StorMagic – and some thoughts on the Broadcom takeover of VMware

It can’t have escaped anyone’s notice that Broadcom has been having some issues these days – ranging from old (2021) semiconductor monopoly investigations to new concerns about its VMware takeover. Some of these issues have been, presumably, impacting its  , although they are probably fairly normal for large tech companies such as Broadcom. Bruce Kornfeld, CMO at StorMagic, points out to me that Broadcom’s stock price is soaring just now, so that its strategy of focusing on the top (and most profitable) enterprise accounts is probably working pretty well. But, he asks, “what about its midmarket customers, SMBs [small/medium businesses], the enterprise edge in branches, stores etc.?” More about StorMagic’s reaction to this later on.

Broadcom CEO and President Hock Tan has admitted that the sweeping changes (in licensing, entitlements and support, I think) implemented after the recent VMware acquisition caused some unease amongst its customers and partners. Hock Tan has form: on a Broadcom earnings conference call after Broadcom’s acquisition of CA Technologies he apparently explained (on 2018) just how the company planned to milk this acquisition to generate significant profits for its shareholders .

Nevertheless, I think that a lot of the current furore in the press and online comes down to the fact that change is always unsettling and, whilst people quite like change (it makes life interesting) they hate being changed, outside of their control. And, as I see Broadcom as being mainly interested in the largest customers and in keeping its Price to Earnings ratio (P/E – which measures a company’s share price relative to its earnings per share (EPS) high, perhaps smaller VMware customers (of which there are many) do have grounds for concern.

Obviously, one consequence is that Broadcom needs to manage its acquired customers’ expectations and morale – and there is evidence, from its mainframe division, at least, that it is doing this quite effectively with zero-cost programs such as:

Beyond Code: “We are committed to forging deep relationships with our clients at all levels. Our partnership goes beyond just products and services and include Beyond Code programs designed to help you drive new value and get the most out of your mainframe”, which means (amongst other things) helping you build a suitably skilled workforce; and

WatchTower AIOps platform. “WatchTower is not about replacing IT operators – it’s about augmenting your team with actionable insights and fast, automated remediation to prevent issues from becoming outages. You can introduce WatchTower capabilities to your mainframe incrementally, using the tools you already have – shifting focus from reactive recovery to proactive avoidance according to your needs and schedule”, which means, partly, getting more value out of what you own.

I am not sure exactly how the VMware division will implement this sort of thing for its customers yet, but I think that it will have to.

A second consequence is that there will be an opportunity for vendors with an extensive small-customer community, especially, to develop VMWare competitors and, since its largest customers probably won’t want to, or need to, adopt such solutions, Broadcom may not mind about this too much.

Which brings me to StorMagic, which has developed what it calls “the most cost-effective HCI [HyperConverged Infrastructure] solution for the edge”. Its SvHCI is full stack (based on KVM, Kernel-based Virtual Machine, an open source virtualization technology built into Linux), is about half the price of VMware, and is fully supported 24x7x365. It is specialised for edge computing and small to medium-sized business environments, using only 2 servers – so you would expect it to be more cost-effective than full VMware in these environments. SvSAN is the storage software layer for SvHCI.

According to Dan Beer, StorMagic CEO, “This solution is founded on the same tried and true SvSAN code we have been delivering to customers for more than a decade with over 50,000 installations around the world. With SvHCI, we’re helping end users transition from costly, overengineered, overprovisioned software running on VMware to our purpose-built and dependable solution, saving them up to 62% on software costs alone.”

StorMagic’s long history with VMware and its research amongst its own customers suggests that about half will move off VMware to its new product quite quickly – we shall have to see what actually eventuates. According to StorMagic, its customers really do fear that Broadcom is moving the emphasis of VMware towards the world’s largest enterprises and that it may be less interested in small customers using VMware in edge-computing applications. This fear is driven, in part, by Broadcom VMware making all its partners re-apply for partnership (although it eventually asked many of them to rejoin anyway).

In summary, we are in interesting times for VMware – as is usual during any merger/acquisition situation. Broadcom will need to demonstrate that it wants long-term win-win relationships with its new customers – and get these customers to trust them to deliver these. I suspect that it will manage this in the end but that there may well be significant changes in its customer base – continual change is the only constant on the Mutable world. In the meantime, I was rather impressed by the StorMagic edge computing story and I think it may well profit from any uncertainty surrounding VMWare at the moment.