Broadcom’s acquisition of VMware represents a significant shift in virtualization and cloud computing pricing, licensing, and product offerings. Explore the implications of this deal and recommendations for customers and partners to navigate these sweeping changes in this blog. Contact us to discuss.
In a move that has sent ripples through the tech and cloud services industry, Broadcom’s acquisition of VMware marks a pivotal shift in the virtualization and cloud computing landscape. This deal has led to sweeping changes in VMware’s product offerings, licensing models, and, most notably, its pricing structure.
Broadcom’s strategic move from perpetual licenses to subscription-based models and bundled offerings has significant implications for VMware’s existing and prospective customers. Let’s delve into the changes further.
How will the changes impact cost
Since being acquired by Broadcom, VMware has shifted to a more streamlined, subscription-based model as part of a strategy aimed at simplifying offerings and aligning costs with customer usage patterns.
This new strategy will impact user segments in different ways. Here’s a look at the key changes:
- Consolidation into two primary bundles: VMware has significantly simplified product offerings from nearly 9,000 product SKUs to two main bundles: VMware Cloud Foundation (VCF) and VMware vSphere Foundation (VVF)
- Transition to subscription-based models: The shift from perpetual licenses to subscription access will allow customers to benefit from recurring payments instead of one-time purchases
- Impact of core-based licensing: Moving from socket- to core-based licensing could significantly impact costs, especially for organizations with high-performance computing requirements
- Mandatory core and socket purchase requirements: The new requirement of buying at least 16 cores across a minimum of two sockets (effectively requiring 32 cores as a base) will significantly increase costs for some users
- Pricing structure adjustments: The new subscription model includes pricing tiers and bundled offerings. Discounts can range from 8% to 35%, depending on the bundle and subscription term. This restructuring might reduce costs for customers deeply integrated into VMware’s ecosystem but dramatically raise expenses for users buying single products
Market and customer reactions to the acquisition of VMware
VMware customers have reacted to these changes with concern, confusion, and frustration. The end of perpetual licenses and the initial uncertainty about continuing the partner program have been particularly contentious.
Educational institutions and small to medium-sized businesses that previously received significant discounts are now grappling with increased support costs and the elimination of traditional discount structures.
The market’s reaction has been further exacerbated by reported delays in licensing renewals and support and OEM portals not operating, disrupting license activation and support services.
Adapting to change
Customers and partners should reassess their VMware strategies in response to these significant changes. We recommend existing customers take the following steps to adapt to the situation:
- Explore alternatives: VMware customers should identify alternative vendors to the existing VMware product stack to alleviate cost increases stemming from the new subscription model. Given this transition will require considerable time and effort, customers must consider their long-term virtualization strategy when moving to an alternate product
- Renegotiate with VMware: Customers should renegotiate their VMware contracts while exploring options. They should seek clarifications on product bundling and renewal terms and understand the new model’s impact on their VMware product suite and total cost of ownership (TCO). In addition, customers should seek information on Broadcom’s discounts against deal term commitment and leverage this information to strike a deal that gives them maximum cost savings
- Understand the market pulse: The unclear changes in the licensing model and pricing of VCF and VVF bundles have created uncertainty. Most customers are struggling to navigate this unprecedented change in their virtualization journey. Customers need to stay agile and informed to form effective virtualization product strategies
The outlook for the industry
Broadcom’s acquisition of VMware represents a significant turning point in the cloud and virtualization industry, with profound implications for pricing, licensing, and product offerings.
As customers and partners navigate this evolving landscape, the need for transparency, flexibility, and strategic planning has never been greater. While challenges lie ahead, opportunities also exist for those prepared to adapt to these changes. The coming months will be telling as the industry adjusts to a new era of cloud computing and virtualization services under Broadcom’s ownership of VMware.
To discuss Broadcom’s acquisition of VMware, contact Ricky Sundrani, Vaibhav Jain, and Udit Maheshwari.
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