You’ve likely heard that Broadcom acquired VMware back in November 2023. If you’re listening closely, you may have also heard about Dell severing ties with VMware or even VMware’s sudden breakup with its Channel Partners. But have you heard about VMware’s new subscription-based pricing model that has CIOs concerned about cloud budget overruns and price hikes as high as 100%?
Here’s a breakdown of the facts, the impacts, and some next steps to consider for all VMware clients.
Licensing Changes to VMware Cloud Infrastructure
VMware has announced key changes to their cloud infrastructure services including:
- The end of on-premises software: The end of perpetual software licensing contracts for VMware Cloud Foundation solutions including both public and private cloud infrastructure services — some of the products affected include VMware vSphere, VMware vSAN, VMware NSX, VMware HCX, VMware Site Recovery Manager, VMware vCloud Suite
- The end of support: VMware is no longer offering support and subscription (SnS) renewals for perpetual offerings
- The end of usage: Clients can use their products until their current contract ends
- Discounts: In reference to making discounts available, the company stated: “We’ve reduced the previous subscription list price by half and added higher support service levels, including enhanced support for activating the solution and lifecycle management”
- Trade-ins, and incentives: Trade-ins and BYO license options include portability capabilities that “allow customers to purchase subscriptions of VMware Cloud Foundation from Broadcom and flexibly deploy those subscriptions to VMware validated hybrid cloud endpoints, as well as their own on-prem data centers”
In explaining licensing changes, VMware cited a multi-year journey to simplify its portfolio of services (as requested by its clients and partners) and the subscription model as the “industry standard for cloud consumption.”
Price Hikes of 100%: The Impact on Clients
The new subscription-based pricing model is being associated with terms like “unfair” and “universally unpopular” as news publications and research firms interview VMware clients on the new changes. AT&T was facing a proposed annual increase of 1,050% in its VMware bill, and trade publications now report Broadcom is taking a damage control approach with VMware.
Constellation Research informally polled 150 CIOs on the subject and found that one executive reported that “peers are seeing price hikes of 100%.” There was a collective agreement that while VMware services are hard to rip and replace, most CIOs were:
- Shopping their options to seek out alternative services
- Recognizing that market competitors are taking full advantage of the situation
- “Expecting VMware’s innovation, support and service to all decline”
Behind Cost Concerns Lurk Managerial Burdens
Price hikes are the primary concern but not the only one. Principal Analyst at Freeform Dynamics, Bryan Betts, explained it best:
“Subscriptions rarely cost less than purchases over time and require buyers to account for them differently.”
Cloud infrastructure subscriptions will likely line the pocketbooks of Broadcom executives seeking financial payback on their $69B investment in VMware. But as Betts also points out, clients will feel more than just the financial pain – they must “account for them differently.”
Subscriptions are a managerial burden too.
Because perpetual licenses are static in nature, they need little oversight from IT financial analysts. On the other hand, subscriptions require consistent tracking and monitoring to ensure all licenses are fully used and services are in perfect sync with fluctuating corporate demands. Anything less would amount to cloud waste.
Much like software subscriptions, infrastructure as a service (IaaS) pricing models are prone to ad hoc deployments, overprovisioning, and underuse – issues that can threaten the long-term financial sustainability of cloud innovation when left unmanaged.
Effective cloud subscription management involves establishing FinOps strategies and practices to keep spending in check. Forrester warns that without a managed service provider FinOps programs typically start with three full-time employees and home-grown software platforms requiring millions of dollars in technology investments. This is where Tangoe can help!
Rocks and Hard Places: Security Policies, Exit Strategies
The end of VMware software support is also a deal killer for clients, as most IT and security leaders require corporations to operate on services and applications that are actively managed and maintained. Without technical support, security updates, and vulnerability patches, clients have their hands tied.
There’s little choice but to take the invitation to “upgrade” to the subscription model or jump ship.
But migrating cloud workloads to an alternative service can be a complicated, multi-step process that can start with virtual machine conversions and containerization. Rest assured competitors are salivating at the opportunity, rushing their promotional offers to market. The real question is: Do the promos come with a smooth migration path?
Take Bait or Jump Ship? Knowing What’s Best for You
Should you take the invitation to migrate to the subscription model or switch to private and public cloud services from another provider? The next article in this series guides you in evaluating what’s best for your organization with a list of suggested actions and next steps to help you weigh your options.
Read the next article for six recommendations to consider.
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