> The strategy you described has no upside for the vendor (in this case Broadcom VMWare).
The upside is you don't scare off other customers when they hear reports of a 12x price increase.
Right now, in response to this post, VMWare's biggest customers will be drawing up plans for if they need to walk away at the next contract renewal. And they'll want those plans to be extremely credible - it's worth spending $5 million trialling and integrating a competing system, if it stops your $50m contract turning into a $150m contract.
I mean, VMWare customers were warned about this ever since the deal got announced. This is literally the Broadcom strategy for the last decade at least: Buy vendor with lockin, cut non-core features, raise prices and squeeze the customers who are in too deep.
Broadcom goes into these deals knowing it will hemorrhage a lot of customers and they don't care, they know they can make it up on those who are forced to stay. They don't care about reputation at all.
Sounds like customers were not familiar with how Mr Tan plays ball, he's been doing this forever. He isn't trying to kill the cow, he will famish the cow to the point where the cow will be alive enough for him to milk his required rate of return and not an ounce more. Its a risky strategy, but Tan is loved by Mr Market so he gets the benefit of the doubt.
Companies like Walmart, Centurylink, AWS (via Equinix), and the DoD (via General Dynamics) use VMWare and most likely have contracts in the 9 figure range for a backbone service like VMWare
As I said in my comment - you can safely assume mean contract value is in the mid 8 or low 9 digits at a company the size of VMWare.
If this scares away customers spending less than that, good for them. It doesn't make a dent when a F1000 is spending tens of millions a year on VMware and purchase by committee and will get sweetheart deals by being strategic accounts.
That’s going to get you basically the same number unless you think most of those 400k customers do not have contracts for some reason? My revenue-based approach would undercount in-year bookings but your approach would undercount NRR which I suspect is nontrivial for VMWare (but I haven’t checked).
Also just to be clear I agree with your initial comment - there are lots of reasons even big customers can be worth repricing based on their true costs and strategic relevance. And at less than 0.1% of revenue VMWare can certainly afford to risk it.
> The strategy you described has no upside for the vendor (in this case Broadcom VMWare).
It has. Product/brand trust matters... the most obvious example being Google, who have had an extremely hard time getting their stuff to be actually used as they have shown time and time again that even if you're the biggest game publishers on this rock, you won't be able to rely on Google keeping up their end of any deal.
You do not have an individual purchaser - the deal will be vetted by committee for 1-3 quarters.
> most obvious example being Google, who have had an extremely hard time getting their stuff to be actually used
Extremely hard disagree. GCP does well in enterprise/strategic accounts where a customer in some way competes with Amazon (which is around 20-30% of the F1000) and also doesn't have a significant Windows presence (minimizing the need for Azure+MS Support)
The upside is you don't scare off other customers when they hear reports of a 12x price increase.
Right now, in response to this post, VMWare's biggest customers will be drawing up plans for if they need to walk away at the next contract renewal. And they'll want those plans to be extremely credible - it's worth spending $5 million trialling and integrating a competing system, if it stops your $50m contract turning into a $150m contract.