After Broadcom acquired VMware for $61 billion, "rapid transition from perpetual licenses to subscriptions" will follow.
On Thursday's Broadcom earnings call, Tom Krause, president of the Broadcom Software Group, announced that rapid transition from perpetual licenses to subscriptions is expected to happen soon.
According to The Register, Krause was asked how the semiconductor giant plans to deliver on its guidance that VMware will add approximately $8.5 billion of pro forma EBITDA to Broadcom within three years of the deal closing, a pretty significant growth given VMware currently produces about $4.7 billion.
He said that subscriptions was the answer.
Broadcom To Invest in VMware's Key Product Portfolio
Krause said that he is pleased to be acquiring a sales organization and channel relationships within the software game. He said that Broadcom is planning to invest in VMware's key product portfolio.
Broadcom's narrow sales efforts reflect its belief that CA Technologies does best when focused on Global 500 companies through direct relationships.
Broadcom plans to nurture VMware's 300,000-plus customer base, according to Krause and Broadcom CEO Hock Tan. This move to subscription-based licensing will apparently happen over the course of the next few years.
"We will make sure they are well supported. This is a business base that we will grow." Tan said.
Channel partners will apparently get the job as Tan said that they don't want to walk away from the channel and they want to embrace it.
"Whether it's perpetual or subscription, frankly, it's the same. We are, in a sense, restructuring the contracts from perpetual to subscription," Tan further added.
According to the Register, due to the licensing shift, VMware may also experience slower growth in the short term.
With R&D to benefit as a result, Krause said Broadcom is willing to live with lower margins for VMware than it expects from CA and Symantec.
He pledged ongoing investment and innovation for VMware's core infrastructure products, naming vSphere, VSAN, vRealize and NSX as the subjects of ongoing love and attention, as per The Register report.
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What Acquiring VMware Means for Broadcom
According to Tan, buying VMware will mean Broadcom gains another thousand or so big customers to work with. He added that the virtualization giant will allow Broadcom to help users manage application lifecycles from development to infinity and beyond, The Register reported.
Tan expects VMware's portfolio to help companies with complex IT fleets to modernize apps and consider public cloud migrations more easily in the shorter term. However, since Broadcom's big customers are mostly highly regulated entities, he feels that private cloud will remain a big opportunity for VMware.
The CEO also suggested that CA Technologies' developer tools will complement VMware's Tanzu portfolio.
However, Michael Warrilow, Gartner research vice president for infrastructure software, who covers VMware, told The Register that he advised customers to "proceed cautiously."
Because Broadcom has increased bills for acquired companies' wares in the past Warrilow said customers need to get commitments on VMware's prices.
He also advised VMware customers to start contingency planning.
Moreover, Warrolow suggested that until Broadcom's intentions can be better understood, customers considering VMware's Tanzu cloud-native application development portfolio should "stop" their explorations.
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