6 Key Predictions for VMware Users Post Broadcom Acquisition

Broadcom’s $61 billion acquisition of VMWare in November 2023 has ignited discussions and speculation across the tech community as experts observe various transformations taking place within both organizations. As the company integrates VMware’s offerings into its portfolio, users are eager to understand how the strategic changes will impact their operations, costs and strategic planning.

Below are six key predictions based on the latest developments and potential impacts of this landmark acquisition:

1. Increased Focus on Enterprise Solutions

One of the most anticipated shifts post-acquisition is Broadcom’s likely emphasis on enterprise-centric solutions. Broadcom has a history of maintaining a large enterprise clientbase, and this acquisition is expected to further the trend by offering enhanced features and services designed to meet the complex needs of enterprise organizations. The VMware Cloud Foundation, their flagship enterprise-class hybrid cloud solution, will encourage customers to run business-critical and modern applications securely, resiliently and cost-efficiently, especially after a reduced subscription list price and enhanced support service for this solution.

Additionally, with the launch of VMware vSphere Foundation, a simplified enterprise-grade workload platform for mid-sized to smaller customers, vSphere will integrate with intelligent operations management for optimal performance, availability and efficiency. Both VMware Cloud Foundation and VMware vSphere Foundation will include optional advanced add-ons such as storage, ransomware and disaster recovery services, and application platform services.

While Broadcom’s acquisition of VMware is poised to enhance offerings for enterprise clients, non-enterprise customers may face challenges related to increased costs, reduced support, limited access to advanced features and a growing need to evaluate alternative solutions.

2. Changes in Licensing Models

VMware’s strategic overhaul is reshaping both licensing models and their impact on users. Here’s how:

• End of Perpetual Licenses: VMware will no longer sell new perpetual licenses. All future offerings will be available only as subscriptions. This shift aims to provide predictable cash flow for customers. While subscription models spread costs over time and improve cash flow predictability, they can also lead to higher total costs over the software’s lifecycle, impacting overall financial planning for VMware users. To overcome these financial implications, users may need to renegotiate contracts or explore alternative solutions to fit their budgetary constraints.

• Introduction of Bundled Services: VMware products are now offered in two main bundles: VMware Cloud Foundation (VCF) and vSphere Foundation (VVF). With this shift comes the risk of increased costs, particularly for customers who do not require all the services included in the bundles. For instance, vSphere ENT+ customers might see 2x to 3x increases now that this product is only available bundled with vSAN and vRealize licenses, especially for those who are not HCI customers. The elimination of standalone options, replaced by high-priced bundles and a capacity-based vSAN licensing model, means prices will vary substantially from historical perpetual license experiences. Customers must plan carefully around their infrastructure assumptions.

• Core-Based Pricing: Licensing is now based on the number of CPU cores, which can lead to higher costs when compared with previous pricing models, especially for organizations using high-core-count CPUs.

Implications for customers

• Cost Predictability: Subscription models spread costs over time, providing more predictable budgeting, though they may result in significantly higher total costs over the software’s lifecycle compared to traditional perpetual licenses.

• Potential for Increased Expenses: Bundling strategies may lead to significant price increases for existing customers, particularly those transitioning from vSphere Enterprise Plus to bundled offerings like VVF or VCF. This transition may require users to purchase more than they need due to Broadcom’s focus on enterprise solutions and bundled services.

• Trade-In Incentives: Broadcom is offering incentives for customers to trade in their perpetual licenses for subscriptions, which may help ease the transition and provide updated features.

• Support Continuity: Customers can continue using perpetual licenses as long as they have active support contracts, but transitioning to subscriptions will be necessary for future support and updates.

3. Impact on Support and Customer Service

Concerns have arisen among VMware’s extensive customer base about Broadcom’s historic pattern of reducing investment in support and innovation following acquisitions.

Additionally, transitioning to a subscription-based licensing model and the end of perpetual licenses could complicate license management and support processes, leaving customers to navigate a more complex landscape with potentially less support available to them. However, VMware will maintain active support for the duration of existing contracts.

VMware’s Fortune 500 customers should anticipate changes in their support interactions and plan accordingly. To mitigate potential disruptions, they might need to invest in third-party support services or enhance in-house capabilities to manage VMware solutions independently. Staying informed about Broadcom’s support strategies and preparing for a transition period will be crucial for maintaining operational stability.

4. Product and Service Realignments

As part of its restructuring efforts, Broadcom has divided VMware into four divisions, each focusing on different product subsets: VMware Cloud Foundation (VCF), Tanzu (TNZ), Software-Defined Edge (SDE) and Application Networking and Security (ANS).

Many VMware solutions can no longer be purchased as standalone products, and another 56 platforms have been eliminated as standalone SKUs. This includes popular solutions like VMware vSphere+, VMware Aria Suite and VMware NSX. Some of these products have been integrated into VCF or VVF, but others, such as the free ESXI hypervisor, have been discontinued. This is a significant loss for users who relied on the free version to test projects before moving into production. Old users should plan for potential product discontinuations by exploring alternatives or upgrading to newer, supported solutions to avoid disruptions.

5. Increased Migration Away from VMware Technology

Forrester predicts that 20% of VMware customers will switch to a new virtual machine vendor in 2024 due to Broadcom’s policies. This anticipated shift reflects a growing dissatisfaction among users who have experienced years of significant price increases and support degradation.

For those considering a migration, it’s crucial to conduct a thorough evaluation of alternative technologies. Factors such as compatibility, support, cost and scalability should guide decision-making. Engaging with industry experts and leveraging peer networks can provide valuable insights into the best alternatives. A well-planned migration strategy will be essential to minimize disruptions and ensure a smooth transition to new platforms.

6. Divestment of Non-Core Assets

The acquisition of VMware has sparked concerns about reduced innovation and support as the company shifts focus to private and hybrid cloud solutions for large enterprises. CEO Hock Tan’s plans to divest VMware’s end-user computing and Carbon Black units, seen as non-core, echo past Broadcom acquisitions like CA Technologies and Symantec, where customers experienced slowed innovation and support. This focus on core cloud offerings raises concerns about diminishing support for existing products and potential customer dissatisfaction. The divestment could also result in lost market share in the end-user computing space, as customers may look for alternatives amid VMware’s shifting strategy.

The Broadcom acquisition represents a significant turning point for VMware users. Understanding the potential strategic changes and preparing for their impacts will be crucial for maintaining operational stability and leveraging new opportunities.

By proactively addressing these changes and staying informed, VMware users can navigate the post-acquisition landscape and reassess IT strategies, explore new solutions and enhance technological capabilities. Whether you plan to continue with VMware, opt for a public cloud solution or seek alternatives, Material offers tailored VMware solutions to fit unique organizational needs. Talk to our experts today to discuss your needs and find the best path forward.