Broadcom recently acquired virtualization giant VMware in a $61 billion deal that closed in November 2022. As part of Broadcom’s strategy to maximize VMware’s value, the company has decided to shift VMware’s business model entirely to a subscription-based approach.
Effective December 11, 2023, VMware ceased offering perpetual licenses and related support and subscription services for its products. This includes popular solutions like vSphere, vSAN, NSX, and vCloud Suite. Customers can no longer purchase VMware products with a one-time upfront perpetual license cost.
VMware will now only sell its software via term-based subscriptions. This provides recurring subscription revenue versus a single license purchase. It also contractually obligates customers to ongoing payments to maintain access to VMware products.
Broadcom aims to rapidly expand VMware’s subscription transition over the next three years. The goal is to grow VMware’s EBITDA from around $4.7 billion currently to approximately $8.5 billion by 2025. Shifting to subscriptions is the primary vehicle Broadcom plans to achieve this aggressive target.
Existing VMware perpetual license customers can continue using their purchased licenses. However, they will lose access to ongoing support and updates when their current support contract expires. At that point, customers would need to transition to a subscription model to keep receiving product upgrades and assistance.
On December 11, 2023, VMware officially transitioned under Broadcom’s ownership, leading to significant changes in its licensing structure. This acquisition has prompted VMware to streamline its offerings, reducing the number of products from 168 to just four primary bundles, all now available exclusively through a subscription-based model. These sweeping changes are worrying customers who have relied on perpetual licensing for years.
Overview of VMware’s New Licensing Models
Simplified Product Portfolio: Four Main Bundles + Advanced Services Add-ons
VMware’s new licensing model features four primary bundles, along with various advanced service add-ons. The new offerings are as follows:
- VMware Cloud Foundation (VCF)
- vSphere Foundation (VVF)
- vSphere Standard (VVS)
- vSphere Enterprise Plus (VSEP): This product replaces the previously offered vSphere Essentials Plus (VVEP) due to low demand and is a distinct offering.
Additionally, VMware provides advanced services add-ons, including vSAN, VMware Live Recovery, Private AI Foundation, vDefend Firewall with ATP, Avi Load Balancer, and Tanzu Platform.
Detailed Breakdown of Each Bundle
VMware Cloud Foundation (VCF)
- Model: Subscription-based
- Pricing: Based on per-core usage, with a minimum requirement of 16 cores per CPU.
- Terms: Flexible options available for 1-, 3-, and 5-year subscriptions.
- Support: Premium global assistance with improved SLAs.
vSphere Foundation (VVF)
- Model: Subscription-based
- Pricing: Per-core usage with a minimum of 16 cores per CPU.
- Includes: Production Support, vCenter Standard, and VMware vSAN Enterprise (250 GiB per core).
vSphere Standard (VVS)
- Model: Subscription-based
- Pricing: Per-core usage with a minimum of 16 cores per CPU.
- Includes: Production Support and vCenter Standard.
vSphere Enterprise Plus (VSEP)
- Model: Subscription-based
- Pricing: Per-core usage with a minimum of 16 cores per CPU.
- Includes: Production Support and vCenter Standard.
Customer Concerns and Industry Reactions
The shift to a subscription-only model has left many customers feeling uneasy. VMware’s sweeping changes are worrying customers who now face the prospect of ongoing payments instead of a one-time purchase. Existing customers with perpetual licenses can continue using their software, but they will lose access to support and updates once their contracts expire, compelling them to switch to subscriptions to maintain service.
Many partners and customers have expressed concerns about potential price increases and the continuity of support, especially in light of Broadcom’s recent layoffs within VMware. While some customers may adapt to the subscription model as a modern standard, others feel shortchanged by the abrupt shift from perpetual licenses.
Frequently Asked Questions (FAQ)
What happens when the subscription expires?
There is no grace period at the expiration of the subscription. Customers must renew promptly to avoid late renewal fees.
Can perpetual and subscription licenses be mixed?
A mix of perpetual and subscription licenses is only possible in the vSphere area on a host-based basis. For vSAN, mixing is not allowed.
What are the storage expansion options for VVF?
The vSAN add-on can be used to expand storage, but licensing starts from scratch rather than just adding capacity.
Will there be any changes to Horizon Enterprise?
No changes have been announced yet for Horizon Enterprise.
What is the cost increase?
Costs vary based on individual situations. Consultation with licensing experts is recommended.
For more detailed information on VMware’s new licensing models and to address your specific needs, please contact our specialists for tailored advice.
Conclusion
Broadcom’s acquisition of VMware has initiated sweeping changes that are worrying customers, particularly with the shift to a subscription-only model. As organizations navigate this new landscape, understanding the implications of these changes is crucial. For further assistance and to explore your options, reach out to us today.