It continues to be a tough year for smaller VMware channel partners.
In June, parent company Broadcom, which acquired VMware in November 2023 for $61 billion,
slashed VMware’s channel partner program, removing many smaller MSPs, VARs, systems integrators, and other partners.
Now, more cuts have arrived in November as Broadcom takes its corporate hatchet to another group of VMware partners, this time in VMware’s Cloud Service Provider program, taking aim at smaller cloud services partners.
Through it all, Broadcom’s corporate message has been clear – the parent company wants to cull the company’s partner programs of less profitable partners so it can focus on the ones that bring in the highest revenue and profits to the mothership.
“Broadcom's strategy since closing the VMware acquisition has been to drive simplification, consistency, and innovation across the VMware Go-To-Market ecosystem, including VMware Cloud Service Providers (VCSPs),” a Broadcom spokesperson told ChannelE2E. “Recent changes to this ecosystem are consistent with this strategy. Broadcom is focusing more and going deeper with the VCSPs who have demonstrated commitment to their cloud services built on VMware. This will enable us to deliver greater value, stronger execution, and a more streamlined experience for Broadcom’s VMware customers of all sizes and enable a truly competitive offering to the hyperscalers through our CSPs.”
For VMware channel partners, Broadcom’s cuts mean watching many of their longtime VMware customer relationships forcefully severed while leaving them scrambling to find other vendors to partner with so they can continue providing IT help to their services-hungry SMB customers.
Analysts See Risks With This Strategy
“This move by Broadcom VMware to cut out smaller partners from its cloud partner program is one of those moments where strategy and optics diverge sharply,”
Paul Nashawaty, principal analyst for AppDev and modernization at theCUBE Research, told ChannelE2E. “On paper, you can see the rationale: Broadcom wants to double down on high-value, enterprise-scale partners that can drive predictable revenue and deliver premium customer experiences, and this is not surprising. They are clearly aligning with their VMware Cloud Foundation (VCF) strategy, consolidating to fewer, better-trained partners that can manage full-stack deployments at scale.”
“But from an ecosystem perspective, this is a risky play,” said Nashawaty. “My research data shows that 41% of enterprise IT leaders say partner diversity is critical to innovation velocity, and 48% of organizations rely on smaller MSPs or SIs for customized integration and local support. When you start cutting out those niche, high-touch partners, you lose the connective tissue that often drives customer loyalty and regional market growth.”
Ultimately, “the long-tail impact could be brand erosion and customer churn in segments where smaller partners have been VMware’s frontline advocates for decades,” he said. “The collective business from those smaller partners does add up; my research estimates roughly 22–25% of VMware’s indirect revenue historically came from mid-tier and regional providers. Losing that might not crater the top line immediately, but it definitely narrows VMware’s reach in the midmarket and hybrid cloud segments.”
The largest impacts, though, will hit the smaller channel partners that Broadcom and VMware continue to shed, said Nashawaty. “For MSPs, VARs, and SIs, this move is a gut punch, especially for boutique firms. I was just talking to an IT services guy, and he specifically brought it up as a challenge. Many of them have built managed services models around VMware licensing flexibility. Now, they are being told to either migrate customers to a larger aggregator or pivot away entirely. That creates friction not just in channel economics but in customer trust.”
Broadcom’s corporate messaging here “is about elevating the customer experience, but the market hears ‘shrinking the ecosystem,’” said Nashawaty. “Whether that gamble pays off depends on how effectively they can keep those displaced partners’ customers from walking away. The upside is efficiency and standardization. The downside? A hollowed-out ecosystem that cannot easily re-expand once the market moves again.”
Another analyst,
Shelly Kramer, founder and principal analyst of Kramer&Co., called Broadcom’s latest partner purge at VMware “a dramatic acceleration of its profit-maximization strategy that is forcing hundreds – and possibly thousands – of smaller cloud providers out of the VMware ecosystem entirely.”
And while the moves may be financially successful for Broadcom in the short term, they “are generating unprecedented partner dissatisfaction, driving customer migration planning, and potentially setting up a long-term exodus that will not be visible for two to three years,” said Kramer. “The collective revenue from smaller partners is substantial – 30% to 40% of SMB revenue – but Broadcom is betting that consolidating around large, profitable partners will outweigh those losses. These partner cuts by Broadcom will require partners to sell the full-stack VMware Cloud Foundation solution, which not all partners are prepared to do. What Broadcom cares about is not in any way confusing: the company is laser-focused on delivering maximum value for shareholders.”
Kramer said that while Broadcom’s moves are understandable today from a financial standpoint, the thing to watch will be their impacts on VMware's long-term market position. “These and other Broadcom moves have resulted in a fair amount of partner community dissatisfaction, which is understandable. Also understandable is a company wanting to focus where the biggest revenue potential is. This news should not come as a surprise in any way.”
Jack E. Gold, president and principal analyst with J.Gold Associates, LLC, told ChannelE2E that this is just more of the same for Broadcom as it pares overhead after pulling off acquisitions.
“This is one way to cut back on the number of third-party sellers, especially those that do not meet a sales and profitability profile,” said Gold. “Reducing costs is the way Broadcom gets higher revenues out of its acquisitions. Of course, that means the resellers need to scurry around to find a replacement vendor for their clients, so it is not an efficient or profitable arrangement for them as changing to new vendors is costly.”
