Broadcom swallows VMware – what next for the enterprise?

Unless you’ve been hiding under a rock or haven’t been plugged in to the tech news lately, you’ll have probably heard a few rumblings around the Broadcom acquisition of VMware .

VMware built its portfolio of products over the last quarter century and has established itself as a go-to provider of IT systems management software, starting out with a hypervisor through to providing solutions across virtual desktops, software-defined networking, hybrid cloud management, security and more.

Over time VMware’s product portfolio has become more comprehensive but criticism has often been levelled at how complex the products and licensing had become for organisations to navigate. An “à la carte” menu of multiple cuisines, flavours and tastes, if you will.

However, in the last few months, Broadcom have largely ripped up the existing à la carte and told everyone it’s a set-menu now.? If you wanted just a dessert, sorry; it’s a 7-course meal now.? Just drinks and a coffee sir? Sure, but there’s a minimum.

“Surely my VMware costs aren’t going to go up by 500%? Can that really be right?”

The market has naturally reacted with some incredulity. “Surely my VMware costs aren’t going to go up by 500%?? Can that really be right?” was a comment I heard one senior leader say recently.

Well, here’s the thing, for many organizations this may well be their current reality.? Some may get off more lightly but for others it could be much worse. If you’ve only used a tiny fraction of VMware’s product set, but at significant scale, you could be in for a surprise come renewal time.? If you’re responsible in any way for your organization’s IT landscape, I wouldn’t blame you if you’ve already started looking down the back of the sofa for some extra coin.

Part of it is the set-menu aspect above, with Broadcom ceasing availability of products sold individually in favour of a more “suite” style of product bundling. But the other part is moving from individual perpetual licensing models to subscription only. It’s a valid point that many suppliers have moved away from perpetual licensing to subscription-based models, but it’s the way this has been communicated which has set the cat amongst the pigeons for enterprises. Could enterprises have predicted this was coming? Possibly.

Some may prefer a subscription model of course though; with more predictable monthly expenditure as opposed to the traditional large single renewal cost covering multiple years. But I suspect not if the price goes up by a factor of 5x or more… So invest more in the VMware ecosystem, or re-evaluate options?

Let’s take a step back and take a quick look at the history here.

• 1998 – VMware launches.
• 2004 – Data storage giant EMC acquires VMware for $625 million.
• 2016 – Dell completes acquisition of EMC for $67 billion, including VMWare.
• 2021 – Dell spins off VMware as a separate entity.
• 2022 – November; VMware stockholders agreed to approve acquisition by Broadcom.
• 2023 – November; Broadcom acquires VMWare for $69 billion, after various regulatory bodies approve the transaction.

The vast majority of Broadcom’s revenue has traditionally come from communications products via the semiconductor solutions part of its business.? It’s previously been mainly a chipset company but has been on somewhat of an acquisition spree for the last few years, picking up CA Technologies in 2018 for $18.9 billion and Symantec in 2019 for $10.7 billion

Broadcom’s acquisition spree has been most likely spurred by residual impacts of challenging market conditions for competitor Huawei. In 2018 the Trump administration blocked Broadcom’s potential acquisition of Qualcomm, citing concerns linked to China, despite Broadcom being based in Singapore at the time. Broadcom knows it needs to diversify into becoming a software company and with CA, Symantec and now VMware in the fold, it’s well on its way.

Broadcom have become adept at picking up such software companies, trimming the fat and making them much more profitable and we can see evidence of that already here: Broadcom cuts 2,800 jobs+ . But some argue this is not always for the benefit of the end customer.

The Register wrote , after following Broadcom’s investor Day in Nov 21 that Broadcom actively pursue 600 companies typically in highly regulated industries as they’re risk averse and less likely to change suppliers.? The analysis goes on to highlight VMware’s cost of sale is 34% of revenue, a high figure by most organisations’ standards. So, slashing that becomes a key priority for Broadcom's business.

So, what will the effects be for enterprises? It’s certainly true VMware’s portfolio has become complex and individual product lines are not always well integrated.? Trimming the fat here and unifying product divisions under single leadership should pay dividends to enterprises looking to stay with VMware, but what about those who’re spooked by the recent turmoil?

Decision time, but try not to rush into anything.

So where does this leave customers looking down the barrel of a significant VMware licensing price-hike?

Forester writes that “Twenty percent of VMware enterprise customers will escape the VMware stack” during 2024.

If your organisation is in the relatively luxurious position of only being dependent on VMware’s hypervisor, you could have a few relatively easy migration options.? But the deeper you’ve invested in the VMware portfolio, the longer it’s going to take to extract yourself, if you decide that’s the route for you.? Planning for an 18 month+ transition would be start and that will come at a cost of course.

In that time, Broadcom could change their mind. If the licensing changes see an exodus of customers to other technologies, it would be relatively trivial to revert or change up the licensing models once more.? That’s the gamble, but it would be prudent to plan ahead.

If you’re feeling you should jump ship because you’re now feeling locked-in to VMware and somewhat held to ransom over these changes, it’s because, to an extent, you are.? But that doesn’t mean that if you choose another supplier, you’re not going to end up in a similar position with them.

If you can, take your time and assess your options. If you have time before your renewal, take a look at your IT strategy, in particular any drives to move to public cloud and reassess your decision points.? That previous business case that favoured on-premise previously may now tip in favour of public cloud, or at the very least a hybrid-cloud blend with more public cloud than private/on-prem.

Maybe you have a large investment in VMware skills, in which case a VMWare on AWS or Azure VMware Service solution could be an option.? But be mindful with both that current bundled licensing terms from hyperscalers there could also be affected in the future. What you can contract for now, might not be possible in the future, so make sure you check for solution longevity.

Maybe this is the last straw and you’re ready to look at a completely different hypervisor alternative with Nutanix or you’d like to take another look at what Hyper-V, Red-Hat, Oracle or Proxmox could do for you.

If you’ve gone much more deeply into the VMware ecosystem and leveraged their wider portfolio of SAN and SDN capabilities, the options and resulting decision-tree gets ever more complex. Here’s a very quick set of some of the options:

VMware Core Virtualization

VMware vSphere: Example competitors:

• Microsoft Hyper-V
• Nutanix AHV
• Citrix Hypervisor (formerly XenServer)
• Red Hat Virtualization (based on KVM)
• Scale Computing
• Oracle VM
• Proxmox VE: (Open source, combines KVM virtualization and LXC containers)

Networking and Security

VMware NSX: Example competitors:

• Cisco ACI
• Arista Networks CloudVision
• Juniper Contrail
• Open source solutions like Open vSwitch, OpenContrail

Cloud Management and Operations

VMware vRealize Suite: Competitors:

• Microsoft System Center
• Red Hat CloudForms
• IBM Cloud Orchestrator
• Morpheus Data

End-User Computing (Desktop Virtualization)

VMware Horizon: Competitors:

• Citrix Virtual Apps and Desktops
• Microsoft Windows Virtual Desktop / Azure Virtual Desktop
• Amazon WorkSpaces
• Parallels RAS

Storage

VMware vSAN: Competitors:

• Nutanix Distributed Storage Fabric
• HPE SimpliVity
• Dell EMC VxRail
• NetApp ONTAP: (Storage OS for NetApp storage arrays, can support virtualized environments)
• Ceph (Open source)
• Other open-source solutions like ZFS

Whatever you do, also consider the following factors:

• Product ecosystem: VMware's ecosystem is vast. Check the integration capabilities of alternative products, especially any open-source ones. Just because product X delivers similar basic functionally to one product, doesn’t mean it’s going to play nicely with your monitoring tools or incident / ticketing system without further work.
• Replacement product feature parity: With such a broad list of competitor products, there will be USPs but there won't be exact feature matches. Careful evaluation will be important to ensure any potential migration away from VMware is feasible.
• Hyperconverged solutions: Nutanix offers tight integration for example, but there are also open-source-based hyperconverged options. Be careful that your application vendor will provide full support for your critical apps on those open-source options though.
• Open-source Expertise: While providing cost-savings, some open-source alternatives require in-house skills or third-party support contracts for production-level reliability. Be mindful of the potential hidden costs here.
• Pricing models: Explore perpetual, subscription, and depending on business criticality and your organisation’s risk appetite, maybe even community-supported options with various open-source projects could be an option, at least for some of your estate.

Your trigger point is that all important VMware licensing renewal date.

If you’d like some assistance navigating the options, for example:

• adjusting your strategy
• executing a migration of any kind
• managing your estate for you

then do reach out; we’re known for doing complex things well.