VMware: what changes after the acquisition of Broadcom

Implications for customers using VMware products 

After Broadcom's acquisition of VMware, there are and will be significant changes for customers: let's find out what they are and how WEGG can help make the transition less dramatic.

Following the completion of Broadcom 's $61 billion acquisition of VMware in November 2023, the well-known virtualization technology software house announced two major changes regarding its licensing model and product offerings:

• Change in licensing model: from perpetual licenses to subscriptions

As of the official announcement on December 11, 2023, effective immediately, perpetual licenses will no longer be available for subscription of new licenses. This is because of VMwares choice to offer only subscription solutions as the standard for cloud consumption: the announcement states that the company sees this model as the most effective for innovation and flexibility in supporting customers as they undertake their digital transformations.

VMware makes it known that it will ensure that customers can continue to use the perpetual licenses they have already purchased and the related support service (as per the contractual terms), but it will no longer be possible to renew SNS (Support and Subscription) contracts for perpetual offerings.

In this regard, Broadcom will activate a special license trade-in program to ease the transition to this new licensing model: in short, it will help customers trade-in their perpetual products in exchange for new subscriptions.

• Simplifying the offering into two macro-bundles

The official announcement also states that there will be significant portfolio simplification across all VMware by Broadcom divisions, motivated-at least according to the vendor's statement-by feedback from customers and partners who complain about the complexity of offerings and related go-to-market.

Specifically, the two main offerings will be:

1. VMware Cloud Foundation: this existing software stack is designed for enterprise-class hybrid cloud and includes solutions such as vSphere, vSAN, NSX and vRealize Suite. Broadcom says it has halved the list price of the previous subscription and added higher service levels, including improved support for activation and lifecycle management.
2. VMware vSphere Foundation: this is a new solution that offers a simplified enterprise workload platform for small and medium-sized customers that is based on vSphere integrated with operations management. More details are expected to follow, but this introduction is likely due to the historical tendency of customers of this size to look no further than the core virtualization offering.

What changes for VMware customers

We are getting reassurances from the vendor about how the changes made will improve things, but Broadcom's acquisition policy (see CA Technologies and Symantec in 2019) portends a transition that is certainly not easy and free of disruption.

Let's look at them in detail:

• asome solutions will no longer be available for purchase as standalone

In the Jan. 22 statement, VMware clarified about more than 56 VMware platforms that have been "eliminated" and no longer available as standalone SKUs (and here we recall the huge concern of customers and partners about this), including much-loved solutions such as VMware vSphere+, VMware Aria Suite, and VMware NSX: some of whichhave decided to include them back as part of VMware Cloud Foundation (VCF) or VMware vSphere Foundation (VVF) vSphere Foundation (VVF), while others have not.

This is the case, for example, of the discontinuation of the free ESXI hypervisor, which for many was the stepping stone in using the VMware stack: in fact, the ability to test projects with a free version before moving into production was highly valued.

With the requirement to subscribe to software package subscriptions, the first discomfort will surely be related to figuring out whether what one already has at home fits into the software packages offered and what the cost differences are if the grounding of new services and platforms that cover the required features and now no longer available is planned.

• there may be budgetary consequences  

The "forced" transition to a business model focused on annual recurring revenues could also have some not insignificant budgetary implications regarding recently purchased perpetual licenses.

If estimates had been made for the amortization period of associated perpetual licenses, now that license and support costs may not be maintained over the expected period customers will find themselves having to investigate contrivances to be able to amortize multiple fiscal periods in a single year, even going so far as to sacrifice other (equally important) budgeted needs.

• pthere could also be consequences on operating  

Switching from perpetual licenses to subscriptions could also have operational consequences starting with the license keys. They are version-specific: having "time-based" license keys valid only for the subscription period could have an impact when upgrading to a newer version or renewing the subscription.

To avoid service interruptions, it may be necessary to change them, with all the inconvenience associated with installing and communicating them.

• VMware's "legacy" partners may no longer be available for mediation. 

Considering that most companies do not work directly with VMware, but through partners, the news that Broadcom is terminating partner agreements with VMware resellers and service providers, eliminating VMware's partner program and sales incentives, and forcing existing partners to reapply for their roles, suggests different terms of sale in the future to those to which customers are already accustomed.

So there may be a questioning of the existing ways of contacting and negotiating.

While these changes in organization and subscription model are in line with current market trends, in the long run there could be significant costs associated with the transition , related to product replacement and continuity, but also to understanding the new contract terms.

According to Forrester, this policy could lead to 20 percent of VMware customers dropping out in 2024 and switching to a new virtual machine vendor shortly. This is a perceived deterioration for these realities, which, according to analysts, are exhausted by years of "significant price increases and support degradation" and complain about the shelfware of certain modules, such as NSX and Aria Suite/vRealize Suite, being forced back into the mandatory subscription.

Considering that many entities in the industrial, military and banking spheres rest their services on VMware, there could be no small upheaval within IT infrastructures if a decision is made to switch vendors.

One would, in fact, have to retrain staff to the new systems and then verify that performance is at least equal: training and analyzing SLAs takes time and effort on the part of the entire IT team.

How we can help at WEGG 

At WEGG we are experienced consultants in licensing and what-if scenario analysis so we can support you in multiple ways:

• by analyzing the functional needs associated with the installation of licenses., and all’installazione delle licenze 

We delve with you into what needs led to the purchase of perpetual licenses and related support services, to verify their functional coverage even within the new subscription bundles.

We then start with an inventory of perpetual licenses (including renewal and expiration dates of support services) to help you gain clarity on active contracts. If you would like to proceed with divestment (again, if coverage is deemed to be functional to the consumption detected by the SAM analysis) in exchange for the new subscription products, the vendor has made it known that there will be incentives on upgrade pricing and we can also support you in negotiation.

• with evaluation of alternative scenarios 

Dove i nuovi bundle non fossero funzionali alle vostre esigenze di budget, copertura ed effort, possiamo aiutarvi a valutare altri fornitori: come riporta Gartner, ci sono diverse alternative a VMware, tra cui vendor come Nutanix, Scale Computing, Virtuozzo ma anche realtà più grandi come Microsoft con Hyper-V/Azure Stack e Red Hat con OpenShift Virtualization.

Between developer companies and open source, the possible scenarios are many and our analysis can help you identify the best solution with lower cost for the same performance.

If you are a VMware customer and need support in transitioning to the new licensing model or evaluating alternative vendors, please contact us at [email protected]!!