VMware Acquisition Close: Q&A with Hock Tan, President and CEO, Broadcom – Six Five Insider

By Patrick Moorhead - November 22, 2023

On this episode of The Six Five – Insider Edition, hosts Daniel Newman and Patrick Moorhead welcome Broadcom’s Hock Tan, President and CEO, for an inside look at the future of a combined Broadcom and VMware, the company’s private and hybrid cloud strategy, security, and more.

Their discussion covers:

  • What to expect from a combined Broadcom and VMware and what the company plans to focus on throughout this next fiscal year
  • Broadcom’s private and hybrid cloud strategy and what role VMware will play in furthering that strategy
  • The impact of the VMware acquisition on Broadcom’s customers, and how what it means for the future of the private cloud
  • How the inclusion of VMware’s services, will help Broadcom’s customers navigate challenging security issues
  • How Broadcom plans to incorporate VMware’s existing partners into Broadcom’s robust partner ecosystem and what VMware partners can expect in the coming months

You can watch the full video here:

Or Listen to the full audio here:

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Transcript:

Patrick Moorhead: The Six Five is live at Broadcom headquarters in San Jose, California. It is deal close day between Broadcom and VMware. It’s an historic day, Dan, and I just am super excited that we’re part of this day.

Daniel Newman: Yeah, it’s great to be back. Pat, we have been chronicling this journey for a long time. We’ve had conversations with numerous folks across Broadcom and VMware during this time. Pat, this is a mega deal. It’s a huge, huge moment, and I also am very excited to have the chance to be part of this historic moment.

Patrick Moorhead: Yeah, and let’s just jump to our very special guest here. Broadcom CEO, Hock Tan. Hock, it’s great to see you, and gosh, it just feels like it was yesterday when you were kicking off the Six Five Summit. So, thank you for coming on.

Hock Tan: Thank you. Thank you for being part of this exciting day.

Patrick Moorhead: Absolutely.

Daniel Newman: Yeah, it’s a really big moment, and I think there’ve been those that saw this coming to fruition and happening, Hock, and there were those that said, “It’ll never happen.” But here we are, and it’s happened. It’s a deal day. I think everyone out there, now that it’s done, wants to kind of hear from you, what does the deal being done mean? What’s the next thing? What’s the next steps for Broadcom and VMware, and what should people expect over, say, the next year?

Hock Tan: Well, getting this deal to the finish line took a while. It was a marathon, but we figured we’ll get it done. That’s why we started this journey. And, but now that we have gotten to this milestone, and I call it a milestone, I think here now starts the hard part. We now have to generate this return on this monster investment we are making, but I think it’s all going to be good.

Patrick Moorhead: Yeah. So, super exciting, Hock. One of the key parts of your strategy and some things that I really liked and admired what VMware was doing was around multi-cloud, or basically running cloud workloads anywhere. On-prem, at the edge, in the public cloud. First question is, how does that strategy get executed on? Will it change, and also, will Broadcom hardware be a part of that multi-cloud strategy?

Hock Tan: That’s a whole list of questions.

Patrick Moorhead: I know, I know.

Hock Tan: Let’s start with a-

Patrick Moorhead: I think I asked you three all at once.

Hock Tan: … Can we do it in little bits at a time? But let’s start with the first one.

Patrick Moorhead: Exactly.

Hock Tan: No, VMware is the whole concept of cloud, and VMware is one of those few companies, technology companies, who can really claim to be part of the cloud, simply because of their core technology dating back many, many years. They were one of the pioneers in developing, creating this stack of software that can create a virtualized environment in a data center. And what that represents is, instead of what you see here today which is pretty much in data centers, in enterprises, a very complex makes environment, where while you try to optimize best of breed in each particular component of compute, networking, storage, when you try to put it together, it doesn’t work. It doesn’t work very well, not that resilient. And what you do by creating this virtual or abstraction of diversity of hardware underneath, which is what virtualization is and the technology VMware has, is you basically make the environment into what you call a cloud. You make it no different than what the hyperscale is doing, right? And except now, you can do it on-prem and you can take it the same stack of software into any of the public clouds, and hence the concept of hybrid on-prem-

Patrick Moorhead: Right.

Hock Tan: … and in any public cloud of choice, or across multiple public clouds to create the concept of multi-cloud. And frankly, I think VMware is one of those few people out there, few organizations out there who can make that happen.

Patrick Moorhead: Yeah, it’s interesting. I mean, today, enterprises are essentially standing up each individual team’s full stacks of software teams to address every singular cloud. And when I talk to them, they do say, “There’s got to be an easier way to do this.” There’s got to be a way to orchestrate those workloads, have them be secure, be able to even move workloads where they need to. I have yet to talk to a Fortune 500 enterprise that is not using multiple clouds today, but the tools just aren’t there. On the hardware side, will there be any integration between Broadcom hardware and VMware hybrid cloud or multi-cloud software?

Hock Tan: Not really.

Patrick Moorhead: Okay.

Hock Tan: Because see, this whole concept of virtualization, which is the core to VMware, is really to become hardware-agnostic. Basically, data centers have a diversity of hardware from whether it’s compute, networking, storage, anything else that ties to it. And the whole idea of the technology of virtualization is to create this abstraction, abstract in software, what’s the underlying huge, as I mentioned, a diversity of hardware. So you really try to be agnostic on hardware, and it should be. And in fact, VMware should create its products to work across as many kinds of hardware as you possibly could.

Patrick Moorhead: Great.

Daniel Newman: So, I want to shift a little bit to talk about innovation. So, we had the chance, we spent some time with the VMware team at Explore in Las Vegas recently, and I think we were both pretty blown away by some of the innovation. We saw some of the largest AI leaders in the business, including Nvidia and others, private AI and strategy, Hock. I mean, you were showing, VMware was showing lots and lots of promising innovation. But the market is obviously interested because of the perception of how Broadcom approaches innovation and perhaps how VMware and how they invest in R&D and how you invest in R&D are different, and I think people are trying to reconcile. Can you talk a little bit about how you see the innovation continuing now that this deal is done, and what you think about those plans and how you plan to maybe amend them?

Hock Tan: Well, there’s a cost similarity. The cost similarity is we’re both very technology based companies, VMware and Broadcom. Now that we are one, its convergence is a very aligned thinking because it’s still about getting very talented pools of engineers and developing technology that your customers, that your world can utilize. And in the case of Broadcom, that’s always been the case, and VMware always has been. But I tell you the biggest thing we’ll do upon this combination of the two companies, particularly where VMware is concerned, is focus and execution. Focus, talking innovation from a viewpoint that, “Hey, let’s build up this… Let’s build, it already is there, but let’s deploy.” Make it easy to deploy among its many customers this whole stack of software that enables you to virtualize and even run containers for modern applications in this same stack of software, the same platform.

It’s all about focusing and getting it there. The true innovation we believe will come on when you add services, a catalog of very rich services on top of this stack of software, that virtualized environment. Because once you virtualize it, intrinsic in it is the ability to then really push the envelope on innovation to create this rich catalog of services. Example, we’re talking about being able to run modern applications on containers much better on the same software stack, on the same platform, to put in advanced security services. Unlike having to create parametric firewalls, you can build firewalls intrinsically within VCF, as we call the VMware Cloud Foundation stack. You can make it happen. And that’s just the beginning of a whole series of it. And you heard in VM Explore in Las Vegas, it can run very effectively GPUs for AI applications. And this will keep proliferating as we focus R&D, those great talented R&D onto this particular space.

Patrick Moorhead: Two big takeaways for me on that. First of all, one of the hallmarks of Broadcom’s success has been, and these are my words, but really valued innovation. It’s innovation, it makes a difference to the customer’s core business, and Broadcom to the T has been delivering that forever. And that’s really an antithesis to what I’ll call technology for technology’s sake. Hey, it’s cool technology, but it really doesn’t change the game for our customers. And the second thing is this wrapper of services, and it’s incredible when I talk to enterprises how they want things as a service. I mean, some people still want, “Hey, we want this license and we want it in perpetuity,” but the majority of people realize that the technology is moving at such a pace that to keep up with it, having these services that they can subscribe to is a better, and I might call it a more mature way to go. And the same thing’s true for security. So, I want to shift to a security question. So, we have nation state budgets, we have hacking as a service. I mean, the threats literally, it sounds like a meme, but they just keep getting bigger. And I’m curious, when you look at one of VMware’s specific products and services, NSX+, right. which was upgraded at Explorer, how does that improve an enterprise’s security posture?

Hock Tan: Well, it’s almost a natural extension of this whole virtualized stack and creating this abstract data center in software, simply because typically, in any data centers, in any infrastructure, enterprises thing in terms of protecting their data centers, their environment from external elements. And so, they built up, as I mentioned, firewalls, just for what they call “north-south” firewalls against external intrusions. Gradually, it’s coming to be understood as, well, maybe you can do that, but maybe it’s also inevitable things can get in. And when they get in, do you have almost intrinsic protection against a malware entering your data center, your infrastructure, and then running rampant?

And the nice thing intrinsically, back to this, of virtual environment is you can create, as part of the environment, east-west protection. Firewall, east-west protection, we call it distributed firewalls as part of NSX+. And that is a new growing phenomenon that’s coming in, that while you may do all this north-south in the past, when things get in, you better think about how you protect east-west internally within the data center. And that’s one of the biggest things that is coming on, and that’s one a lot of our enterprise customers are looking at very, very interestingly. So that in effect, before I even came on the scene, much of this purchase of NSX, the networking virtualization component, is for distributed firewalls.

Patrick Moorhead: Right.

Hock Tan: Not just for the overlay to create a virtual environment.

Patrick Moorhead: No, I appreciate that.

Daniel Newman: So, companies are all up against a pretty considerable architectural challenge, Hock, and that is the multi-cloud, and we’ve kind of talked about it already through a few lenses. The lens of companies that have lots and lots of on-prem have a lot of legacy with VMware. And then, of course you have companies that were more born on cloud that have now had to go back to prem. And I think everyone’s kind of landed, ultimately, that there’s going to be some distribution, and that distribution means every company’s hybrid. Most companies end up being multi in some capacity. And of course, VMware has been addressing this challenge with Tanzu, with trying to enable companies to have a rapid expansion to multi-cloud solutions, and of course running cloud native applications. How do you see this, I am sensing from listening that you see the private cloud is very important. You see the need for companies to be able to leverage the public clouds, of course. But how do you see the evolution taking place of cloud native and Tanzu, now that this deal is done?

Hock Tan: Let me rephrase. I understand what you’re trying to ask, but let me rephrase multi-cloud this way.

Daniel Newman: Yeah.

Patrick Moorhead: Yeah.

Hock Tan: And this problem. What VMware will be doing and has started doing is to create a whole stack of software, from compute all the way up to management, or what I call, we call it VCF or VMware Cloud Foundation. It virtualized the entire data center, totally. And this same stack, or this stack that it creates on-prem, equipment on-prem, the private cloud, this same stack could be subscribed and stood up in any of the public cloud, as I mentioned before. And this same stack will run, the applications that are created on this tank on-prem by any enterprise, those application workloads can move to any pub cloud. It’s totally portable. Now, you want to take that to the extreme example? The ideal is, if you are an enterprise and you create all this application VMware and not VCF stack, you could, in the future, move these workloads, migrate those workloads that you may initially run on-prem in your private cloud, to any public cloud. And back again. And that is the true definition of multi-cloud. It’s a mix of both hybrid, private, public, any of the public cloud of choice, all moving across public clouds, all because all these public clouds would have the ability to stand up and run the same stack of software. So. That’s the only, this is as far as I understand, short of open source, the only company out there that’s able to create this kind of ecosystem.

And by the way, they’re not just creating it in public cloud and on-prem, they’re hosting it or being hosted by several hundred managed service providers, MSPs out there who do call law but also provide services. And these guys are also standing up VCF. So, you can think, if you are an enterprise and you’d write your application on VMware, you can run it on-prem, you can run it in any other public clouds, and you could possibly move it to any hosted environment operated by MSPs that runs this. And the basic reason for it is the business model of VMware is to try not to be a cloud company, operate a cloud, but to enable service providers, companies, to create their own cloud.

Daniel Newman: In short, it’s the ability for these companies to realize the benefits of both private and on-prem infrastructure, as well as public cloud infrastructure. But to get the security, the data portability, to have all those things that companies are looking for, regardless of sort of location, and then create one experience?

Hock Tan: And, yeah, and with a consistent management across all this. And by the way, we’re doing it not just to run virtual machines, but to also support a platform for containers, that’s hence Tanzu. So, that same platform can run both virtual machines and containers.

Patrick Moorhead: Yeah, the hybrid multi-cloud is a reality. The only question is, how do you most efficiently do that? And I see companies acquiring other companies, and they’re trying to figure out how do we integrate? They’re on different cloud platforms. And I think one of the benefits of standardizing on the VMware platform would be just kind of this ultimate flexibility, wherever you want to run it and wherever you want to be covered in the future. So, it’s the reality, and I love this opportunity. I think I’ve written more about the hybrid multi-cloud for VMware than anything else at this point. I’m pretty excited about it, and I’m pretty excited about this with Broadcom now.

Hock Tan: Well, since, while waiting for this deal to go through over 18 months, spend my time talking to a lot of CIOs who are customers of VMware and Broadcom too-

Patrick Moorhead: Right.

Hock Tan: … on a different line. And they all face the same problem. They’re trying to find a platform where they can create workloads that are modernized, but also be able to run across multiple cloud environments. And frankly, it’s a great opportunity we have today to create that multi-cloud environment for these enterprises because they don’t want to be locked up in each particular cloud or go simply cloud native. And really, frankly, VMware is about the only solution out there that can enable them to both run on-prem and migrate those same workloads as time progresses, conditions change, to their public cloud of choice. Now, whether you do it, that’s a different matter, but they do want that optionality.

Patrick Moorhead: Exactly. So I’d like to shift the conversation to partners, and partners have been a big part of Broadcom’s success, and I know for VMware, it has as well. What should VMware partners be expecting over the next 60, 90, 120 days?

Hock Tan: Well, partners is a very broad term, as you know.

Patrick Moorhead: Sure.

Hock Tan: And they have very broad… they bring to the ecosystem different values, different benefits depending on what they do. So, we see in VMware, as in any software enterprise, multiple categories of partners, from OEMs where you partnered to provide engineered solutions like hyperconverge, as VMware has done, VxRail as in Dell, that are very purposeful, sole hardware, software engineered compatible to certain applications. Then you have another kind of partner which is more related to MSPs, managed service providers I talked about earlier. And that probably extends to include public cloud, the larger cloud service providers as well as the smaller MSPs. And these are partners who, by standing up infrastructure, that are able to run VMware workloads very efficiently with add-on services, and you see that particularly in a public cloud environment, are basically a means for VMware to offer many of its, a whole slew of customers who instead are wanting to own their own infrastructure, hardware, software, and everything, prefer to take it as a service.

And I like to call it VCF, VMware Cloud Foundation stack as a service, whether it’s in a public cloud or in an MSP environment. And those are partners, real partners. And in helping these partners and the enterprises who decide to subscribe to VCF, which is a very tricky set of tools to put it in place, we have embarked on bringing on critical vast value added resellers with the willingness to invest in services, in talented people to be able to act as consultants, or GSI Global’s system integrators who basically build up and dedicate teams of people to a practice of deploying and operating VCF in environments, whether it’s MSPs or in enterprises. And then finally, very importantly, of course, the whole network of distributors and resellers that enables VMware to make its product, it’s a great product, particularly vSphere, one of compute virtualization, to a long tail of 300,000 customers out there. So, we see different categories of partners, and we will focus and optimize their value into our expanded ecosystem.

Daniel Newman: Well, Hock, on behalf of the Six Five, I want to thank you so much for sitting down with us today. It’s been great to have this conversation, great to learn more. Congratulations. It was a marathon.

Hock Tan: Well, the bigger marathon begins.

Patrick Moorhead: Yes.

Daniel Newman: Yeah, absolutely. And we are so excited to stay with you, follow the journey, and hopefully sit down again in a year or so and catch up with you and see how this is progressing.

Hock Tan: I look forward to it. Tell you more in a year. Thank you in the meantime.

Patrick Moorhead: Yeah, thanks.

Hock Tan: Good to be with you.

Patrick Moorhead: Yes.

Daniel Newman: All right. It’s deal day and we are here at Broadcom headquarters in San Jose, California. We are The Six Five and we are excited to be breaking this special opportunity to speak with CEO Hock Tan. But for now, for The Six Five, we’ll say goodbye. Check out all the episodes that we have here at Broadcom during this deal day. We’ll see you soon.

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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.