At Bespin Global, our customers who still run on-premises data centers are seeing costs skyrocket and asking us to help assess their options.
A Quick History: Broadcom Acquisition and VMware Transition to Subscription Model
In early December, shortly after Broadcom completed its $69 billion acquisition of VMware, the company announced a significant shift in its business model. VMware will no longer offer perpetual licenses, they are shifting to a purely subscription based price model. This means reducing nearly 9,000 product SKUs and 160 product bundles down to two primary bundles: VMware Cloud Foundation (VCF) and VMware vSphere Foundation. The VCF bundle is their enterprise offering including: compute, storage, and networking, with the full suite of cloud management services. VMware vSphere Foundation is tailored for smaller and mid-sized customers with a smaller feature set.
"It's Going Up How Much??"
As part of the restructuring, Broadcom has announced that they are retiring all perpetual licenses for VMware, and replacing them with updated pricing for subscriptions to VCF and vSphere Foundation. The end result is a series of price increases that are a magnitude higher than the previous costs many customers were paying. According to a CloudBolt Software report1, almost all surveyed IT decision-makers expect their VMware bills to increase significantly. Three-quarters expect costs to more than double post-acquisition. Some CIO's reported a 500% increase. Historic investments in perpetual licenses that were still deprecating on balance sheets are now worthless. Licensing costs also impact growth plans and hardware refresh cycles. And to top it off, unless you are one of the largest VMware customers, in most cases the new prices are non-negotiable.
Can't You Just Rent Licenses from AWS?
As of April, 2024, AWS is no longer able to resell VMware. The "VMC" (VMware on AWS) product line has been discontinued. Similarly, a large number of reseller partners in the cloud ecosystem have been informed that they are no longer able to resell VMware to their customers.
Navigating a New Strategy
Rather than accept a massive cost increase for legacy software, many of our customers are coming to Bespin Global's Professional Services Consulting practice for business planning and strategy assistance. We're helping these clients to analyze their overall IT estate, software and datacenter contracts, migration paths and dependencies, and overall ROI for staying the course with VMware versus pursuing a modernization and cloud migration effort.
Here are some of the hot-button issues that we recommend any VMware customer analyze and understand:
1. **Evaluate Current Contracts** Review your existing contracts to understand the impact of the changes and identify the scope of how they affect your agreements.
2. **Assess Alternatives** Explore all your available alternatives in the context of your new price basis. Many customers who previously found it more economical to remain in their on-premises data centers are now reassessing cloud migration. There may also be options to monetize your existing datacenter contract, hardware, and licensing agreements.
3. **Budget Adjustments** Prepare for the short-term impact of cost increases on your IT budget and communicate with your finance and executive teams in advance of Q4.
4. **Stay Informed** Keep up-to-date with the latest developments and announcements from Broadcom and VMware to ensure you are aware of any further changes.
5. **Talk with your Partners** Partners like Bespin Global benefit from the perspective of seeing hundreds of similar companies going through the same issues you are. We're always happy to offer advice, whether strategic or technical, to help old and new customers handle these types of transitional periods.
Is It Time For a Migration?
If you decide that it is time to reconsider a move to cloud-native infrastructure, Bespin is offering a 30-day program to plan your migration and get a head start.
We hope this overview was helpful. Tune in next week for a technical deep dive into some of the hurdles and challenges of the Broadcom VMware acquisition in part 2 of this series.
1 https://www.cloudbolt.io/industry-research/vmware-acquisition-aftermath/
