At this year's VMware Multi-Cloud Industry Analyst Summit 2023, CEO Raghu Raghuram and the VMware team shared the advancements in VMware strategy. Across the portfolio, we learned how the offerings are aligning to the company's go-to-market approach.
With 4% year-over-year growth and $13.35 billion in revenue, VMware subscriptions are up 25% year over year. SaaS annual recurring revenue is up 30% year over year. This growth aligns with industry expectation, and the pivot to a subscription business is well underway. Also, growth in subscription revenue doubled over the past three years.
But where VMware is seeing growth in customer environments is where clients are getting more into distributed environments, including increasing investments at the edge. VMware sees itself in a unique position across infrastructure and platforms and multi-cloud deployments. The two main areas of growth and focus for VMware are multi-cloud services and delivering a comprehensive set of infrastructure offerings.
As VMware is expanding its next chapter, it is focused on being the multi-cloud leader, as well as simplifying business and pivoting to be more of a SaaS-based company. This also includes the partner ecosystem as an integral part of the VMware strategy.
Play offense and defense
VMware sees the market in two ways: digital innovation on offense and cost optimization on defense.
The cloud-smart approach provides an answer to the digital innovation, or offense, challenge. It is a promise to accelerate application delivery, accelerate cloud migration and empower employees with the ability to productively access the expanding SaaS universe. VMware claims the fastest way to speed cloud migration is to move from a VM on premises to a VM in the cloud. This makes sense, as not all applications need to be refactored. By encapsulating the heritage application, you enable the seamless movement from different locales.
On the cost optimization, or defense, approach, VMware aims to reduce cloud spending, modernize with hybrid infrastructure and provide zero-trust protection. The focus on an organization's platform engineering, cloud (public/hybrid) team and end-user computing teams will help to achieve this vision.
VMware Cross-Cloud services
VMware Cross-Cloud services offer a differentiated multi-cloud portfolio. With the evolution of applications from PC to web to mobile -- and now AI-powered -- organizations are looking to use the appropriate tech stack to achieve business goals and objectives. VMware is striving to be best positioned to help customers thrive across multi-cloud, data center, edge and device apps.
To simply execution, VMware wants to streamline execution, simplify the portfolio with Cloud Packs and improve customer experience. VMware's customers are moving from a cloud-first to a cloud-smart approach; therefore, streamlined execution becomes important to grow customers across the portfolio. However, not every customer is ready for the complete portfolio. To accelerate adoption, VMware is looking to provide three customer segments:
- Strategic. Customers with a large VMware footprint, a diverse tech stack and modern cloud apps account for approximately 2,000 VMware customers.
- Corporate. Customers with a strong VMware footprint that looks to achieve faster time to value and are early adopters of cloud and modern apps don't include just SMBs. The corporate segment is positioned to execute with focus. This is more of a land-and-expand strategy with lead offers, expanding co-sell and co-delivery opportunities in the partner ecosystem.
- Commercial. This segment consists of customers with simple use cases. The commercial segment is about retaining scaling with partner-led motions to drive volume in the partner ecosystem.
Mind the skills gap
The skills gap is a real concern across organizations, as it is a challenge to acquire and retain talent. VMware is rolling out Cross-Cloud managed services programs to assist with this challenge. Partners that build the offering are available with co-selling, as selling incentives and managed services is the way around this challenge. This is also in alignment with TechTarget's Enterprise Strategy Group (ESG) research, which found that most cloud-native spending is focused on staffing and working with service delivery partners and that organizations prefer managed services to overcome staffing skills gap concerns. VMware Cross-Cloud managed services is an attempt to shift focus from offerings to outcomes.
Other advancements to simplify the portfolio include the following:
- Continuing to invest and provide solutions for modern apps with Tanzu for Kubernetes Operations (TKO), Tanzu Application Platform (TAP), Aria Guardrails and Aria Cost.
- Private and hybrid cloud services to reduce the current 180,000 SKUs. (VMware Cloud Packs has just 20 SKUs.)
- VMware Cloud Packs, which include Compute with Advanced Automation to enhance on-premises workloads with cloud services, hyper-converged infrastructure (HCI) for cloud and storage, HCI with Advanced Automation for HCI in a multi-cloud environment, and VMware Cloud Foundation for a full private stack offering for private and hybrid clouds.
- Providing end-user computing with Workspace ONE and Horizon.
VMware continues to innovate. The future roadmap and direction are clear, and, even with the uncertain times preceding the pending Broadcom oversight, it's clear that VMware continues to listen to customers and provide responses to organizational challenges. The VMware approach also aligns with our 2023 ESG cloud-native research, which matched many of the internal VMware data sets closely. VMware is on point with regard to having a pulse on the market. It is also clear that the bifurcated business of infrastructure and development is coming together.