The upside is you don't scare off other customers when they hear reports of a 12x price increase.

Right now, in response to this post, VMWare's biggest customers will be drawing up plans for if they need to walk away at the next contract renewal. And they'll want those plans to be extremely credible - it's worth spending $5 million trialling and integrating a competing system, if it stops your $50m contract turning into a $150m contract.

Broadcom goes into these deals knowing it will hemorrhage a lot of customers and they don't care, they know they can make it up on those who are forced to stay. They don't care about reputation at all.

Usually that means prices increasing by ~10% every year, so that it's never quite worth it to switch to an alternative system.

"[Broadcom's methodology] was not based on taking existing products and raising their prices" Broadcom CEO Hock Tan Oct 26th 2022

If this scares away customers spending less than that, good for them. It doesn't make a dent when a F1000 is spending tens of millions a year on VMware and purchase by committee and will get sweetheart deals by being strategic accounts.

It should be:

(Contract_1_yearly+...+Contract_n_yearly)/num_contracts

Anyhow the customer signed the deal (https://twitter.com/cioontherun/status/1761882689886433742), implying they were underpaying and had the capacity to pay the true rate.

Also just to be clear I agree with your initial comment - there are lots of reasons even big customers can be worth repricing based on their true costs and strategic relevance. And at less than 0.1% of revenue VMWare can certainly afford to risk it.

itsdrewmiller is right

If they are sufficiently locked in, this might have been the best option to migrate away without major disruption.

It sounds like this was a (comparatively) PITA small-fry legal / law office.

Maybe I'm completely out-of-touch, but an 8M$ contract should be sufficient to get "appropriate deals"?

It has. Product/brand trust matters... the most obvious example being Google, who have had an extremely hard time getting their stuff to be actually used as they have shown time and time again that even if you're the biggest game publishers on this rock, you won't be able to rely on Google keeping up their end of any deal.

At Enterprise SaaS level it does not.

You do not have an individual purchaser - the deal will be vetted by committee for 1-3 quarters.

> most obvious example being Google, who have had an extremely hard time getting their stuff to be actually used

Extremely hard disagree. GCP does well in enterprise/strategic accounts where a customer in some way competes with Amazon (which is around 20-30% of the F1000) and also doesn't have a significant Windows presence (minimizing the need for Azure+MS Support)