Our Value Proposition Is Even More Attractive During Downturn: VMware CEO Raghuram
Amid the troubled USD 61.2 billion acquisition deal with Broadcom Inc., VMware recently posted poised quarterly results during the fourth quarter which saw the company beat analysts’ expectations to record revenue growth of 5 per cent year-on-year (YoY) at USD 3.71 billion.
During the quarter, the mix of subscription and SaaS and license revenue for VMware was USD 2.03 billion, an increase of 7 per cent in comparison to the corresponding quarter in fiscal 2022. The subscription and SaaS revenue constituted 32 per cent of the company’s total revenue in Q4.
Despite the travails around its acquisition deal with Broadcom and speculations of the deal falling through, VMware has remarkably maintained great numbers.
On the sidelines of VMware Explore India event, VMware CEO Raghu Raghuram spoke with BW Businessworld’s Rohit Chintapali on tough market conditions, deals and the Indian market. Excerpts:
What are your observations on the kind of deals happening, given the macroeconomic pressures affecting the tech ecosystem? What kind of behaviour are you expecting from your clients in 2023?
What we have said in the past is that there is a greater amount of uncertainty and companies are preparing for a plan A, plan B and even plan C in some cases. That's how we see them behaving. They are prioritising but still spending money. They are prioritising on things like digital transformation, cybersecurity, cloud migration and more. So, in those projects, they are more certain. They say, ‘we might spend less, but we are still going to spend.’ And certain other projects, they say, ‘if we get more money, we'll spend it or we won't spend it’. But VMware is fortunate to be working in the envelope where they are going to be spending money. But they are going to be cautious about their spend and the level of ROI that we must show increases. That's the behavior we expect. And it's not just the banks, it's everybody. Any large category you can think of.
Do you see spends going down from the startups on the global front?
Globally, we tend to work more with enterprises than with cloud-native startups. But they face the same problem of cost optimisation. In many cases, the cloud migrations are behind schedule and they are using our technology to speed it up. In many cases, their developers are spending too much time on activities needed to put applications into production and they are using our technologies to solve those sorts of problems and building new applications. Those are the areas where we see traction.
Is there a time horizon, where you see normalisation setting in globally?
This is just economic cycles. In the past decade, we have forgotten about economic cycles. It's a fact of life. Now, we are back into normal economic cycles. But our value proposition as VMware is even more attractive in a downturn. It is attractive all the time, but during downturn, because of our cost savings and optimisation potential, we get a lot more interest.
Reports suggest that smaller companies with better economic value proposition are being favoured for deals in the tough market conditions of today. How is VMware finding the conditions under this context?
Two things happen during downturns. One, a company that has better economic value proposition gets an advantage. Secondly, there is a flight to quality. So, customers tend to go to the vendors that have treated them the best and proven themselves over the years. Both these things help us because our ROI from deploying our technologies is demonstrably higher than the competition. And we've been running our customers’ most critical applications for a long, long time. From that point-of-view, we are more trusted.
How important is the Indian market for you from the global perspective?
It’s quite important from two perspectives. One is as a standalone business. Secondly because of its influence on other global businesses.
How so? How does the Indian market influence global businesses?
Because if you think about where our customers develop, our teams are located, most of them are here (in India). If you look at our customers and operations teams – they are all located here. And so, if you want to influence these customers, you have to influence them here. That’s what I mean.
