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Broadcom Further Streamlines VMware, Omnissa is Born

Broadcom Further Streamlines VMware, Omnissa is Born

The News: Broadcom’s End-User Computing Division is embracing its future as a standalone business with renewed focus and innovation. This transformation marks a significant step forward in independently delivering cutting-edge digital workspace solutions. Read the announcement on Omnissa here.

Broadcom Further Streamlines VMware, Omnissa is Born

Analyst Take: Broadcom has been making significant strategic moves to streamline VMware, following its acquisition. Many of these changes have been unpopular with the market, but one of the most obvious moves was to exit end-user computing. The recent changes in software licensing, an overhaul of the go-to-market (GTM) model, and now the sale of the End-User Computing (EUC) Division reflect Broadcom’s intent to focus exclusively on the private cloud sector. This strategic shift is part of a broader trend where Broadcom aims to shed non-core assets and double down on its strengths in the private cloud market, even as this strategy raises questions about its remaining business units’ future stability and cohesion.

Broadcom’s strategy to streamline VMware has not been without controversy. The radical changes to the software licensing models have left many customers grappling with increased costs and complexity. By altering long-standing licensing terms, Broadcom seems intent on driving higher revenue from its existing customer base, a move that has stirred dissatisfaction among long-time VMware users. The overhaul of the GTM model has similarly raised eyebrows. By shifting away from VMware’s traditionally strong partner-centric approach, Broadcom risks alienating key partners and resellers who have been integral to VMware’s success over the years.

Selling off the EUC Division, which includes flagship products such as Workspace ONE and Horizon, underscores Broadcom’s determination to prune its portfolio. The divestiture is positioned as a step toward a more streamlined and focused business, but it also suggests a retreat from a comprehensive enterprise IT strategy. As Broadcom narrows its focus on the private cloud, it remains to be seen how well this leaner approach will serve its long-term growth and market position.

What Was Announced?

KKR entered into a definitive agreement to acquire Broadcom’s End-User Computing Division in a transaction valued at approximately $4 billion back in February. The EUC Division, originally part of VMware, provides digital workspace solutions that allow organizations to securely deliver and manage applications, desktops, and data across various devices and platforms. Key products under this division include Horizon, a leading desktop and application virtualization platform, and Workspace ONE, a prominent Unified Endpoint Management (UEM) platform.

This transaction sees the EUC Division become a standalone company, launched earlier this week as Omnissa, gaining greater access to growth capital and a dedicated strategic focus under KKR’s ownership. KKR’s involvement is expected to bring increased investment in product innovation, customer relationships, and strategic partnerships. The former VMware management team, led by Shankar Iyer, will continue to run the EUC Division, ensuring continuity in leadership and strategic direction.

Omnissa has emerged as a new player in the digital workspace market, bringing a fresh focus and innovative spirit to the industry. Backed by KKR, a global investment firm, Omnissa is poised for growth with a significant investment of approximately $4 billion. The company is built on the foundation of flagship products such as Workspace ONE and Horizon, which are renowned for their leading-edge digital workspace solutions. With a dedicated focus on innovation and customer-centric strategies, Omnissa aims to revolutionize how employees worldwide experience digital work environments. Omnissa’s mission is to empower employees to work seamlessly, securely, and productively from anywhere.

KKR plans to support the division’s focus on customer relationships through significant investments across go-to-market functions. This includes expanding research and development, pursuing new strategic partnerships, and enhancing support for customers and partners. Additionally, KKR aims to implement a broad-based employee ownership program, a strategy intended to drive engagement and build a strong ownership culture within the new standalone company.

Broadcom’s decision to divest the EUC Division aligns with its strategy to streamline operations and concentrate on core areas. However, this move also raises questions about the future direction of VMware’s remaining business units and how well they will integrate with Broadcom’s overarching goals.

The EUC Division’s transition to a standalone company marks a significant shift for Broadcom. While the sale is positioned as a strategic move to enable greater focus on private cloud solutions, it also suggests a retreat from the broader enterprise IT market. As KKR takes the helm, the focus will be on leveraging the strengths of Horizon and Workspace ONE to drive growth and innovation in the digital workspace sector.

Looking Ahead

With the establishment of Omnissa, the former EUC Division aims to carve out a significant niche in the digital workspace market. Omnissa will be positioned as a leader in providing secure and seamless digital work environments, leveraging the strengths of Horizon and Workspace ONE. Under KKR’s ownership, Omnissa is expected to benefit from increased investment in innovation and customer-centric strategies.

However, the future success of Omnissa is not guaranteed. The market for digital workspace solutions is highly competitive, with established players such as Microsoft and Citrix dominating the landscape. Omnissa will need to differentiate itself through innovation and exceptional customer service to capture and retain market share. The transition to a standalone company also presents challenges in maintaining the same level of service and support that customers have come to expect under VMware.

Today, Omnissa’s solutions are dependent on Broadcom’s VMware vSphere technologies. Citrix, Omnissa’s primary competitor, integrates with hypervisor technologies based on open source, VMware, and Microsoft technologies. Omnissa’s product managers must balance integration with additional cloud platforms and adding additional product functionality such as advanced AI support for client GPU sharing and data science desktop virtualization.

As customers explore their private cloud options beyond VMware Cloud Foundation, EUC is a significant part of the decision criteria. Broadcom has led with a solid integrated EUC portfolio that included data center virtualization, desktop and application virtualization, mobile device management (MDM), and security under a single management construct. It’s of great interest to understand how Omnissa and Broadcom will work together to ensure a seamless vendor transition and future Omnissa innovations that provide a non-disruptive experience while expanding the addressable market beyond VCF customers.

For Broadcom, the divestiture of the EUC Division allows it to narrow its focus on the private cloud market. This streamlined approach could lead to more efficient operations and a clearer strategic direction. However, the loss of a significant business unit also raises questions about the overall robustness and diversity of Broadcom’s portfolio. By concentrating solely on the private cloud, Broadcom may be putting all its eggs in one basket, potentially exposing itself to higher risks if market conditions in the private cloud sector change unfavorably.

In conclusion, while the formation of Omnissa and the divestiture of the EUC Division align with Broadcom’s strategy to streamline and focus on core areas, the long-term implications of these moves remain uncertain. Both Omnissa and Broadcom will need to navigate a competitive and rapidly evolving market landscape to achieve sustainable growth and success.

Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

Other insights from The Futurum Group:

Broadcom Redefines VMware – The Futurum Group

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

Author Information

Keith Townsend is a technology management consultant with more than 20 years of related experience in designing, implementing, and managing data center technologies. His areas of expertise include virtualization, networking, and storage solutions for Fortune 500 organizations. He holds a BA in computing and an MS in information technology from DePaul University. He is the President of the CTO Advisor, part of The Futurum Group.

Regarded as a luminary at the intersection of technology and business transformation, Steven Dickens is the Vice President and Practice Leader for Hybrid Cloud, Infrastructure, and Operations at The Futurum Group. With a distinguished track record as a Forbes contributor and a ranking among the Top 10 Analysts by ARInsights, Steven's unique vantage point enables him to chart the nexus between emergent technologies and disruptive innovation, offering unparalleled insights for global enterprises.

Steven's expertise spans a broad spectrum of technologies that drive modern enterprises. Notable among these are open source, hybrid cloud, mission-critical infrastructure, cryptocurrencies, blockchain, and FinTech innovation. His work is foundational in aligning the strategic imperatives of C-suite executives with the practical needs of end users and technology practitioners, serving as a catalyst for optimizing the return on technology investments.

Over the years, Steven has been an integral part of industry behemoths including Broadcom, Hewlett Packard Enterprise (HPE), and IBM. His exceptional ability to pioneer multi-hundred-million-dollar products and to lead global sales teams with revenues in the same echelon has consistently demonstrated his capability for high-impact leadership.

Steven serves as a thought leader in various technology consortiums. He was a founding board member and former Chairperson of the Open Mainframe Project, under the aegis of the Linux Foundation. His role as a Board Advisor continues to shape the advocacy for open source implementations of mainframe technologies.

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