Broadcom's $61 billion bet on private cloud

Welcome to Runtime! Today: how VMware's strategy under Broadcom is evolving as customers grumble and rivals circle, Anthropic goes to Washington, and the latest enterprise moves.

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Private dancer

Around a decade ago, data center pioneer VMware looked like it was going to get run over by the stampede to public infrastructure cloud computing before it embraced a "can't beat 'em, join 'em" strategy and forged close partnerships with cloud providers to meet their customers where they wanted to go. But VMware is under new management these days, and Broadcom would prefer you rely more heavily on your own servers.

"The future of the enterprise is private — private cloud, private AI, fueled by your private data," said Hock Tan, CEO of Broadcom, in his keynote address at VMware Explore in Barcelona, according to ITProToday. The company unveiled several new products designed to keep current customers inside their own data centers and encourage cloud customers to move back to the server farm. 

• Cloud computing actually brought about two significant changes in enterprise architecture; renting servers over buying servers, obviously, but cloud computing also introduced a new philosophy for application development that emphasized reliability and flexibility, regardless of where that application actually runs.
• VMware's goal this week was to convince companies that want to maintain their own servers and storage that they can get the benefits of that latter shift without having to move their workloads into a cloud provider's data center.
• Old-guard enterprise vendors have been trying different versions of that approach in recent years with some success, as the stampede to public cloud services has slowed amid cost concerns and regulatory requirements.

VMware Cloud Foundation is the primary vehicle for Broadcom's private-cloud preferences, and this week it rolled out several new features that bring some cloud-like capabilities to companies that want to self-manage their infrastructure.

• It added VMware Tanzu Data Services, which promises to make managing data services tied to popular databases such as PostgreSQL and MySQL easier, to its package of Advanced Services for private cloud customers.
• VMware Live Recovery now supports Google Cloud VMware Engine as a recovery service in the event of a ransomware attack or major outage.
• And Cloud Foundation now comes with an integration into Microsoft's Azure AI Video Indexer, which will allow customers to conduct audio and video analysis on their private data using Microsoft's tools. 

The $61 billion question is whether or not these features keep current VMware customers from defecting to competitors, who are circling every VMware installation after a series of changes to the product lineup and price list following last year's acquisition.

• Veeam's Dave Russell, senior vice president and head of strategy, told Business Insider earlier this year that the company was hit with a 300% increase in the price of its VMware account, which was "in line with what he's heard from customers, some of whom have reported even higher price increases."
• "Gartner noted that these concerns will result in half of enterprises over the next couple of years initiating 'proofs of concept for alternative distributed hybrid infrastructure products to replace their VMware-based deployments and embrace hybrid cloud infrastructure delivery, up from 10% in 2024,'" SDXCentral reported last month.

This week VMware EMEA CTO Joe Baguley told ITPro those concerns were overblown, arguing that customers need to think about "the value of what they're now eligible for in the new product offering."

• But the whole reason Broadcom spent that much money on VMware was because changing hypervisors is a daunting task for most IT departments, which means a sizable number of them are likely to swallow the increased operating costs rather than fix something that isn't actually broken.
• Keeping customers in line for the long term will require actually delivering on that value.

Here we go again

As the world prepares for the ramifications of Donald Trump's second term in office, Anthropic is getting into the military business. It announced a partnership Thursday with AWS and Palantir to allow the defense and intelligence communities access to its Claude large-language models.

The deal "will dramatically improve intelligence analysis and enable officials in their decision-making processes, streamline resource intensive tasks and boost operational efficiency across departments," said Anthropic's Kate Earle Jensen in a press release. "The company’s terms of service allow its products to be used for tasks like 'legally authorized foreign intelligence analysis,' 'identifying covert influence or sabotage campaigns,' and 'providing warning in advance of potential military activities,'" according to TechCrunch.

Anthropic's terms of service prohibit its AI models from being used for "domestic surveillance," which is going to be a huge issue in 2025 should the incoming Trump administration follow through on its promise to deport millions of undocumented immigrants. Still, there are bound to be some AI companies that will take great pride in slapping an ICE logo on their customer pages.

Enterprise moves

Rachita Sundar is the new CFO at Qualtrics, joining the customer-experience company after serving in a similar role at HubSpot.

Dwarak Rajagopal is set to become the new vice president of engineering for AI and machine learning at Snowflake, according to The Information, following AI leadership roles at Google, Meta, and Uber.

The Runtime roundup

Cloudflare's stock fell nearly 8% in after-hours trading Thursday after providing softer-than-expected guidance for the fourth quarter, despite beating third-quarter earnings estimates.

On the flip side, HubSpot's stock rose nearly 8% Thursday after it reported earnings well above Wall Street's estimates.

Bitcoin miner Galaxy Digital plans to pivot to AI cloud services, according to Coindesk, following perhaps a little too late after CoreWeave began that shift in early 2023.

Crowdstrike acquired Adaptive Security for a reported $300 million price tag, adding cloud security monitoring services to its arsenal.

Thanks for reading — see you Saturday!