Broadcom hands VMware partners 'termination notice'

Existing VMware partner agreements will be cancelled by Broadcom on February 4

Broadcom is terminating all of its partner agreements with VMware resellers and service providers, killing VMware's partner program and sales incentives, and then forcing existing partners to reapply for their roles, according to Broadcom.

Broadcom will tell partners next month whether they will be allowed to continue to sell its virtualisation software.

"Broadcom remains committed to creating value within our combined ecosystem, which has been made stronger with the addition of VMware partners. Effective February 5, 2024, Broadcom will be transitioning VMware's partner program to the invitation-only Broadcom Advantage Partner Program," according to a statement provided to CRN US Saturday by Broadcom.

"Based on recent discussions with hundreds of partners globally, this transition will help our partners achieve even greater opportunities for profitability through simplified bundled offerings and more opportunities for service revenues."

An email to partners on Friday titled "VMware Partner Programs Termination Notice" announced the changes and told partners to "take this opportunity to ensure your company's contact information is correct within the 'My Company' section of the Partner Connect portal home page" as they wait to find out if they can still sell VMware.

Invite-only program for partners

For those invited to join the Broadcom Advantage Partner Program, the email - signed by the Broadcom Partner Program Office - touted simplified partner profitability opportunities with Broadcom's net margin model; compensation for renewals as well as incumbency protection; deal registration discounts with differentiation by program tier; performance-based incentives for renewal business; and simplified certification requirements and free training for all partners.

One VMware partner who has listened to internal briefings on Broadcom's changes and asked not to be identified told CRN US that invitations are only expected to be sent to those reseller partners who make between $500,000 and $1m or more in revenue.

"It is an invite-only program, but if you are in good standing, if you are making good revenue, everything else, I wouldn't be worried with all of this," the partner said. "I think it's very important for everyone to understand that for the small partners, this is going to be quite a challenging scenario. We can only hope that there will be a tier two program where the smaller ones can work with larger ones to get through."

For those smaller partners, particularly the roughly 4,000 VMware service provider partners, "It's going to be a tough Christmas," one source said.

"All contracts are terminated as of the end of January for most, but up until April for Service Providers," said one VMware By Broadcom employee who asked not to be identified. "Only the chosen few will get to join the new program. The rest will no longer be able to sell VMware products."

The employee, who has experience in partner facing roles, said this will only embolden VMware rivals, such as Nutanix.

"Those competitors are actively going after more business from the partners. In my experience, this change is too much, too fast, and will cause defections and a drop in revenue," the employee said. "The most significant revenue drop will be for vSphere. Broadcom is pushing VMware Cloud Foundation. They are pushing bundles that force customers to buy things that they don't need."

Broadcom claims greater ‘opportunities for profitability'

In the email Friday to its 65,000 global partners announcing the changes, Broadcom said resellers and service providers will be able to achieve greater "opportunities for profitability" thanks to a simplified model that focuses on fewer "bundled offerings."

Broadcom said this provides partners with predictable up-front discounting and more opportunities for partner-delivered services revenue.

"Broadcom and VMware are driven by technology and innovation and have a shared passion for, and commitment to, partner profitability and success," Broadcom's Partner Program Office wrote in its email Friday.

"You are now well-positioned to capture substantial growth opportunities for delivering advanced, innovative cloud infrastructure and associated services wherever your customers need."

Broadcom closed its $61bn deal to buy VMware on November 22, about three weeks after the deadline CEO Hock Tan had set. The deal took 18 months to complete and throughout that process, Broadcom repeatedly refused to speak with CRN about the future of the channel under its leadership.

Partners said the announcement, coming the weekend before the Christmas holiday caught them off guard, with one adding they had talked with their VMware rep hours before the announcement and were told nothing.

"They didn't say anything to our team about the change coming," said one who transacts millions per year in VMware business. "Its going to get interesting."