What Broadcom has done to VMware could become a playbook ripe for repetition, one analyst said.

As the chipmaker dismantles one of the channel’s most entrenched ecosystems, independent analyst Michael Warrilow sees Broadcom drawing a distinct pattern: target a deeply embedded, high-margin enterprise software company, then fundamentally rethink how it’s sold, supported and consumed.

If Broadcom stays true to that approach, Warrilow told Channel Dive, its next target could be just as foundational as VMware's — on the scale of SAP.

Less than three years into Broadcom’s ownership of VMware — and viewed alongside its earlier acquisitions of CA Technologies and Symantec — one thing is becoming very clear: Broadcom is going after “very sticky, incumbent software within a mature market,” said Warrilow, chief researcher at independent, Australia-based analyst firm Virtified.

Broadcom appears likely to repeat its template given the payoffs it has seen from VMware. “Wall Street loves what they’re doing,” Warrilow said.

As such, Warrilow expects Broadcom will snap up another high-profile legacy vendor. In a “doomsday scenario,” he points to a target such as SAP, a platform as embedded and partner-reliant as VMware once was, subjected to the same kind of overhaul.

“He’s just getting started,” Warrilow said of Broadcom CEO Hock Tan. “There’s more to come from Broadcom.”

The unraveling

For partners, Broadcom's treatment of VMware sends multiple warnings.

“VMware was completely committed to the channel,” Warrilow said. “The majority of money was transacted through the channel, and Broadcom completely unraveled that. And that’s the biggest impact to the channel.”

The channel still absorbs shocks from Broadcom’s VMware fallout. Warrilow recently published self-funded research showing that 48% of organizations plan to reduce their VMware usage by 2028. Virtified’s findings align with a February CloudBolt report that found that VMware customers were planning to pare back deployments rather than abandon the virtualization software suite.

Intent doen’t equal execution. Among organizations aiming to reduce VMware dependence, one-quarter of had yet to find a one-to-one VMware replacement, Virtified found. Re-creating a VMware environment means cobbling together solutions from a variety of providers such as Red Hat, Nutanix, Microsoft and Virtuozzo, Warrilow said.

“While VMware remains the technology leader, Broadcom’s licensing changes have triggered a once-in-a-decade disruption to the dynamics of the IT infrastructure market,” said Warrilow, who keeps Virtified research free of vendor funding.

Migrations from VMware have given channel partners a fresh opportunity.

Warrilow found 13 common alternatives that partners are helping VMware users sort through.

“It's a function of things like network reliability and latency, your preference for cloud, a whole bunch of factors,” he said. “Narrowing it down is critical, because while the opportunity is almost the whole VMware customer base, they're going to go in many different directions.”

For partners, the process starts with an assessment. Under VMware’s previous enterprise licensing model, many users accumulated layers of functionality across storage, networking and management over multiple renewal cycles. That resulted in overbuilt environments that benefited partners and VMware more than customers.

“Everybody got fat and lazy … just getting more and more every renewal, because that was just the way that rolled,” Warrilow said. Organizations, on the other hand, “got things they didn’t need.”

Broadcom has sought to address that problem with bundled offerings, but many end users have complained that they’re still paying for technology they don’t want.

The first phase of any VMware exit is critical, calling for expert consultation, Warrilow said. The work then expands into requirements mapping, vendor evaluation, coexistence strategy and, eventually, migration. For mid-sized and large enterprises, that process can take three to four years.

MSP fallout

While Broadcom’s VMware disruption has spanned the entire channel, it has hit MSPs most acutely.

A VMware Cloud Service Provider program overhaul cut off thousands of smaller partners, forcing them to rethink both their core platform and their business model. More than any other partner type, MSPs “really are in a situation where they have to… change the jet engine mid-flight,” Warrilow said.

The shift put MSPs in a bind. They must find a viable alternative to platforms such as vCloud Director, which allows multitenancy control, while continuing to support existing customers — often without access to the VMware licensing model on which they originally built their services.

Again, VMware’s strengths — particularly in multi-tenancy and management — are not easily reproduced, and that has raised the technical bar for replacement.

“Getting off the dependence on vCloud Director is absolutely critical for [MSPs],” Warrilow said. “And I think they would well and truly know that, but it's still worth pointing out because there's not a lot of alternatives.”

Meanwhile, MSPs have continued to compete with systems integrators, resellers and consultants for migration-driven opportunities.

VMware entrenchment

A massive wave of VMware migrations many analysts expected after the Broadcom acquisition haven’t materialized. Virtified’s research suggests it won’t. 

“Half of the customers aren’t going to move,” Warrilow said.

The reasons come down to considerations including timing, depreciation cycles and competing priorities. A big chunk of organizations have chosen to absorb higher costs rather than take on migration risk.

“It's futile for partners to think that everybody on VMware is going to move, because there are many organizations that are just going to accept the higher licensing costs and the pain of dealing with Broadcom over the pain of a transition,” Warrilow said.

Some organizations are locked into renewal cycles or recent infrastructure investments. Now, though, after what Warrilow describes as a “wasted year” of hesitation and indecision, customers at last are narrowing their optionsand partners need to do the same – focus on projects that align with their strengths rather than chasing every potential VMware-related deal.

“Really zero down on the opportunities that are in your sweet spot,” Warrilow said. “A lot of that is learning to say no more often than yes.”

AI effects

Finding a VMware alternative and the associated customer base is only half the challenge for partners. Convincing customers to make the move is a heavier lift. As Warrilow noted, organizations won’t take on migration risk without a clear upside.

“The only way you can justify the pain of moving … is incremental benefit,” he said.

For the channel, that means tying VMware exits to something bigger, like cloud adoption, modernization, reduction of legacy debt or AI-driven infrastructure investments.

“Getting rid of legacy is a massive need,” Warrilow said.

In fact, emerging demand for on-premises AI inference may offer one of the best paths forward.

“There's a lot of budget that's being allocated to that,” Warrilow said. If channel partners can “sneak a little bit of this heavy lifting under the covers,” it helps justify the business case for VMware migration.

If Broadcom’s approach to VMware turns out to be a playbook rather than a one-off, will matter beyond the current cycle.

Warrilow’s advice for partners is straightforward: “[They need] to look about where their exposures are, where their portfolio is, and think about what would happen in that kind of next doomsday scenario.