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VMware Acquisition Fallout: Licensing Disputes and IT Service Provider Options after Broadcom's Purchase

Dive into the licensing issues and prospective workarounds confronting IT service suppliers post-Broadcom's procurement of VMware. Examine the repercussions on industry operations and proposals.

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4 min read
Delve into the licensing hurdles and workable substitutes that IT service providers could face post...
Delve into the licensing hurdles and workable substitutes that IT service providers could face post Broadcom's takeover of VMware. Gain insights into the repercussions on market procedures and offerings.

VMware Acquisition Fallout: Licensing Disputes and IT Service Provider Options after Broadcom's Purchase

Navigating the Storm: VMware Licensing Challenges for IT Providers

The 2023 acquisition of VMware by Broadcom has turned the tech world upside down for IT service providers and partners alike. With a firm focus on shifting VMware's licensing model from perpetual to subscription-based, changes are aplenty—and none of them come without a fight. Here’s a look at the key challenges faced by IT service providers, and why many are steadily turning towards Microsoft and AWS as viable alternatives.

Subscription hell: A new price tag for old friends

The most significant alteration since the Broadcom takeover is the retiring of VMware’s perpetual licenses, replacing them with a subscription-based model. While the aim is to create a steady revenue stream, the longer-term impacts on customers lie elsewhere—primarily on their budgets. Smaller to medium-sized enterprises (SMEs) are hit the hardest, struggling to adapt to the hefty subscription costs, which previously wouldn’t have been an issue with the one-time capital expenditure (Capex). This evolving financial landscape isn’t for the faint-hearted. In some cases, support costs have ballooned up to 450%, sending shockwaves through the industry, as seen with the London Grid for Learning.

Simplification, but at what cost?

Broadcom’s reorganization of VMware’s product portfolio has rendered it starkly different, stripping it down to four main offerings—VMware Cloud Foundation (VCF), VMware vSphere Foundation (VVF), vSphere Standard (VVS), and vSphere Essentials Plus (VVEP). Past products like NSX, vSAN, and VMware Aria have met either a premature demise or rebranding as add-ons to the primary packages. Despite the streamlined portfolio, businesses relying on these tools have been left confused and needing to adapt in order to stay afloat.

License hurdles and mounting financial implications

Another stumbling block involves VMware’s shift to a "license per core" pricing model, which has a minimum requirement of 16 cores per CPU. This change can dramatically amplify licensing costs for organizations using mid-range to high-core servers, adding to the financial pressure on IT service providers as they grapple with Broadcom's new licensing rules. Existing Enterprise License Agreements (ELAs) will experience little immediate impact, but when these terms culminate, customers will be compelled to migrate to the subscription-based model to continue enjoying support. While there is a migration path provided for those holding perpetual licenses, many are finding these paths to be less than cost-effective, setting the stage for higher renewal costs down the road.

The changing of the guard

Broadcom's partner and reseller networks have undergone a radical transformation, too. With Broadcom opting to directly manage large strategic accounts, smaller resellers—who previously played a vital role in supporting these accounts—have found themselves on the sidelines. As a result, many IT service providers have been forced into direct interactions with Broadcom or must seek larger resellers to manage their licensing and support needs, potentially resulting in the loss of personalized support and discounts.

Finding a new dance partner

In the face of these licensing and support challenges, IT service providers can no longer afford to stand still. With the flexibility and scalability offered by public cloud platforms like AWS and Microsoft, they're seriously considering making a switch to avoid the restrictions and vastly increased costs required by Broadcom's subscription model. AWS, for example, permits businesses to start and stop virtual machines as needed, making it an attractive alternative for those striving to escape the clutches of Broadcom's rigid licensing.

Embracing the wilderness

As the IT landscape evolves in this post-Broadcom era, it's clear that adaptation is essential for IT service providers to maintain profitability. Here are some strategies to help them weather the changes:

  1. Thorough License Audit: Critically assess your VMware usage to ensure compliance and identify any optimization opportunities under the new licensing model.
  2. A Customized Transition Strategy: Develop a tailored plan to transition to the subscription model, balancing immediate changes with long-term strategic considerations.
  3. Leveraging Incentives: Utilize any financial incentives Broadcom offers to facilitate a smoother transition to subscription-based licensing.
  4. Exploring Alternatives: Assess cloud alternatives like AWS and Microsoft, casting a keen eye on their flexible pricing and support structures, as they may prove more cost-effective and lenient in the long run.

In a Nutshell: Riding Out the Storm

The Broadcom acquisition of VMware has forever changed the licensing and support landscape for IT service providers and partners. Faced with steep financial burdens, reduced flexibility, and partnership restrictions, many are compelled to look beyond VMware for more reasonable alternatives. As providers navigate this new reality, a strategic approach is paramount for overcoming the licensing changes of Broadcom and seizing the opportunities within the evolving cloud landscape. The ongoing dance between virtualization needs and licensing costs is far from over, but the future looks increasingly promising for those embracing change and adaptability.

  1. Facing hefty subscription costs under the new VMware licensing model, many IT service providers are struggling, particularly smaller to medium-sized enterprises (SMEs), whose budgets are considerably affected.
  2. The shift from perpetual licenses to subscription-based models in VMware's portfolio has simplified the product structure, consolidating it into four main offerings, but this change has left some businesses confused and needing to adapt.
  3. Organizations using mid-range to high-core servers may experience a dramatic increase in licensing costs due to VMware's "license per core" pricing model that mandates a minimum of 16 cores per CPU, putting additional financial strain on IT service providers.
  4. With Broadcom managing large strategic accounts directly and leaving smaller resellers marginalized, IT service providers may face a loss of personalized support and discounts, prompting them to consider cloud alternatives like AWS and Microsoft for more flexible pricing and lenient support structures.

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