How does Broadcom’s VMware acquisition affect your IT setup?

Change is never easy. The Broadcom acquisition of VMWare, particularly, has led to much uncertainty and risk among enterprises—and they are not happy.

One of the most concerning changes that followed the acquisition was the shift from perpetual licenses to subscription-based pricing. According to some reports, this has led to price increases for some businesses, ranging from 400% to 700%!

Another disruptive change is that VMware Cloud on AWS is no longer being resold by AWS or its channel partners, with the service now available exclusively through Broadcom.

These changes are even more impactful due to the widespread adoption and integration of VMware’s technology. IT leaders are now concerned about the implications of these changes for their infrastructure and cloud strategies. Besides the financial woes, tech leaders are stressed about their future with VMware technologies, given Broadcom’s history with prior acquisitions.

This blog post unpacks the changes brought about by the Broadcom-VMware acquisition, explores their impact on different types of VMware users, and provides a framework to navigate the VMware situation post-Broadcom.

In November 2023, Broadcom completed its $69 billion acquisition of VMware, which now operates as VMware by Broadcom. The acquisition raised several concerns among VMware customers about how VMware would develop software and the changes in business practices.

VMware has been the gold standard for virtualization, but Broadcom dramatically simplified its pricing structure, product bundling, and go-to-market strategy for the entire portfolio. A month later, Broadcom laid off employees, ended perpetual licenses, and terminated all its partner agreements with VMware resellers and service providers, forcing them to reapply.

Many changes were unanticipated and swift, causing disruption on a global scale. We have discussed the changes in detail below.

• End of perpetual licenses

VMware has discontinued the sale of perpetual licenses and will no longer offer support and subscription (SnS) renewals for perpetual offerings.

You can still use your current perpetual licenses with active support contracts but will not have access to support and upgrades. Customers will need to buy the SnS contract on a subscription basis to receive support, updates, and new software versions.

• Transition to subscription licenses

VMware offerings will now solely be available as subscriptions or as term licenses. To encourage customers to take up an annual software subscription, Broadcom has cut the price of VMware Cloud Foundation (VCF).

Additionally, it introduced a “bring-your-own-subscription license” option, providing license portability to VMware-validated hybrid cloud endpoints running VCF.

• Product line changes

As an outcome of portfolio simplification, many VMware solutions will only be offered as part of VCF or VMware vSphere Foundation (VVF) and will not be sold as standalone solutions. However, VMware offers optional advanced add-ons that can be used with these solutions. Some VMware products and services have been discontinued or consolidated.

• Discontinuation of the free ESXi hypervisor

The VMware vSphere Hypervisor (Free Edition) has been marked as EOGA (End of General Availability). There is currently no equivalent replacement product available.

VMware’s hypervisor is deeply ingrained in most organizations’ tech stacks and has been instrumental in cloud adoption and hybrid cloud.

• Change in pricing structure

The new model simplifies licensing to a single SKU—the VCF—marking a significant departure from previously available cafeteria-style options. Furthermore, the pricing structure is shifting from a multifaceted calculation method to a more straightforward, SKU-based pricing model. This simplification aims to reduce complexity in how services are priced and consumed and the licensing process.

• VMware Partner Program overhaul

Broadcom has overhauled its partnership structure with VMware resellers and service providers, terminating all existing agreements and moving to an invite-only model called the Broadcom Advantage Partner Program.

VMware Cloud on AWS is no longer directly sold by AWS or its channel partners
This is another significant change for many users. Customers who previously purchased VMware Cloud on AWS from AWS will not be able to purchase new subscriptions, add-on services, or renew existing subscriptions. They will have to work directly with Broadcom or a Broadcom-authorized reseller to renew their subscriptions and expand environments.

However, customers with active one- or three-year subscriptions with monthly payments purchased from AWS will continue to be invoiced by the cloud giant for the duration of the contract term.

While the changes are significant for traditional VMware users, those utilizing VMware Cloud on AWS face an even more complex situation. Let’s delve deeper into how it affects these two main user groups.

For organizations using traditional on-premises VMware services, the acquisition brings several concerns.

• Potential cost increases

The shift to consumption-based licensing aligns with cloud-based consumption models, but it could increase costs for some organizations, especially those with high-performance computing requirements. The OpEx vs. CapEx allocations have a major impact on budgets.

Furthermore, the transition to consolidated product packages could highly impact businesses using lightweight VMware deployments. The shift to consumption-based licensing could lead to higher costs for some users, especially those accustomed to perpetual licenses.

• Bundled products not aligning with needs

The simplified product bundles might reduce costs for customers deeply integrated into VMware’s ecosystem, but they dramatically raise expenses for users buying single products. Even if you use one product, you must pay for the bundle.

• Focus on enterprise customers

Broadcom has indicated a focus on VMware’s largest customers, potentially impacting smaller organizations’ access to certain products or support levels.

• Uncertainty about product roadmaps

There’s concern about the future development and support of certain VMware products, particularly those not aligned with Broadcom’s enterprise focus. Broadcom is following a familiar strategy from its past acquisitions– seeking to capitalize on its investment by increasing revenues and cutting costs. Organizations want to be better prepared for the road ahead if these decisions impact their critical workloads.

With these challenges in mind, what steps can traditional VMware users take to adapt?

To navigate these changes, traditional VMware users can consider the following options:

1. Evaluating current VMware usage and licensing

Understand how the new licensing model will affect your costs and operations. Review your inventory of perpetual licenses, noting refresh cycles, renewal dates, support services renewal and expiration dates, and familiarize with VMware’s available subscription offers.

For customers waiting for their renewal to come up, now is still a great time to focus on validating the current state and exploring options for a future state.

2. Exploring alternative virtualization solutions

Customers should reassess their VMware strategies to determine whether alternative vendors to the existing VMware stack can alleviate cost increases stemming from the new subscription model.

Research other options in the market that might better suit your needs under the new circumstances. For instance, if you want to remain on-premise, consider switching to an alternate hypervisor like Nutanix.

3. Negotiating with Broadcom

If you’re a large enterprise customer, you may have leverage to negotiate favorable terms with Broadcom. You should seek clarifications on product bundling and renewal terms, understand the new model’s impact on the VMware product suite, and understand the total cost of ownership (TCO).

In addition, customers can seek information on Broadcom’s discounts and leverage it to strike a deal that gives them maximum cost savings. Broadcom will work with customers to facilitate “trading in” their perpetual products for the new subscription products, with upgrade pricing incentives.

4. Developing a long-term strategy

Consider how these changes align with your overall IT and cloud strategy, and plan accordingly. You must consider a long-term virtualization strategy when moving to an alternate product, given a transition will require considerable time and effort.

5. Staying agile and informed

Most customers struggle to navigate these unprecedented changes in their virtualization journey. To form effective virtualization product strategies, you must stay agile and informed about the Broadcom changes.

Some traditional users might consider migrating to a native cloud like AWS for its ease of use and scalability, especially if they lack the in-house expertise to manage on-premises infrastructure. Others might prioritize control and choose to stick with on-premises deployments.

The acquisition’s impact is more pronounced for enterprises currently using VMware Cloud on AWS due to the shift in sales and support channels.

• Disruption in support

With AWS no longer reselling the service, there have been immediate concerns regarding the continuity of services and support for enterprises relying on VMware on AWS.

If you are one of them, you can no longer create, renew, upgrade, self-purchase, or manage subscriptions within the VMware Cloud Services portal. Only read-only subscription details related to VMware Cloud Foundation services will be displayed.

While new purchases have been halted, AWS has assured that current deployments will remain supported under the terms of their existing agreements. However, companies need to evaluate the lifecycle of their contracts and the associated support terms, paying close attention to how these changes might affect future service renewals or expansions.

Broadcom no longer supports the on-demand model. However, as with most cloud services, VMware Cloud on AWS was elastic. If users needed extra capacity, they could summon new hosts quickly and dispense them later. The new arrangement means it’s still possible to spin up new resources, but only with a one-year minimum commitment.

Moreover, Broadcom or a reseller authorized by it must be involved, not AWS or its partners. Organizations may need to familiarize themselves with Broadcom’s support channels and processes.

• Potential cost increases

Broadcom’s pricing strategy differs from AWS’s, and there’s a chance VMC on AWS licenses could become more expensive, given Broadcom’s history of raising prices post-acquisition. Customers have already been reporting licensing cost increases of 3 to 10x.

• Limitations on AWS integration

The level of integration and control between VMC on AWS and native AWS services might decrease compared to the previous setup with AWS managing the offering. Organizations must explore the level of control and available functionalities under Broadcom’s management.

• Limited cloud portability

With changes to VMware Cloud on AWS, organizations may find it more challenging to implement hybrid cloud strategies using familiar VMware tools.

• Uncertainty about future development

There are questions about how prioritized the VMware Cloud on AWS offering will be in Broadcom’s product strategy.

• Re-evaluating partnerships

Broadcom has stringent requirements for joining the new partner program, which has also raised concerns among organizations that they might have to change their tech partners. This can be disruptive as organizations rely on partners for sales, support, and implementation.

Given these substantial changes, VMware Cloud on AWS users must carefully consider their options moving forward.

To navigate these changes, VMC on AWS users can consider the following options:

1. Assess the impact on your current setup

Evaluate how the changes affect your operations, costs, and future plans. This is an excellent time for VMware Cloud on AWS customers to assess their current state with VMware infrastructure and management products.

If continuing with VMware Cloud on AWS, you can look for Broadcom-authorized resellers to find the best terms. Before renewals, scrutinize your existing VMC on AWS contracts to understand terms, termination clauses, and potential upgrade paths.

2. Re-evaluate application needs

It is also crucial to re-evaluate your application needs before considering drastic changes. Not all applications require the complexity of a virtualized environment.

It has always been an “application first” approach and never an “infrastructure first” approach. Focus on the right infrastructure platform to best support your applications, combined with backups, business continuity, and disaster recovery. Consider if some applications can be containerized or run serverless on a cloud platform, potentially eliminating the need for VMC on AWS altogether.

3. Move to public cloud or hybrid cloud solutions

While VMware on AWS is technically not going away, users are faced with a crucial decision: migrate to AWS native solutions or another cloud provider.

While VMC has been popular due to its similarity to on-premises VMware environments, it typically incurs higher costs compared to native AWS solutions. This cost disparity presents an opportunity for businesses to realign their cloud infrastructure for greater efficiency and cost-effectiveness.

Some customers have also noted the convenience of being billed through AWS. Additionally, AWS is offering incentives for migrating from VMC to its native services, making the transition more attractive.

Choosing the right alternative:
The best alternative for VMC on AWS users depends on specific needs and priorities such as cost, complexity, control, application needs, and in-house expertise. By evaluating these factors and the impact of the Broadcom acquisition, users can make informed decisions about their future cloud strategy.

Its position as an incumbent has somewhat sheltered VMware. However, there are fewer excuses for software being tied to a specific infrastructure in this era of Kubernetes, hybrid cloud, and serverless.

Historically, virtualization was a tool to simplify application support, but next-gen applications are less reliant on the underlying infrastructure. In its 2024 Predictions, Forrester stated that 20% of VMware enterprise customers would start to move away from the platform.

Unlike the usual turbulence that follows such acquisitions, AWS has a consistent track record of prioritizing customer-centricity and operational excellence. With robust support systems and a strong focus on customer service, AWS offers a stable and secure environment that businesses can trust.

Thus, migrating to AWS may offer numerous benefits and opportunities for organizations looking to optimize their IT infrastructure and operations.

• Cost optimization

Native AWS services often prove more cost-effective than running VMware in the cloud. AWS also claims that migrating on-premises VMware workloads to Amazon EC2 can provide significant benefits, including reduced operational costs, increased scalability, and improved performance.

AWS Application Migration Service simplifies the process by “providing a seamless, automated block-level replication solution for migrating VMware VMs” to Amazon EC2 instances. Moreover, AWS’ pay-as-you-go model and various pricing options (such as Reserved Instances and Spot Instances) allow for better cost management and optimization.

• Increased scalability

AWS’s vast array of services offers unparalleled scalability options. You can easily scale your resources up or down based on demand, ensuring optimal performance without overprovisioning.

• Improved performance

Native services are optimized for the AWS environment, potentially offering better performance. AWS’s global infrastructure ensures low-latency access to resources and applications worldwide.

AWS also consistently introduces new services and features, giving you access to the latest cloud innovations, such as machine learning and artificial intelligence. In addition, it offers the most comprehensive compliance controls, currently supporting 143 security standards and certifications.

• Comprehensive support for migration

To ensure a smooth migration, AWS and its partners help you navigate your cloud strategy, helping identify pathways, programs, incentives, and support.

For instance, Simform, an AWS Premier Partner with Migration Competency, conducts a thorough analysis of your current infrastructure, applications, and business needs to create a tailored migration strategy.

There are several approaches to choose from, depending on your specific needs and goals:
1. Rehosting (Lift and Shift): Quickly move applications to AWS with minimal changes.
2. Replatforming: Make minor optimizations during the migration to take advantage of cloud capabilities.
3. Refactoring: Redesign applications to be cloud-native, allowing full utilization of AWS services and benefits.

This is where Simform’s VMware to AWS Migration Assessment services come into play. Our VMware specialists and AWS solutions architects analyze your current environment thoroughly to identify dependencies and potential migration challenges unique to your IT infrastructure. We then provide a detailed assessment report that answers all the questions of what, how, and in what order to migrate the components. This assessment helps minimize risks and downtime, optimize costs, and ensure a successful transition to AWS.

1. Initial assessment: We begin by understanding your current VMware environment, including your vSphere platform, vCenter Server, and vSAN setup. This helps us identify potential challenges and opportunities.

2. Application dependency mapping: We create a detailed map of your applications and their dependencies to ensure nothing is overlooked during migration.

3. Cost analysis: Our team performs a comprehensive Total Cost of Ownership (TCO) analysis, comparing your current costs with projected AWS costs to demonstrate potential savings.

4. Migration strategy development: Based on our assessment, we create a migration strategy that aligns with your business goals and technical requirements. We also provide recommendations for how to best take advantage of and use the various incentives and funding options offered by AWS for customers migrating from VMware to AWS.

5. Risk mitigation: We identify potential risks (such as compatibility issues with VMware tools) and develop strategies to mitigate them, ensuring a smooth transition with minimal disruption to your operations.

6. Execution and support: Our team assists with the migration process and provides ongoing support to ensure your new AWS environment operates optimally. Before full-scale migration, we can also set up a proof of concept (POC) to demonstrate the benefits and address any concerns.

Our comprehensive approach helps you not just migrate but also modernize your infrastructure, setting you up for long-term success in the cloud.

The future of VMware post-acquisition is a topic of much speculation. Hopefully, this article will help set a framework for navigating what could be a daunting task. While challenges lie ahead, opportunities also exist for those prepared to adapt and evolve their IT strategies.

Whether you decide to stay with VMware or migrate to AWS, our team of experts can help you navigate the complexities of this changing landscape, ensuring your strategy is tailored to your specific needs. To learn more about how Simform can assist you, contact us today!