VMware Licensing Changes by Broadcom – Details, Implications and Recommendations

The $69 billion acquisition of VMware marks a pivotal moment in Broadcom’s strategic shift from its semiconductor roots into enterprise multi-cloud environments, making one of the largest tech buyouts ever. Broadcom’s acquisition of VMware completed in late 2023 and today the eye-watering stakes remain high with the merged company hoping to show immediate enhanced revenue streams and cost synergies.

Undoubtedly, Broadcom buying VMware at such a hefty price tag brings them significant market opportunities driven by VMware’s extensive customer base rooted in 25 years of development. Focus now turns into understanding how the VMware Broadcom licensing changes will impact deployments and critically, customers’ VMware pricing structures.

Who are VMware?

VMware were founded in 1998, bringing its revolutionary x86 server virtualization and consolidation software to market. By the early 2000’s, VMware had already established itself as a key player for rationalizing hardware usage within the data center through its software-based Virtual Machine (VM) approach, using its vSphere hypervisors (ESXi) and vCenter management tools, for virtualization administration and centralized control over ESXi hosts and VMs respectively

Storage and network virtualization came next with vSAN and NSX solutions laying the foundations for a full scalable cloud enablement platform for hybrid and public clouds. Collaboratively named VMware’s Cloud Foundation, VMware focused on helping cloud users protect data and manage resources in the most effective manner, enticing users and partners alike, until the ultimate suitor came knocking in the form of Broadcom.

With such a large user base and innovation pedigree, VMware was no stranger to staggering ownership changes, bought by EMC as early as 2004 for $625 million; then becoming part of Dell/EMC when Dell bought EMC for $67 billion in 2016. In a final precursor to the Broadcom acquisition in 2021, Dell announced its intention to spin out its 81% share of VMware to focus on core business areas of servers, and to reduce its debt loading.

Broadcom Acquisition of VMware

With Broadcom’s acquisition of VMware in late 2023, the company unlocked substantial growth potential. To show immediate winnings from their investment, Broadcom announced a total and near-immediate shift and removal of VMware perpetual licenses to subscription pricing, with the idea of creating a steady and recurring revenue stream.

Broadcom VMware Licensing Changes

The following points highlight, in detail, changes in the licensing model stemming from the acquisition by Broadcom. This emphasizes a monumental shift for current VMware customers.

Removal of Broadcom’s VMware Perpetual Licenses

Like most software companies, VMware had already started changing their perpetual model into a new VMware licensing model based on cloud-based consumption but had lacked the speed of transition due to the sheer size of the user base. So, transitioning to Broadcom’s VMware Subscription Pricing is a top priority for the company.

However these VMware licensing changes also require changes in mindset and budgeting to calculate VMware license costs before opting for subscription plans. Broadcom had proposed a dramatic 50%+ price cut in an early trade-in incentive to new VMware licensing subscriptions, coupling discounts with ‘higher’ support levels.

And in the final hammer blow for Broadcom VMware perpetual licenses, the company announced that it would no longer offer perpetual support renewals or SnS contracts. Businesses with active perpetual licenses can continue to use them but moving to a subscription model will be mandatory once the contract expires in order receive continued support or updates.

Few companies condone the use of unsupported software, so switching to a subscription-based model or an accredited third-party are the only realistic alternatives.

A Simplified ‘VMware by Broadcom’ Product Portfolio to License

Broadcom also announced that VMware would be dramatically simplifying their product portfolio from 168 products to focus on just four primary offerings with immediate effect:

1. VMware Cloud Foundation (VCF)
2. VMware vSphere Foundation (VVF)
3. vSphere Standard (VVS)
4. vSphere Essentials Plus (VVEP)

The product family above is broadly known as ‘VMware by Broadcom’.

Product lines that were to be EOL are extensive: VMware’s vSphere Hypervisor (Free Edition), VMware vSAN, VMware NSX, VMware HCX, VMware Site Recovery Manager, VMware vCloud Suite and VMware Aria products are also no longer available for individual sale, although some can be subscribed as add-ons to the Foundation products. (e.g. vSAN an is now part of VCF and available as an add-on on a per TB usage). They also announced the sale of their desktop solutions.

‘License Per Core’ Model

The least documented change, but not without its own significant price implications, occurs now VMware are to offer licensing pricing per core vs per CPU.

All quotes now have a minimum requirement of sixteen cores and with a typical mid-range server having between 16-32 cores, subscription licensing quickly adds up. As an example, 4 CPUs with 4 cores equals 64 cores, which could lead to expensive support costs.

6 Impacts of the New VMware Licensing Model and Broadcom Acquisition

The acquisition of VMware by Broadcom has brought about an enormous shift to the way customer’s VMware devices will be managed. We have highlighted 5 impacts of the acquisition and how the new subscription-based model for VMware will likely affect IT teams moving forward.

Before that, this video provides a snapshot to the varying effects for VMware customers since the Broadcom acquisition:

1. Considerable Increase in Support Costs

Most organizations, though particularly small and Medium-Sized Enterprises (SMEs), may find themselves at a disadvantage due to the increased costs associated with the subscription model, it is particularly challenging for businesses that prefer the upfront cost and long-term value of perpetual licenses. VMware pricing changes can be staggering, with our VMware Support webinar showing that some customers are experiencing a 450% increase in support costs.

SMEs are often in budgetary restrained sectors such as education and healthcare. Here the transition will lead to higher ongoing operational costs coupled with IT budgets already set on three- and five-year cycles of accounting.

Broadcom VMware’s licensing change and speed to pivot looks as if it will not wait, so organizations need to seek creative ways to offset cost surges.

2. Worsened Support Quality

VMware has faced huge criticism from customers that the level of support for their devices since the Broadcom acquisition has deteriorated considerably.

Broadcom already had a poor reputation for customer support, with it being both hard to access and engineers possessing an insufficient level of experience. Factor in a supposed preference to focus on clients who are more profitable, many VMware customers are becoming frustrated.

3. Stricter licensing

Broadcom’s method of operating post-acquisition is known for profitability first, shown in the first batch of VMware Broadcom price increases, but overnight these can go higher, or license conditions can be tightened.

SMEs are likely to inherit features within the compulsory bundles that they will rarely need, bloating their environments. Bundles also mean compatibility with far fewer external solutions, delivering a narrower Hardware Compatibility List.

4. Lack of Innovation

There are concerns that Broadcom could stifle VMware’s innovation record. Broadcom has a reputation for being largely focused on profitability, but some fear this could stifle VMware’s inspiring innovation record. If R&D is reduced, VMware’s competitive edge could be undermined. Customers therefore have real concerns for VMware’s ongoing roadmap.

5. Loss of Partner Eco-System

What of VMware’s former global partner network of resellers, system integrators, MSPs and cloud providers? Initially it looks like only those providers who are currently already aligned with Broadcom, (especially those within their exclusive Expert Advantage Partner Program) will benefit.

With the discontinuation of the VMware Cloud Service Provider program, numerous smaller partners will also be dropped. Customers who have relied on support for VMware from their preferred reseller of years may have no choice but to swap trusted advisors, and fast.

Third-party maintainers also have a natural intermediary role here. They are already versed, VMware trained and certified, and experts at infrastructure migration planning.

6. Horizon Product Line Sold Off

Since the acquisition of VMware by Broadcom, the VMware Horizon product division has been sold off to the global investment firm, KKR, rebranded as Omnissa and established as a standalone company. Horizon is a virtualization solution, allowing users to access desktops and applications virtually via a centralized environment.

A consequence here is that this introduces risk to service delivery. It can no longer be guaranteed that customers can enjoy a sufficient standard of quality from VMware, which can negatively impact product reliability.

Top 6 Recommendations to Adapt to VMware’s Licensing Changes

It is unlikely that VMware users will stay passive and ignore the inevitable changes that face their environment. A few outraged customers have taken their grievances to the highest levels in EU Courts claiming anti-trust violations. Here’s our top 6 recommendations for next steps.

1. Audit existing VMware Licenses

It now essential to understand what’s running under VMware in your estate. And because the portfolio used to be so extensive, it’s highly likely that you will need professional support to do so, identifying which underutilized licenses can be eliminated; which are compliant and cannot be deemed as misaligned by a Broadcom audit; and to give you the most comprehensive benchmark yet as to how to be able to respond in the months and years to come.

2. Consider Alternative Support Option for VMware Devices

It is not advised to leave VMware devices running without a support provider. Instead of Broadcom VMware OS support, an alternative reputable Infrastructure Managed Service Provider with accredited VMware pre-trained engineers on response, is a viable solution to give you the right software support 24×7.

3. Plan a Transition Roadmap

Moving to VMware alternatives is an option, in fact, VMware’s competitors are queuing up with attractive competitive take-out programs.

However before you rush in, assess the design; clarify the migration strategy (for workloads, business critical apps and data); testing regimes; implementation plans; and monitoring needs. If you have a valid plan, your negotiating stance improves dramatically.

4. Seek Replacement VMware Licenses

VMware licenses from different providers are another possibility. This includes global brands such as Microsoft, Red Hat, and Nutanix who provide alternatives to both VCF and VVF.

5. Trade-In Deals

Consider leveraging any trade-in deals that may be currently on offer for your perpetual assets to offset the sting, knowing that the pricing incentives on the table from Broadcom are unlikely to hang around.

6. Keep Up-to-Date and Informed

Broadcom’s take-over of VMware is an evolving story, and we can see from their acquisition history that we are unlikely to be at the end of the many twists and turns.

VMware Support from Park Place

At Park Place Technologies, our VMware third-party support provides software support with an improved approach to assess, advise, and fix issues surrounding software, operating system, and compatibility issues for your VMware devices – all this while also saving you 30-40% in support costs compared to Broadcom/VMware.

Support and maintenance will be delivered by our VMware L3 engineering team who provide end-to-end VMware assistance including equipment configuration and troubleshooting any issues you may have, such as answering “how to” questions and finally delivering complete remediation.

We also provide IT infrastructure managed services, so we can monitor and manage your VMware environment; this includes fixing any issues and providing patches and upgrades. Finally our IT professional services team can be called upon if you’re thinking of leaving VMware – we can ease your migration to alternative devices such as Nutanix or Hyper-V.

Contact Park Place Technologies today to hear about our VMware support service, ensuring increased Uptime, at a fraction of the OEM cost.