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The bridge Podcast - Saad Saleem Bridgepointe_LOGOOn this episode of The Bridge, I’m joined by one of our Bridgepointe team members, Saad Saleem, Senior Cloud Architect. We’re walking through the overarching impact of recent VMware changes on customers and service providers and exploring some VMware alternatives.

Bridgepointe is a tech advisory firm that helps bridge the gap between tech investments and business goals. For two decades, we’ve helped mid-market and enterprise clients make quicker, more informed tech investments. We’ll help you save time by shortening the procurement process while saving money and increasing ROI. We work with 150+ suppliers to simplify the process of planning and procuring the tech solutions you need to meet your tech and business needs.

During our conversation, we discussed the importance of assessing how to deliver business functionality, the potential for transformation in the cloud journey and so much more. 

Topics covered in this episode:

  • How VMware has shifted from perpetual license models to recurring revenue licenses.
  • The cost increases customers are experiencing.
  • How service providers have been impacted by the new licensing structure.
  • Why service providers may need to seek licenses from larger partners.
  • Why customers are exploring alternatives to VMware and reevaluating their service delivery models.
  • How the focus is shifting towards delivering business functionality and considering the right mix of infrastructure and software expertise.
  • Why IT administrators with VMware expertise may face challenges in transitioning to new tools and should carefully evaluate the costs and impacts of change.

The bridge Podcast - Saad Saleem Bridgepointe_HEADSHOTABOUT SAAD SALEEM

As an architect, Saad leads Bridgepointe’s Cloud Transformation Practice. Saad joined Bridgepointe in 2018 after a SaaS Delivery focused IT and Product Management career spanning 25+ years at software companies including Oracle, Siebel, UpShot, Granicus and UnitedLayer.

A graduate of San Jose State, Saad is focused on IT Strategies that leverage technology to deliver business outcomes.

Areas of Focus:
 ▪ Cloud Strategy and Execution with an emphasis on Business Results
 ▪ Designing Workload Centric Integrated Cloud solutions that scale & integrate into the business
 ▪ SaaS Operations & Management

CONTACT SAAD

LinkedIn

Web

Full Transcript

Scott Kinka:

Well, hi, and welcome to The Bridge Studios. I’m your host, Scott Kinka, and I’ve been looking forward to this one. Joining me today on The Bridge is a Senior Cloud Architect, our Senior Cloud Architect here at Bridgepointe. My friend Saad Saleem. Saad, how are you today?

Saad Saleem:

Well, Scott, good to be on.

Scott Kinka:

And the reason we have a side on this VMware discussion lately in the media has become somewhere around all-consuming, and we’ve had quite a bit of content on it actually on the podcast, with multiple episodes. We’ve touched on it, and I figured it made some sense for us to cap the topic a little bit. Bring it back to a central point. We’re going to do a brisk 25, 30 minutes here, so if you’re looking for a kind of piece that just catches you up, whether you’re a customer who hasn’t made a decision yet, your partner, partner or a service provider who’s just trying to think about how to talk about it, this is ultimately a little bit of a capstone project for us to sort of share our feelings on what’s going on and give customers some good advice and a little bit of insight on what’s going on out there in the field and what your peers are asking us for. So before we do that, though, you all might not know the side, so let’s do a little bit on that first side. Where are you calling us from

Saad Saleem:

Scott, I’m in the Bridgepointe home office in San Mateo, California,

Scott Kinka:

Right there in Silicon Valley. Do you live locally?

Saad Saleem:

I do, I do. I’m very, very close to the office.

Scott Kinka:

How long have you been there?

Saad Saleem

Bridgepointe? Six and a half years now in the area since 91.

Scott Kinka:

  1. Where were you before that?

Saad Saleem:

Pakistan, actually.

Scott Kinka:

What’s that?

Saad Saleem:

In Pakistan.

Scott Kinka:

Okay.

Saad Saleem:

Dad was in the force, so we got to travel all over the country, all over the world, so we lived in a few different places.

Scott Kinka:

That’s fantastic. Now you’ve settled in Silicon Valley and you’ve been in Bridgepointe for some time and we’re thrilled to have you and super excited to get your insight. Tell us a little bit about your career journey though, to get to Bridgepointe. I think it’s relevant for this conversation.

Saad Saleem:

Yeah. When you and I first met prior to Bridgepointe, I was at a private cloud provider in San Francisco and was there for a few years. Prior to that, I had various primary software as a service role running small companies, large companies, Oracle and Siebel. You’ve probably heard those names. And then Gran.

Scott Kinka:

Yeah. Little companies. Yeah.

Saad Saleem:

And Gran is an upshot. Granicus is big now they’re in the government space, openness of transparency and other SaaS service. And I started my career at a company called Upshot, which was head-to-head with salesforce.com back in the days we won more than Salesforce did, but they were in a lot deals than their marketing engine was just absolutely brilliant. We’ve been doing this for a while.

Scott Kinka:

Still is today, right? Yep. Speaking of gigantic marketing engines and crazy hype cycles, there’s just been a massive amount of conversation around what’s gone on with VMware since the Broadcom acquisition, and we’ve had all kinds of our partners and our customers sort of opining on this situation. Let’s just take a step back for those who maybe haven’t seen the other episodes and aren’t following along at home. Can you just give us your version of what’s occurred? Just to catch everybody up, Broadcom acquired VMware and then blank.

Saad Saleem:

Yeah, I think Scott Broadcom’s doing the same thing. Microsoft did. Broadcom’s doing the same thing. A lot of other major software companies have taken their shiny product, making it cheaper and easier to support easier to manage. We’ve seen and ensured recurring revenue. Microsoft is the biggest example of this, but if you look at the software world, everybody is tried at one point, especially those who are managing and supporting customers who run on-prem in uncontrolled environments. They’ve tried to lower their support costs and make it easier to manage their customers from a product perspective and a labour perspective. Broadcom’s doing exactly that. Customers are running all different versions of VMware. They call in direct support to Broadcom now, and they’re streamlining it just like everybody else did. If you were running something, it becomes really, really hard to support. And frankly, if you look at Broadcom’s stock price, they’re really good at this. They’ve done this time and time again, and you had a podcast with AJ Ek from Expedient, who was talking about the transformation within VMware and how Broadcom’s enacting that. It’s a classic recurring shift to a recurring revenue model while lowering the cost to support it.

 

From Perpetual to Recurring: Understanding the Implications of VMware’s Licensing Transformation

Scott Kinka:

Got it. And we’ll certainly use any of those other assets that you referenced. We’ll make sure our listeners are in the show notes so you can check out that conversation. And I agree with you; AJ did a good job for the listeners at home on this particular episode. So that means lemme just read that back. Perpetual license models of VMware are everywhere, with customers running it locally and service providers buying it perpetually and turning it into services that they’re building monthly. Broadcom comes in, simplifies 3000 SKUs down to a small set and turns it into a recurring revenue license, whether you’re running it in a cloud or running on your own infrastructure. Generally speaking, what has that meant really effectively to the customers that you’ve spoken to? The cost has gone up, cost has changed. What are the challenges they’re contending with?

Saad Saleem:

Cost has impacted, but we’re seeing different levels of impact. We’ve had tens to hundreds of conversations already around this with our customer base, and what we’re seeing is some people are freaking out about a 15% increase, and there are others who are dealing with a 900% increase. It’s not that VMware arbitrarily changed cost structures or skewed pricing for customers. They changed the model. You talked about this with AJ Dustin and others in previous episodes. The changes are per core. There are minimums per core. There’s no more RAM utilized per gig. There’s no more perpetual license, and that change in the model has impacted people in different ways depending on what infrastructure they bought to support their applications and their private, self-hosted, self-managed clouds. It’s frankly had a significant impact on the smaller service providers, private clouds, and cloud service providers. A lot of them have been kicked out of the program, and they now have to go upstream to one of the pinnacle or premier partners for VMware to get their licenses. More importantly, from a Broadcom perspective, who do they call for support? They’re calling service providers. So we’re seeing customers get impacted both at the enterprise level and by the service providers who support these small and medium enterprises all over the world. And most of it is a licensing cost increase.

Scott Kinka:

So let’s break those into two categories real quick, and I want to be a little bit specific just in terms of realistically, if you’re a customer right now who has bought it, and we’re sort of equating it to what everybody’s done, clearly you bought it perpetually. It looked one way on your balance sheet. It’s now an OPEX monthly, of course, right? So, your CFO is going to tell you what that means to you at the end of the day. But in terms of the infrastructure side of the house, going from a memory-consumed model to a Coors model is one big one. The second one that I’ve heard, and I would love you to talk a little bit about this, is how the bundle is. So you could buy VMware like Legos previously, right? Everybody’s on an ESX host from the hypervisor perspective, but whether they’re vsan, whether they’re vCloud director or whether they’re using the various other layers of orchestration that VMware has was really a matter of how big of a customer they are. Now they’ve got to sort of buy at least the foundation’s bundle that has more than just the hypervisor in it. Where are you seeing the big effect with your customers? Where is it really hard to answer that because it depends on what they’re using? Is it in this perpetual change, is it in the core versus the memory versus proc change, or is it in this bundling challenge?

Saad Saleem:

I don’t think the customers who are self-managed are getting impacted by the memory change. CSPs are it, but you’re dead on what feature are they using vsan? Are they using NSX? Are there firewalls, VMware? What components have they layered on and now have to buy bundles? So, what they have to pay for in order to get the same feature functionality from their stack has been changed. And so it’s the variability in how the feature functionality that they’re currently using in the bundled model is having different levels of impact for different customers.

Scott Kinka:

Depending on how far they are. So thus, your difference could be 15%, or it could be 900%. It depends on which Legos you bought, right,

Saad Saleem:

Exactly. And then the impact, there’s certainly a technical impact on the hypervisor and the tool used to manage the hardware and the virtualization, but I think the real impact, and even for those customers who are not impacted 900%, it’s a business impact, the ROI for delivering a set application to do a business function has now changed. And whether it’s you just doubled, or you went 500%, a customer whose cost went up 150%, that may be more significantly business impacting than somebody who had a larger increase because they had more margins or what have you. It’s the business impact on people versus just a straight line item cost increase. That’s what people are starting to know; the initial reaction is that we’re getting past that. It’s people are trying to assess how it impacts delivering business functionality with delivering ROI. What is the cost of goods sold? How is that impacted, and what do they do about it?

Scott Kinka:

Yeah, yeah. Let’s double click on the, you made some comment about the service providers. I just want to clarify that statement. So what you said, I was going through the multiple ways people could be seeing cost increase, and you said the processor memory change, utilized memory versus processor change, probably doesn’t affect customers as much because they’re sort of buying and dedicating static stacks, if you will, to single customer use where service providers were playing a little bit of the oversubscription game, right? So that’s one challenge I love you to talk to. But the other one is this licensing one. So, you mentioned that the smaller providers were kicked out of the program. What it really amounts to is that VMware had a ton of partners who were service providers, and they said we’re going to focus on this smaller subset. What do the smaller providers do? I mean, they’re not closing up shop around VMware. They’re now transacting through the larger service providers to get licensing. Give me a little bit about the impact on the service providers because certainly, customers may be looking at this as, Hey, I’m not running this locally, but I am running it through this boutique service provider who I really like around VMware. How is it affecting the smaller service providers in your mind?

Saad Saleem:

Well, anybody who doesn’t have 3,500 cores licensed isn’t getting into the program. They’re not premier. You’ve got to be 7,000 or 7,500 cores to be the pinnacle. So if you’re not at that level, then you have to go buy licenses from somebody else, and you use the term closing up shop. I think some of them are having those conversations. Should we sell the business to somebody else because we can’t really afford to continue to support it? It’s about the cost of goods sold. It’s about the same decision-making that every technology and business leader at the enterprise level has to make. Are we going to? Does this tool make sense? Same thing with the CSPs. So we’ve had a number of conversations with CSPs, directed them, and helped them navigate where they get the licenses from and who can provide them with first-level support because VMware isn’t taking that call anymore.

 

Balancing Technology Shifts with People’s Expertise

Scott Kinka:

Yeah, it’s funny, we’ve actually seen, I’ve seen some of our partners who are Premier and Pinnacle advertising to other service providers basically going and saying, Hey, let us be the partner of the stage above you in between VMware, which is super interesting. So all of this leads you to believe, we talked about the closing up shop thing, and certainly, if you’re a, we haven’t seen any evidence of that necessarily per se, where we’ve had a partner come to us, a supplier partner of us come to us and say, Hey, we’re going to stop doing VMware yet. And we may yet. But I do think it brings up an interesting question: Are you an internal IT shop or a service provider, and are you VMware-centric? Is this the right time? And we’ve had some of these conversations to be thinking about something else. It’s obviously a lock-in scenario, even though VMware’s been sold three times, and there hasn’t been an effect. This is the first time it really means something where it’s changing, but it is changing. So, talk a little bit about what we are customers asking you. Let me phrase it in a different way. Are customers asking you if they should just be getting away from VMware at this point?

Saad Saleem:

Absolutely. And in fact, I think the first reaction was exactly that. What’s an alternative to VMware? And there’s a ton of alternatives. Go back to any of the recent podcasts you’ve done, right? Everybody brings up KVM and Prox marks, Nutanix comes up, HyperV comes up, and so on and so forth. That was the initial reaction. How do I get off of this lockin where 85% of the market is using VMware for hypervisor, but I think that that’s passing now you can take one piece of software and replace it with another piece of software companies do ERP transformations and other CRM transformations all the time. It’s not easy. It’s very, very impactful to the people who use that software and, in this case, to the IT people who manage it. Are there alternatives? Yes. Are they viable? They can be depending on the skill set of the people that you have on the staff. I think, what’s this forcing people where the conversation is evolving? Scott, I think you’re seeing this in a lot of the conversations you’ve had both internally and on the podcast. People are talking about how I deliver set applications and, more importantly, how I deliver set functionality to the business and whether it makes sense to keep leveraging VMware. Part of what this is doing is technology leaders and business leaders are starting to ask, Hey, we didn’t do the cloud transformation. We didn’t get on the cloud journey before because we were a CapEx model, and the ROI made sense to continue to deliver it in said model. Is the cost increase or the change? And more to the point, I think the uncertainty around how these changes impact the business. Should we be in a more agnostic model? Should we change our service delivery? Should we reevaluate things that we said were too expensive or too difficult to transform into? Dustin Young from Enzo talked about it in your last podcast. He did it’s transformation. Is this the right time to do away with the vendor and put yourself on a journey where you’re delivering business functionality to the stakeholders? Does that mean you have to transition to AWS? Well, that’s vendor lock-in, too, right? Or do you go more agnostic? Something like containerization? Well, it’s not a push-button change. You have to evaluate and figure out which applications SaaS has been around. I worked for one of the first SaaS companies in the model we’re called an A SP back in the nineties, and SaaS is out there for just about every critical business function. Do you reevaluate SaaS now? So what,

Scott Kinka:

Yes. Not even necessarily just a question about moving an existing workload, but is it time rather than trying to transform the workload, just transform the application or begin to move into a scenario where you’re buying it by the drink as opposed to running the software?

Saad Saleem:

Do you want to run the infrastructure in addition to the application, or do you want the experts to do it for you, the software experts? Do you need infrastructure, or do you need the feature functionality that the software delivers? And I think that’s the thing that our customers, we hear this all the time as the conversation is going upstream within the business, from the system admins to the CIOs to the CFOs and the C-suite, how do we deliver this as me as the IT director, the right person to deliver security as a service? Are we staffed enough to deliver 24-by-seven monitoring management and so on and so forth, or are there experts out there that we can leverage? And that’s the decision I think this is evolving into, and Broadcom’s really almost doing a service to IT people where businesses can now re-look at how they deliver business functionality. The tool change is an option, but it’s really not the stream that we’re seeing from customers. First was the reaction: what’s the alternative to VMware? And now it’s how do we get, let’s deal with the immediate impact of license renewals and so on and so forth, and then go back and systematically look at what are we delivering, how are we delivering it, what are the options to deliver that set software functionality, business functionality, and then what is the journey to transform? As you know, we’ve developed this four-step process that, hey, if we need to help you with your licenses, we were impacted by 900%. Can we leverage one of our pinnacle partners or premier partners to get you licenses or even advise you to go do a short-term renewal? What would BMR give you a year or two years to do? A thoughtful analysis of everything. We’ve got so many amazing partners that can help evaluate. I’ve been doing this for years, and then I’ll decide what the right strategy is for you. The all-in went away a few years ago. It’s a hybrid model. Even customers who are doing everything in-house are leveraging SaaS applications. Some applications are SaaS, and some applications run out of AWS Azure GCP. I’m sure there are people running in the IBM cloud, too, as well as regional clouds, smaller clouds, and private clouds. How does that combination of available delivery models and available cloud models work? How do I deliver bi? How do I deliver AI? Do I build all that infrastructure?

Scott Kinka:

I want to jump back into one topic you mentioned there. I don’t want to miss it in the middle of there. You mentioned people, you also mentioned earlier, I forget the number, exact number you used, something like 80 to 85% of workloads out there are sitting in VMware, which means 80, 85% of the people who are administrating them are VMware trained. What are the people implications, maybe even less at the corporate level and sort of more at the admin level as this market continues to change? I mean, if I’m an IT director, but my legacy is in VMware administration, that’s where my experience is. What would be your advice for me?

Saad Saleem:

That’s a great question, Scott. I’ll use an example. When I was running it for a company, we had a small team. We had an administrator whose job was to make sure the application ran and ran well, and Jason was absolutely fantastic at it. If I decided to, oh, VMware was going to cost too much, and we’re going to move to something else, Jason would have to relearn something and go away from delivering applications, which is 24 by seven real customer impact. We were talking about the United States Senate and the United States House of Representatives leveraging that technology, and then the team had to relearn something. I’m now taking away from what they should be doing and what they’re really, really good at to change the tool, which now everybody’s distracted. I may save a couple of dollars here and there on licensing, but I’m going to lose a whole lot more from a function, from a time perspective, from a labour perspective and certainly from now, I’ve taken somebody out of their comfort zone from delivering applications to dealing with infrastructure. Those are the kinds of situations where resumes and statuses get posted on LinkedIn, right? Real. I think there’s a threat to the people who are just wholesale saying, I’m going to move off of the platform. It’s not the hypervisor. The hypervisor is easy. It’s the tools around it that manage it. It’s the ability that those tools vCenter, you could have 20 different deployments and 20 different data centers or locations, and you have a central management tool that you can move your vMotioning stuff that the vMotion has become part of the lexicon. It’s a very, very VMware-centric functionality. Do you have the ability to understand how much it costs to change and how much it costs and impacts people like Jason? Like others, every team has those superstars who, especially in it where it isn’t known to be overstaffed, it is known to have barely enough. And the only time you get noticed is when something goes wrong and somebody pulls its acts of individual heroism. You’re creating that by changing the tools.

Scott Kinka:

Yeah, I hear you. Well, speaking of acts of individual heroism, let’s just take your heroism up a notch. We’re running out of time here. I want to make sure we get time for some fun questions at a headline. I think I heard you say in the middle of this, and it’s not your recommendation in every case certainly because every case will be different but at a super high level, but figure out how to manage and stave costs off in the short term with creative buying or interim steps while you have an opportunity to just reconsider the workloads over time. Not just in terms of changing out the tool but really in terms of how you want to service that data and that workload from front to back. That’s really the process that, as you’re getting asked questions from customers, you’re walking them through. Fair statement.

Saad Saleem:

Absolutely. For a statement. Okay. Absolutely. For a statement, it’s an opportunity to look at how you deliver hardware that became the virtualized hardware, became ubiquitous, and commoditized with AWS, Azure, Rackspace, and IBM. Everybody’s been doing private clouds and public clouds for a while now. The argument against using available computing hardware was cost. CapEx was easier to digest, divided by 36 or 60. It was easier to digest. Is it still the same? And customers are, as we’ve gone, we are getting past the conversation of they just increased my price. I’m going to change this over. I’m going to change the tool, which is increasing my price. Am I going to get into another vendor lock-in, or am I going to find the right mix? And those are our conversations with customers. Where can we leverage the database as a service? Where can we leverage AI as a service? Where can we leverage CRM as a service, where do we absolutely need to run our own infrastructure, and where do we need to run our own infrastructure? Should we run the hardware and the virtualization, or should we leverage somebody like a JK Tech at expedient Enzo 1111 Rackspace? There are so many service providers out there who can deliver the hardware as a service with the right compliance and industry vertical expertise to be able to deliver that set application that you have to have hardware for that you can’t run in an AWS Azure GCP or what have you.

 

From Oil to Tigers: Bold Predictions and Book Recommendations

Scott Kinka:

Completely makes sense. Great chat. I appreciate the time and for anyone who found this interesting; obviously, SOD and the team are available to help out on your projects, and we would love to engage with you out there in the field. So, I want to have three fun questions with you real quick before we let you go and get back to what is obviously a brisk afternoon of meetings. I’m sure that will all sound more than likely like this conversation. Okay, the first one maybe not be as fun. What are you reading right now? Is there something that could be business or fiction? What’s on your end table?

Saad Saleem:

I’m rereading a book called The Prize. It’s about the history of the oil industry and how it started. And I think the oil industry and reading about the US Federal Reserve and the Bank of England sort of gives you context around how things, one perspective on how things really work. So I love reading about history, and that’s the prize. It was one of the first books. It’s a thick book. It was one of the first ones to kind of read from a perspective on, yeah, this is how things happen.

Scott Kinka:

Got it. Super light reading. It sounds like really super light. It’s super light reading. Alright, that’s one. Number two would be, I’m not sure which one we want to go with first. Alright, I need you to give me a shameless prediction for the next 12 to 18 months. Doesn’t need to be business or technology-related, but if you like, it can be. I don’t care if it’s sports; we try to stay away from politics, but if you want to jump in on that grenade, that’s fine, too. Whatever you like.

Saad Saleem: (30:47):

If Tiger can walk, he’ll win another major.

Scott Kinka:

Okay, I like that one. Well-prepped, and we’ll be able to look back on that one very easily and see how right you were. Last one. The next, the zombie apocalypse happens, or AI comes to take over the world, whatever that is. And in this dystopian future, you have only one app functioning on your mobile phone. You get to choose which one is

Saad Saleem:

It would be the signal that the zombie apocalypse happened. We are probably all strategists trying to monetize the three and a half trillion a year spent on just services uca, C, C, and cloud services.

Scott Kinka:

Got it. For those who are aware, the signal, if you’re on the customer side, if you’re an end customer, this signal is our repository of information and effectively our operating system for our strategist and engineering and architecture teams out in the field. Saad, great brisk conversation. I appreciate the time today. Great job. Love seeing you love chatting with you. I hope you enjoy the rest of your sunny day out there in San Mateo. We’ll talk to you soon.

Saad Saleem:

Thanks, Scott.

Scott Kinka:

You got it. And for those of you who are listening at home, thanks for staying with us and we look forward to bringing you more good information like this on another episode of The Bridge.