Demystifying the VMware Changes

Kris, Bluewave:

Welcome to Bluewave’s webinar series: The Current. Today our topic is demystifying the VMware Changes with our distinguished panel featuring 11:11, Expedient, and TierPoint. I will be your moderator, Kris Hogaboom, Solutions Advisor of Bluewave. Today we’ll be discussing VMware’s significant changes to its product portfolio and licensing models related to Broadcom’s acquisition. First, let’s meet our panel. Please introduce yourself and tell us a little bit about your organization. Let’s start with Mac.

Mack M, 11:11:

Sure. I’m Mack, VP of National Partner Development. I work with our partners on these types of solutions in 11:11. If you’re unfamiliar, really focus on modernizing, protecting, and managing your network and data center.

Kris, Bluewave:

Awesome. AJ?

AJ, Expedient:

Hi, I’m AJ, principal product strategist at Expedient. We are a full stack cloud service provider covering everything from infrastructure and service to containers and application modernization and really helping our organizations and our clients figure out where to get the best outcome and how to get the outcome that they’re looking for.

Kris, Bluewave:

Awesome. Last but not least, Isaiah.

Isaiah, TierPoint:

Hello everyone. Isaiah, Vice President, channel chief for TierPoint. We deliver managed IT services and cloud services through our 41 data centers across the U.S.

Kris, Bluewave:

Very nice. AJ, let’s start with you. What possible ramifications are some of our customers facing?

AJ, Expedient:

There’s quite a lot, and the big thing is, the quick context is VMware had perpetual licensing. You bought the license and then you just paid for your support costs over time. What the Broadcom acquisition has brought on is a shift from perpetual licensing to subscription licensing, specifically for generating recurring revenue for the Broadcom side, but also to make sure that as VMware wants to grow, that they have a consistent revenue stream coming in. They had a set of products, they had vSphere as their base hypervisor product, but then they had VSAN for storage, NSX for networking, the Aria suite for automation and monitoring. But 75% of VMware’s customers only ever bought vSphere. And so, as part of this, they have moved from just individual products that you buy into a very small group of bundles to the point where they went from 9,000 SKUs to 150 SKUs.

And so it is a radical simplification of their price book, but it also means that a lot of VMware clients now own or are being pushed into owning more than one product. And that’s where you see a very large price increase. 3. 5, 7x is very, very common. There are more in certain industries and there’s more based on where your core count was, if you bought smaller hosts or you’ve been holding onto smaller hosts, there’s now a 16 core minimum. So we’re seeing a lot of clients having to add cores on top of that. So it turns into a very large price increase that not a lot of people were expecting directly. And it also means that you now have to, if you want to actually see a value proposition out of this bundle that you have, you now have to take on more components of that stack from VMware than you previously wanted to.

Kris, Bluewave:

Nice. Yeah, we know there’s significant changes affecting the cloud service providers. Maybe we dive into that a little bit, AJ, and then also maybe touch on the bring your own license model that is new.

AJ, Expedient:

And the other ramification that comes out of this is Broadcom also simplified and dramatically reduced the number of cloud service provider partners that they had. Previously, there were about 4,500 cloud service providers globally. There’s now 400, so that is a 10 x shrink of that. And what they’re doing is they’re focusing on the larger providers to be able to maximize that value. So I’m with Expedient. We have 11. 11 and TierPoint. All three of us are Pinnacle partners. We are three of the 12 in the U.S. It is a big achievement for all three of us, but it’s also a recognition of the capabilities that we can deliver. The key thing that allows, and the other piece of that licensing change from perpetual to subscription, is that it levels the playing field, licensing wise. Where clients are buying per core on-prem, we are buying per core as a cloud service provider, and the Pinnacle partners are able to bring your own licensing. So if you have an existing agreement now that you’ve gone over to Broadcom, you switched into that subscription licensing model, you can bring that over and we can run that as a service, which is a huge shift for us overall in the field. Where previously we had to effectively resell clients VMware licensing. They already owned it, but then they couldn’t bring that to us because of the licensing agreements that we have with VMware. Now that portability is there, but that portability comes with this shift to the subscription model.

Kris, Bluewave:

Nice. Yeah. Mack, next up. What are options for customers at this time? What are some of the pros and cons of not changing? How can service providers help?

Mack M, 11:11:

Sure. Yeah. I think that there’s really two categories. You’ve got the premise-based environments, and that comes with renewal, right? You pick one of the four, in all likelihood, one of the top two bundles to continue on with that obviously can drive higher costs, but there’s really no migration required. So it’s probably the least disruptive from a technical standpoint. Obviously from a budgetary perspective, that’s maybe a different story. And then the next is platform change. You think of when an organization first gets the renewal invoice and the emotional response is when AJ says three, five, a hundred percent more, you start to think of alternatives. Why am I running this in this way, in this place? So you start to evaluate maybe a Hyper V or a Nutanix. The issues with that obviously is a different technology. One of our prospects probably put it better than I ever could, and he said, Hey, I’ve looked at some alternatives to my VMware environment, but the way that I view it, I’m either paying a software tax or a people tax.

I don’t have the resources internally to take on this new technology. I don’t have the time for the project to move there, and then plus I’ve got to re-architect or reevaluate my entire ecosystem for data protection and maybe security networking, et cetera. So there’s definitely a balance there. If you move more towards managed services or cloud providers like Expedient,11:11, TierPoint, there’s a potential for a much easier path to migration. So if you are struggling with the people side, you want a little bit more stability in the cost model, a lower learning curve, and then maybe a more comprehensive platform with some of those elements of those third party technologies integrated, that could be a great path forward. And then lastly, your Azure, AWS, similar issues to the premise-based side of replatforming, you have potentially unpredictable costs, quite a bit of a learning curve, complex migrations, and then again, you still have to deal with that ecosystem. So there’s a lot of considerations to take into account for sure. But I think that the Pinnacle provider program and the cloud service providers that are available now are here to simplify that process and kind of ease that burden.

Kris, Bluewave:

Yeah. AJ, Isaiah, if a customer comes to you or a partner comes to you asking for a VMware alternative, what are their options?

Isaiah, TierPoint:

Well, the first thing that we often are looking at when they’re asking that question is trying to understand what that roadmap looks like, what those goals are. And that’s probably the biggest piece for recommendation for clients as they’re going through this trying to figure out, it’s a great time to pause for a second, reassess what that roadmap is. Has it changed? If they’re already in multi-cloud, that cost benefit analysis they maybe had done a year or two ago around which applications living where that might be different. So before rushing into alternatives, understanding what that goal is is more important than ever. But then it is stepping back and looking at that based on those goals, based on the human capital you have, when is your licensing up? When is the end of life on the hardware? What are your cloud initiatives around various applications? Can you reconfigure, like AJ was talking a little bit about earlier, can you reconfigure?

Those are all really, really important things. It’s usually the starting point and then looking at, based on where those goals are, we can assess, does it make sense to look at some of the alternatives, whether it’s the Nutanix or hyperscalers or we’re seeing a lot more interest in even Azure stack lately as a result of this. So there’s a lot of those various options. And then usually we’re working to outline what does it take, what’s a cost comparison? Do you have to refactor? What’s all those third-party tools or even the features in VMware that you weren’t taking advantage of, and then coming up and building a plan and assessment for a client that gives them the insight and knowledge to really truly assess those various options.

AJ, Expedient:

And I think the biggest piece of all is the knee jerk reaction is, screw ’em, I’m out. I’m out. I don’t want to deal with this anymore. They’ve burned me. But not considering what VMware has enabled over the last 10 years, and this is not necessarily to kind of parade out how great VMware is. It’s for the last 10 to 15 years because so many people, it’s like 85% of data centers, have VMware in it. The ecosystem that has been built around VMware. VMware was always number one in terms of vendor support from monitoring tools, from backup tools, from DR solutions, from everything supported VMware on day one because that is the thing that was everywhere. It’s a DeFacto standard. Now, you want to switch to an alternative that’s Nutanix or HyperV. In real life for most organizations who are using a set of tools and suite of tools across the board. There’s Proxmox, KVM, there’s others, but you’re going to spend more time instead of money.

That’s really what that comes back to. For the Nutanix and Hyper Vs of the world. Does your stack, does your ecosystem that you have around that from your operations actually match that? If it’s my backup solution, does it support a HV? Does it support Hyper-V? How do I do dr? If you’re doing it with Zerto today, you can do it a little bit with Hyper-V. You can’t do that with Nutanix. They don’t support it. When you go down the route of how am I doing all my security tooling? Does it run on top of that? Think about things. This is the sneaky one. Think of how many things that you deploy and update that come to you as an OVA, as a virtual appliance.

They’re not directly deployable in certain instances. Do you have applications that are certified to run on top of VMware that are not certified to run on other platforms? These are all of the various questions that you have to ask yourself. And to Isaiah’s point, it’s really assessing what you have and not just saying, screw those guys, I’m out. And that’s the real differentiator that VMware is mostly relying on that says, okay, if you can switch, here you go. Here’s the way to go do it. Do you have the time? Do you have the people? Do you have the financial impact? Because there will be one whether you renew with VMware or not to actually go make that shift happen.

Isaiah, TierPoint:

To your point, AJ, when we’re going in doing an assessment, doing a VMware licensing assessment for clients, a big, big piece of that is not even VMware. It’s the other third-party applications and other licensees and what’s maybe a duplicate of now VMware features that the client isn’t using today. So big piece of the puzzle

AJ, Expedient:

And then kind of coming back around to are you using third party tools today that you could just use the VMware one? Now that everybody’s being pushed over to VCF? If you’re a Nutanix customer, you have a choice to say, I’m going all in on AHV or I’m actually going to go use VSAN because It’s in my VMware licensing now, right? Am I using a third-party networking tool like Cisco ACI, or I’m using the vendor-based networking tools that they have from Arista, Juniper, whoever. Can I flip that over to NSX because it’s now in my toolkit that I didn’t have before because I didn’t want to buy it before. Now I have it. Can I take advantage of it? These are the sorts of conversations to have. And Isaiah’s, right, it’s much more of an assessment. And I think the problem is right now, people are staring at the end of their agreement going, do I have enough time to make a good decision about all of that before we hit the end point? Before we hit the end of the road?

Kris, Bluewave:

Yeah. I think that brings us to a good point here. This is for the entire panel. What would be the advice that the three service providers would give to a customer right now facing the VMware challenges or the changes that are coming up? What advice would you give the customer base?

Mack M, 11:11:

Slow down a little bit.

AJ, Expedient:

Take a breath.

Mack M, 11:11:

That’s that’s the key point. I mean to just echo what everybody’s already said as far as that third party ecosystem, that’s usually where we see that evaluation process start to slow down and kind of die off and tilt back more towards a renewal or migration to a more friendly or known platform because there’s a lot more investment than just a hypervisor themselves. I think the assessment based services of how do I optimize this, what size hosts am I buying and why? I think that while we’re talking buzzwords, we talk hear about repatriation, what’s the cause of that? Well, it’s probably a recognition of maybe I shouldn’t have lifted and shifted everything as is to a hyperscaler. So it’s moving those workloads back because maybe they shouldn’t have been moved in the first place. So just an evaluation of why am I running this workload and this place and quantifying that and then making decisions based off of data so than a reaction to a price hike.

Isaiah, TierPoint:

One of the items I’ll mentioned from a risk standpoint, we touched a little bit on the consolidation of the partner ecosystem as well. So doing an assessment of especially of who you’re buying the licenses from. If you’re on perpetual model, that’s one angle you need to look at to switching over. If you’re already with a cloud service provider, are they in the 12 Pinnacle? Are they in the next tier or do they get cut completely from the program? There’s certainly a business risk assessment that needs to be done around that. I think is something one of the first steps as well.

AJ, Expedient:

And I think the bigger piece here is. to Max’s point. is take a breath and think about it because we’re going to go just lift and shift. We were starting to move to Azure, which is we’re going to go all in on Azure. The cost savings you think you might have from the VMware side might not be as good as you think it is, sliding everything over to Azure and AWS figuring out those right workloads. This is where we as the cloud service provider group can come in and actually help. We have all the options. If you want to switch to Nutanix, Expedient has a Nutanix private cloud and Nutanix DRaaS platform. We also have VMware and a VMware DRaaS option. Our services blend across both of them. So if you want to, we can go solve the ecosystem problem. We can solve that assessment problem and help you actually get to the right thing.

I don’t want you to rush to make a rash decision, right? It’s super easy to do that. You could just say, screw this, we’re going and we’re just going to make this decision. The business thing, it’s not about business, it’s not about financials, it’s about feelings, and that’s a bad way to go about that. Focus. Take a deep breath. Have conversations with us. Because oh, by the way, all three of us have had to optimize our costs too, right? Every single one of the cloud service providers also got a bump in our costs, in our models. We had to shift our model from selling per gig of RAM to per core. That is a big shift literally in our cost models and the way we go to market. So we’ve also had to optimize and we can tell you how to go do that, right?

I can tell you right now that we as Expedient have spent the last three months with teams of people moving hosts around, moving resources around saying, Hey, this cluster that we had more or less deprecated, there’s still a little bit on it. Let’s get it all the way off, right? Let’s clear out this cluster. Let’s make sure that these components are out. Hey, these old hosts that we’ve been running for a while, let’s pull them out and right size our clusters and right size our environments and pods to get our cost structure into place. When we did that, our average client in our shared multi-tenant environment only saw on average a 5% increase in their total cost in our private cloud environment. It was on average about 17% in their total cost. That is a massive difference compared to the 3, 5, 7x that we’re hearing from customers. And even in certain verticals like government and education where those discounts are going away, it’s even bigger. And so this is where we have seen the ability to come in and be not just, Hey, this is what we think is best for you. We can tell you what we had to do to make ourselves work and pass that experience onto you two.

Isaiah, TierPoint:

You bring up a good point there because I’m sure the same as those early days, those first few weeks, those first month or two, is a lot of trying to figure out, understand the licensing, how do the changes going to affect that? And I know a lot of clients are going through that themselves trying to do that. We’ve probably already faced the exact scenario either in our own infrastructure or helping the hundreds of thousands of collective clients that we’re going through these conversations with, so we could probably save everybody a little bit of time with some quick pointers around the guardrails, at least in best practices that we’ve seen come out of this. So understand those goals. Don’t go it alone and there’s resources to help you figure it out.

Mack M, 11:11:

One hot button I’ll hit on too. As far as massive changes and economic shifts is how you look at DR infrastructure at this point. So if you look at Zerto or Veeam or any third party tool that has to run a virtual machine actively on that, what was historically maybe dormant infrastructure, now those have to be licensed fully and doing that yourself versus leveraging a service provider with the capacity built in and a lot of time and expertise on leveraging those tools in a multi-tenant environment and how that might affect costs. We’ve seen some pretty amazing comparisons of, Hey, what if I renew my license on the DR infrastructure and test dev environment versus what does a managed service look like to bundle all this stuff together and just get this out of my ownership? The numbers are somewhat shocking, maybe more so than they ever have been in the past. It’s a little clearer ROI than we’ve had available to us in the past, depending on how it’s deployed. And that shared multi-tenant environment is an enormous benefit at scale to those that are running a data center as a secondary environment, as a standalone,

AJ, Expedient:

And that is another thing for us as well, is that we actually did not see any cost difference for our DR customers. $0. And that’s because of what we had done before with our licensing and all the optimizations that we’ve made. That’s the thing that we can do for clients that previously in the DIY scenario, it’s like, oh, I’ll just buy hardware and I’ll stick it in a colo, or I have a second site and I’ll just put it there. That is a massive cost and it’s only going to go up for something you hope to never ever use.

Mack M, 11:11:

One thing too, a little nuance of what you just said as far as buying infrastructure, sticking in colo. Actually, a more common use case that we’re seeing too is customers that retired their old production infrastructure. So, from a depreciation standpoint, you’re not as married to that secondary side as you were before. So, moving DR, especially when you’re staring down the barrel of a renewal, timing is going to matter. Moving to a like platform is much faster and a lot less disruptive for the DR side than it is for the production side,

AJ, Expedient:

And we see DR as that big entry point, especially if you’re looking to get a big cost savings from day one. Moving over to an MSP or a cloud service provider like the three of us for DRaaS is going to be a cheaper option for you than do it yourself DR. This is the first time in 20 years that that’s been the case. But the licensing alone is going to throw those costs so far off that leveraging a service provider allows you to get where you want to go and allows you to actually focus on the things that matter. Our job is to maintain data centers and infrastructure. It’s what we do. It’s what we sell. It’s what our business is. For you as an organization. It’s taking care of your own insurance premium. You don’t want to do that. Here is a way for you to get a savings to alleviate the burden that you have both on the maintenance side and on the financial side, and actually get to where you want to go.

Kris, Bluewave:

Isaiah, Mack and AJ, thank you very much for participating today and thank you to everyone for watching.

Mack M, 11:11:

Thank you all.

AJ, Expedient:

Thanks everybody. Thanks.

Mack M, 11:11:

Thanks, Kris.