VMware Explore 2024 | Bryan Smith | Expedient

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Bryan Smith

CEO

Expedient

Navigating VMware licensing changes: How Expedient and service providers are adapting to Broadcom’s acquisition

The cloud and enterprise software landscape is undergoing significant shifts, driven by rapid changes in VMware licensing changes and service delivery.Broadcom Inc.’s acquisition of VMware was anticipated, but the company still had to adapt to the changes that came with the $63 billion deal. Expedient had to rearchitect between March and September 2024 after learning of changes in January, requiring an all-hands-on-deck pivot, according to Bryan Smith (pictured), chief executive officer of Expedient.Expedient’s Bryan Smith talks with theCUBE about VMware licensing changes.“We knew it was switching to cores from the consumption of [random access memory] for a service provider,” Smith said

play_circle_outline Survey Reveals VMware Workload Migration Trends; Timeline of Changes and Adjustments in 2024

play_circle_outline Comparing TCO of Staying with VMware vs. Moving to Alternatives: Benefits of VMware Cloud Foundation VCF

play_circle_outline Navigating VMware Changes: Multi-Tenant Impact, Cloud Provider Challenges, and Automation for Price Change Responses

play_circle_outline Strategic conversations driven by VMware's changes

play_circle_outline Maximizing TAM Growth with Broadcom's Strategy: Leveraging Partner Support for Profitability

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Bryan Smith | Expedient

Bryan Smith

CEO Expedient

Rob Strechay, CEO of Expedient, discusses the impact of the Broadcom VMware acquisition on their business. They adjusted their strategy by switching to cores from RAM consumption to minimize cost increases for clients. Expedient found that 70% of clients chose to stay with VMware and 30% moved to Nutanix. They separated disaster recovery clients from production to manage costs effectively. Providing outcomes, rather than worrying about underlying components, helped clients navigate the changes. Migration to VMware Cloud Foundation was smooth due to their expe... Read more

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What was the timeline and process for making adjustments after Broadcom's acquisition? add

What factors should be considered when determining where it makes sense to stay and where it makes sense to move in terms of TCO analysis in regards to using VMware's VCF? add

What was the reason for the 15% price increase for some customers using cloud services? add

What is VMware's roadmap and target customer for their capabilities in building an RDS type of environment? add

What potential impact does Broadcom's strategy and focus on the highest pinnacle group have on their market position and profitability compared to other companies? add

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Bryan Smith | Expedient

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>> Hi, everybody. Welcome to day three of theCUBE's coverage of VMware Explore 2024. I'm here with Rob Strechay. John Furrier flew out last night on the red eye, has going to the US Open for another event with our community. We are going deep. A lot of people come in, they do the quick hits, they watch the keynote and they leave. theCUBE, we go deep, we extract the signal from the noise. There's a lot of trauma and angst and confusion in the ecosystem, particularly the partner ecosystem. And we're going to dig into that and really cut through the noise with Bryan Smith, who's the CEO of Expedient. Bryan, welcome back to theCUBE.

>> Appreciate you having me on again.

>> Yeah, thanks for your time. And it's interesting, this is quite a different VMware Explore. I got to say, last night I was looking for you guys at nine o'clock. There was kind of nobody around, walked by the old circle bar. People were, I guess in bed getting ready for today. So, I feel great. I wasn't up until 2:00 AM or worse. But anyway, Bryan, take us through, okay, we've lost the lights but we'll keep going. So, what's your take on the whole Broadcom, VMware situation? How did it affect you guys? Give us the scoop.

>> Yeah, I'd say the easiest is it's been an emotional roller coaster I think for not only us and the partner community, but a lot of people. So, the initial reaction was the amount of change, the speed of change, and it just really... People weren't sure how to react, but we pretty quickly really regrouped and pulled back to say, "Okay, with the new license model, with the new options, with the new capabilities, what does that mean? Are there ways that we can make adjustments that put us in a better situation than where we were?" So, we quickly did that regroup, rearchitected some pieces and we saw to do a minimal increase to the clients, but less than 5% where you've heard, I think the storyline is much different than that for most and on our go-forward even better than that.

>> So, can you take us through the timeline? So, this is May of 2022, you knew Broadcom was going to make the acquisition. You said, "Okay, it's going to take a while." You kind of knew what was going to happen, $63 billion. Hock Tan came on to The Wall Street analysts and said, "This is what I'm going to do." So, there was no surprises here, but at the same time you had to, as the head of the company, you have to think about, "All right, what does this mean for us?" So, you had, I don't know, what? A year and a half to figure that out. And then November 2022, the acquisition gets closed and they didn't waste any time making changes. So, what was the timeline for you guys? How did you navigate through that? What changes did you make? How was it that you were able to absorb the changes, what seemingly is better than some of the other companies?

>> Well, the timeline was nowhere close to what you're laying out that we found out the actual changes in January of this year. And so, we essentially had to re-architect and re-plan the platform between January and March and then work on executing between March and September. So, it's been all 2024 that we've made all of those changes and pivots.

>> So, you knew in November 2022 that something was happening, but you didn't have the details-

>> No....

>> the devil was in the details. You didn't get those until January and then you had to pivot your entire team. That was like all hands on deck, I presume?

>> Absolutely.

>> Okay. So, what actions specifically did you take to prepare and what was your message to customers during that transition period?

>> Well, the first part was we knew things were changing, but it still wasn't documented until the March-April timeframe. So, we could communicate what we believed was going on and we could start making adjustments. But the biggest thing that we saw was we knew it was switching to cores from consumption of RAM for a service provider. So, we could start doing the math of what that required and we're a little bit different than some of our peer companies where 80% of our platform is actually multi-tenant, 20% private. So, we have a lot more options to make adjustments and control versus everything was just private. So, the biggest thing we did was we had to separate the disaster recovery clients from production so that we're not consuming the licenses as a service provider until they actually fail over and start using it. So, it's one of the big benefits a client can get that there's no change or no price increase on DR in that type of situation.

>> So, when you heard, and then Rob, you got to jump in here, but when you heard about the changes, what did you do? Did you call up your Broadcom relationship person and to have an interesting conversation? Probably like most did, but I'm sure you weren't able to change their mind. So, that's the point. That initial shock led you to, "Okay, now let's go. Fire drill."

>> Yeah, I mean I think our reaction, the most common term I hear people use is pissed. So, I think that was a common theme with people of where it was, but I think our level of that lasted much shorter than most because it was like, "Okay, how do we make adjustments?" And I will say that Hock gave us an audience. So, we had a one-on-one with him early in Q1 to talk about what it was specific for a cloud service provider, what it meant? And from there, adjustments actually happened in the program that actually made it a lot more usable, workable so that we didn't have to make other adjustments. It was some really quick changes.

>> Was that a one-way conversation or was it a give and take?

>> No, it was definitely a give and take because if I said something that he disagreed, we would challenge each other. And if you're willing to back up your facts and stuff and have data and explain what the impact and cascade it all the way to the client, then those are the points where it really mattered.

Rob Strechay

>> I think this is what we've been hearing from others is that Hock really does very large pivots very, very quickly and then there's fine-tuning that happens almost like bottles and stuff like that. And I think one of the things that I found interesting in some of the conversations was again that when we see people haven't gone through this like the customers we're talking to that are here, a lot of them aren't where you are. They haven't really gone through and internalized the trauma and gotten to the other side yet. And in fact, you guys are surveying some of them here at the booth and I think you have some interesting qualitative stats that have been going on. Why don't you tell the people what kind of the breakdown between hyperscaler, other hypervisors and staying VMware and how that's shaking out?

>> Yeah. So, at our booth we put in an interactive display where people could just tap the touchscreen to say... We asked a simple question of where do your VMware workloads live in the future? And they could choose between, we're going to stay on VMware, we're going to move to a hyperscale, or we're going to move to an alternate hypervisor. And essentially 15% consistently say that they're going to move those to a hyperscale. And then it's fairly even split that say that they're going to stay on VMware and about the other 42% say they're going to move to or investigate an alternate hyperscale or hypervisor.

Rob Strechay

>> But what are you seeing in actuality because I mean again, this is now since January, you've had to make your adjustments to your infrastructure to be able to, and having worked with Expedient on the DR side, I understand how that's architected and some of the costs that could go with other vendors who are doing it differently. How do you look at it as a way that you've gotten through the trauma and been able to keep it to, like you said, only a 5% increase, yet people who maybe are not sweating the asset of that server are seeing much greater cost changes in that?

>> Yeah. I'd say that we have some unique perspective because we're not just the highest tier partner with VMware. We have the same highest tier of cloud service provider with Nutanix. So there's the sentiment of what we're going to do, but then there's the action. And we've seen 70% of people stay on VMware when they actually are moving forward and 30% have chosen a Nutanix platform when they're looking at cloud options. And some of the changes, we're starting to investigate DR first because you can move the fastest there because you're not disrupting the business. Some of the fastest cost savings that people can have and then it's looking at what are you really consuming or not because most companies are provisioned for about 40% more than they need because they purchased assets that they're going to grow into it over time and they just plug them in and power them on. And so, they need to think about how they architect internally, but then that changes how they monitor, how they do capacity management. There's lots of cascading if you're doing it all internal versus if you move on to a service provider, you're not having to work those pieces, but also you're not making the decision of all the different components underneath. It's more like you could build your own car by buying all the pieces from the parts department or from our perspective, it's like you're trying to buy reliable transportation and so, we give the outcome versus worrying about all the components.

Rob Strechay

>> Can we double-click into those workloads? So, DR is one that's low risk you're saying because you're not actually using it every day hopefully.

>> Right.

>> Okay. So that can move. What else is moving? And I'm really interested in what's not moving. What's the business case to move and to and to stay?

>> Well, a lot of it is if you take the emotion out of the conversation in two ways. One that if you don't incur the big price increase, that removes a large portion of the emotion. But then you saw like, "Well, I didn't like how they treated me," and so there's still some overhang there. Then the second is that we can do analysis and actually show them their data and show them the different risk points that they have and where there's options to really optimize the environment. So, it's going through in a much more factual component in removing all the emotion is how you can accelerate and get to the impact.

Rob Strechay

>> So broadly speaking, if I'm running mission-critical workloads, presumably you're not going to just rip and replace those or move those, right? Because it's just too risky to the business. So, I think we can agree, that's very clearly staying and you're probably better off going all in on the VCF stack than you are trying to migrate. Migrate's an evil word, but sometimes I call them crapplications those are lower risk. Are those the ones that you're seeing moving?

>> Not really. It is really an all or nothing.

>> Really?

>> Yeah, we're not seeing people pick from... I would say that's true with different hypervisors. We'll see people do hybrid that they'll move certain applications to hyperscale and keep VMware or keep something, but we're not seeing people do partial VMware, partial some other hypervisor. It's really been an all or nothing in those situations.

>> I think we were in agreement that the mission-critical stuff's not moving. Is that fair or are you seeing mission-critical work moving as well?

>> Absolutely. We'll see people, like if they look at the environment, they'll make the call to move everything to a different hypervisor or stay on. They're not doing onesie, twosie. It's more that they're looking ways to minimize their cost immediately in the mission-critical, and then playing long-term for what they do.

>> So, if you're running your business on VMware and you've got transaction systems running, are you seeing those moving to a new hypervisor at this point?

>> Yeah.

>> Really?

>> So far this year we've had 70% of the cloud deals we've done stay on VMware and 30% move onto Nutanix.

>> No, I hear you on that, but those are-

>> So that's the entire environment. So, that's full environment, that's not a subset.

>> No, I understand the subset or not, but I guess I'm surprised to hear that they're essentially migrating those mission-critical applications.

Rob Strechay

>> I think it's a different view from a service provider view versus if you're internal IT where you may already be running different hypervisors internally already or different Kubernetes stacks and things like that where when you're contracting, you're probably contracting for one side or the other and keeping it all together for that.

>> You can abstract that complexity is what you're saying.

>> Absolutely. They're essentially owning the applications, the OS up, and we can even do the OS if they want so that all those other components underneath, we do co-manage that. They can log in and twist the knobs and push the buttons, or they can just have us do the entire platform.

>> And do you freeze the applications when you migrate?

>> It feels like a reboot to them because we actually will move it over and they can spin it up in a subnet, different subnet like a test bubble to see that it all works and everything before they're committing the failover. So, it feels like a reboot at the time of the migration.

Rob Strechay

>> And I think one of the things that we've been hearing from customers is that, and I think to Bryan's point was the fact that the abstraction of that, and this is something that it hadn't really dawned on me, it's like, "Okay, if I'm going to go in with the whole VCF stack, I now have to convince my Arista/Cisco guys to take on NSX or to take on the Broadcom networking stack." And for that, it's abstracted in what they're doing. And I think that's got to be a big piece for customers coming to you is I'm just going to focus on the apps in that cohabitating space there.

>> Well, and specifically when people talk about their cloud transformation and stuff, a lot of that is about how they're modernizing how they behave in their applications. So, if you take out all the noise of all the day two operations and the firefighting, remove all of that, people really get a lot of cycles to focus on the application side. So it accelerates the speed that actually get the transformation benefit.

Rob Strechay

>> Yeah.

>> So, VMware is making the case forcefully and they've got data to back it up that the TCO of staying and going all in on VCF is attractive, more than attractive, it's cheaper than the cloud. They're making that case, you've heard that frequently. But also, they're sharing data that it's significantly less expensive than other alternatives. So, when you do the TCO analysis, it's never black and white. There's always a way to break the TCO, we know this. So, where does it make sense to stay and where does it make sense to move in your experience?

Rob Strechay

>> Yeah, I guess I think I have a pretty good sense on the TCO because I understand my cost per unit on everything.

>> Right.

>> So-

>> Most customers don't.

>> Right. Of all the different sub-components that make up the solution. So, if you are using at least three of the different components in VCF, that's kind of the piece where we've seen that you're getting the value. So, as we re-architected, like I said, we passed through less than a 5%, but the new platform we're building has a lower cost basis than previous. So, by using the other components, we actually are recognizing and seeing that option.

>> And my understanding is they've... Help me get this right. My understanding is they've done the hard work that it used to be if you were in vSphere and you got to go to VMware Cloud Foundation, it was a migration, a rip and replace. They've done the work to make that basically transparent. Is that nine? Is that-

Rob Strechay

>> Yeah, it version nine. And-

Rob Strechay

>> Okay. Actually that's even not out yet.

Rob Strechay

>> It was in... Well, it's in I believe five, what it was 5.2, the previous-

Rob Strechay

>> It's in five two. Okay. So-...

Rob Strechay

>> version. So, they've done a lot of the hard work to make sure that you could migrate between the couple. But I think part of it is you're just taking on much more. If you were just vSphere and you weren't using, to your point, all the two or three other components, that was a big... If you weren't using vSAN, it's a big migration. But if you're going to a service provider, you're bringing your data, you're bringing your apps, you're bringing all of that up there. And so, I think to Hock's point, when he decided not to go cloud two years ago with the Broadcom TCO, and he talks about this all the time, he said, "Basically it's because we run our assets at 92% efficiency or fullness and keep that factory." That has to be a factory and what you're able to achieve because you know the unit cost, you know inside your multi-tenant environment. How is it impacting the ones that are not multi-tenant? I think that's the question I have because I think that for those folks, it's got to be a different story.

>> Yeah. I mean, for those folks, we had about a 15% price increase. So, it was still nowhere close to the percentage you're hearing other places, but it was definitely a bigger increase for those. And the biggest reason for there is you have more overhead because the redundancy servers that are in the mix previously in a service provider side were zero because there was no RAM being consumed. But now we pay for those cores.

>> And is that unique to Expedient specifically and generally cloud service providers or I would expect not all customers are going to see that advantage, that benefit of a relatively small increase?

>> Well, right, because I mean there were still components that we had to change on the back end to make those things work, such as writing automation that auto-adds and removes hosts into the stack so that we're automatically doing capacity management instead of having to... So you can run at a higher capacity but not run the risk of running up against the capacity threshold of auto-adding and removing things.

>> So, VMware's, again, these are the averages of the averages with a lot of fine print. Okay. They're saying 55% savings on infrastructure, 31% on facilities, 42% increased labor productivity. This is with VCF relative to native public cloud, overall they're saying 40% savings. So, I guess going on-prem to on-prem with VCF you have 51% savings and the cost is 40% more attractive than public cloud, I'm assuming, I mean, I don't know if that sounds reasonable, but I'm assuming that there's an assumption in there that that's if you are using at least three components.

>> That's if you're using everything, I believe.

>> This is probably if you're all in.

Rob Strechay

>> It's all in.

>> Okay, which is not the common, I mean, what percent of the customers are using everything? I mean, it's got to be-

Rob Strechay

>> Well, we know that there's less than 25% using at least two.

>> Yeah. So, there you go.

>> Wow. Okay.

>> Okay, so this is the playbook.

Rob Strechay

>> Yeah.

Rob Strechay

>> It's a long term.

>> Right. This is the reality. We're going to deliver this value, but there's a knothole that they got to get through. And if in fact the migration is that easy, that's obviously a risk, but it's not that easy for all customers. It's easy because you've got that-

Rob Strechay

>> Yeah, we've done thousands of them. I mean we do it every week.

>> Yeah.

>> And that's part of the benefit is if you want to get there, you can spend nine to 12 months doing it yourself or you can be there in 30 days.

Rob Strechay

>> But I think this is also where it helps, and it is part of Hock's plan and we've heard this week, is that I want the partners to be able to do the services and build services around VCF and make revenue there. And he's been very clear that there's certain things he wants VMware to do, and professional services is not one of them. And I think that's where this makes sense.

>> For a cloud like-

Rob Strechay

>> Yeah. But it's when he looks at it, he goes... His cloud comments and we know because we heard through the grapevine that it pissed off Microsoft and Google, his comments already, but we're more aimed at the hyperscalers. And I think that again, this part of it, there's still money to be made and obviously, and there's still things to be -

>> I mean, in his keynote, he said, "You basically getting AWS on-prem." Now, in the analysts session, he wasn't as forceful on, I don't want to say he backed off that, he didn't. He said, "You basically get substantially equivalent function as you would in AWS." And when pushed a little bit, he said, "Look, we're not going to replicate all 300 services that they have. We're going to cherry-pick the top 30."

>> Sure.

>> And so, I guess my question to you, Bryan, is could you support that statement that it is substantially similar to an AWS experience or maybe even better in some cases?

Rob Strechay

>> Well, I think he's got a great example here because he's going to be leaving us and going and actually talking about private AI and how they're doing private AI.

>> Yeah. So, to your statement, I think that that's where they're trying to get to. Today, it's going to be more efficient for running VMs or consistently consume container environments that from performance and costs, definitely is a better platform for that. As you start using some of the different microservices and stuff, I still think hyperscale is at an advantage right now, but that's what they're trying to catch up to for some of those components.

Rob Strechay

>> What are your customers doing for the data stack? This is something that's been bugging me. I see that as a gap in VMware's strategy. I know they got Tanzu and that's their developer play. Okay, check that box. That's what they've got. Good, bad, ugly, whatever you can say about that. They at least have a play there. Their data play tends to be MySQL, Postgres, Greenplum. It just doesn't seem to be hyperscale equivalent. So, what are your customers doing there? Are you helping them bring in their own data stack? What's that look like?

>> Yeah. Well, I think that's what they're trying to build too, because if you talk to VMware about their roadmap, it's to add more capabilities so you have more of an RDS type of environment. So, our target customer is probably a little down the stack from some of the people that are really heavy users in those environments. So, mid-market, small enterprise, but it's the people that want to have access like you were talking on the AI side. It's how you help guide them to different platforms or connect to their data where it's today is how we've helped people because we know that they're not going to just be able to move everything. So, we've started first with connect to where it is, make it available. Once you prove that that's the data you need, for example, for AI, then building the automated pipelines that move it into AI-ready storage in a vector store so that they can leverage, use it, and then put all the security controls and stuff around it.

>> So, from your standpoint, how would you summarize the mid-term effect on Expedient in terms of this change? Is it a positive, a negative, or a neutral?

>> Yeah, I would put it in the highly positive. And the main reason is these were workloads that sat in the background that just worked that nobody wanted to talk about. They only wanted to have a conversation of the new shiny thing they were building, and it forced the conversation to be had no matter where it goes. They have to have a conversation of what do we do with this workload and ask a lot of questions. And when you do that, it uncovers a lot of areas of potential inefficiency or things that we're hiding in the background. So, just by having the conversation has been incredibly positive from our perspective.

>> And as a CEO, you understand markets and total available market and TAM expansion. When you step back and look at the strategy that Broadcom is affecting and you think about the ecosystem and the dollars in that ecosystem, it's enormous. I mean, it's tens of billions of dollars, maybe 30, 40, maybe even 50 or more billion. So, that TAM doesn't go away. It probably continues to expand. VMware's TAM or served market could contract, but the profitability of that is going to be substantially higher. Is that the right way to think about it? And that is a highly positive for you guys.

>> I believe so. And especially the way that they've changed the partner market by focusing on the highest pinnacle group and forcing that down, they're moving a lot of the level one and level two support for the end user to us. So, it makes it more efficient, but then that drives clients to us as well.

Rob Strechay

>> So, anyone who doesn't have 60% or 61% operating margin, this is great for them, which is by the way, nobody except Broadcom. And so, if you're running like a normal business, this is great business for you guys and you welcome it.

>> Yeah, creating that conversation has really put us back into a strategic conversation with people and less of a technology conversation because it's happening at the CFO and CEO level where it's made them wake up and then have a broader technology and direction conversation.

>> Now, Bryan, thanks for coming on theCUBE and helping us unpack all this data. We're trying to get to the truth and it was super helpful. Thank you.

>> Thanks for having me.

>> All right, keep it right there. Rob Strechay and I will be back live from VMware Explore 2024 from Las Vegas. Keep it right there.