for most customers,” Lee Caswell, SVP of product and solutions marketing for Nutanix, wrote in a January blog post.

Changes to the Partner Program

Some of the amendments are more straightforward. For example, partner users gain single-sign-on access to all VMware by Broadcom sales tools, systems and dashboards, eliminating previous complexities resulting from the cloud company’s swift expansion.

Among improvements aimed at enhancing support, Broadcom made some internal changes that give reseller partners access to professional services, reducing channel conflict in the process, wrote Loyd. However, some worry about a decline in channel-based support affecting a slice of the nearly 70,000 partners in the VMware ecosystem. Forrester analysts warned that “degraded support” would likely result from the technology mega-merger.

Broadcom claims that new incentives will encourage partners to “confidently invest in customer adoption and successful deployment of their VMware investments,” Loyd shared, referring to the incumbent protection policy aimed at guarding reseller deals.

The dust is far from settled in the fallout from Broadcom’s VMware acquisition, a watershed shakeup in the surging cloud computing sector. Channel partners with any exposure to VMware must evaluate the new reality at play and reassess their prospects and potential.


Jessica Binns

Jessica Binns, an XaaS Journal contributor, has more than 15 years of experience as a B2B journalist and editor in tech, retail and fashion.