Navigating the Cloud Shift: The Impact of Broadcom's Acquisition of VMware

The acquisition of VMware by Broadcom represents a pivotal shift in the cloud computing landscape, bringing both challenges and opportunities for VMware's ecosystem, including its competitors and over 10,000 partners. This shift will particularly affect those not selected to advance in VMware's premier partnership tier, sparking significant changes across the industry.

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Impact on Businesses and Service Providers

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For organizations that rely on VMware, critical changes set to roll out in May 2024 are anticipated to disrupt their cloud strategies and operational dynamics, potentially leading to higher costs. Many Managed Service Providers (MSPs) and Cloud Service Providers (CSPs) will face challenges, as they may no longer be able to resell or support VMware products post-May 2024. This situation could force these providers to migrate to alternative platforms, while also grappling with a new licensing model and altered cost structures.

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What are the New Changes in VMware Licensing and Service Offering?

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The acquisition has led to substantial modifications in how VMware products are licensed and offered. VMware is shifting from selling perpetual licenses to exclusively offering subscription-based licensing, a transition from RAM-based to CPU core-based pricing, altering cost structures. This change will impact how customers budget for and manage VMware expenses.

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Streamlining VMware's Product Lineup

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With an aim to transition to a modern, cloud-based service model, Broadcom has consolidated VMware's product range into two main bundles: VMware Cloud Foundation and VMware vSphere Foundation. This consolidation may increase costs for customers who previously utilized standalone VMware products.

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Partner Program Overhaul

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Broadcom has terminated existing VMware partner agreements and incentives, effective February 4, 2024, requiring resellers and service providers to reapply, which may disrupt ongoing customer negotiations and access to favorable licensing terms.

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Potential Price Increases

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The move to a subscription model is expected to substantially increase prices for some customers, possibly doubling or even tripling their existing costs, which will significantly impact IT budgets and operational expenses.

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VMware's Streamlined Product Range

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Broadcom is indicating a move towards contemporary, cloud-based environments with its emphasis on four primary divisions: VMware Cloud Foundation, Tanzu, Software Defined Edge, and Application Networking and Security. The new streamlined product line includes:

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·???????? VMware Cloud Foundation (VCF): VCF is the new all-in-one solution for those who need a full stack infrastructure that includes vSphere, vSAN, and NSX, along with the complete Aria management and orchestration suite and additional new services.

·???????? VMware vSphere Foundation (VVF): VVF targets data center optimization in traditional environments and includes Tanzu Kubernetes Grid, Aria Operations, and Aria Operations for Logs. For customers with simpler needs like basic hardware consolidation or minimal virtualization, VMware continues to offer vSphere Standard and vSphere Essentials Plus Kit.

·???????? Add-on services: For both VMware vSphere Foundation and VMware Cloud Foundation are also available to enhance storage, security, disaster recovery, Generative AI, and other specific needs.

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Strategic Considerations for VMware Clients Post-Acquisition

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In light of these changes, companies heavily reliant on VMware solutions are at a crossroads. They need to navigate these changes strategically to maintain operational efficiency and capitalize on new opportunities. Hence, they must consider their strategic options carefully:

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·???????? Adapt and Adjust to New Licensing Model & Service Line: Many organizations have made significant investments in VMware and are deeply integrated with its products, making it challenging for them to quickly transition away from VMware to other cloud offerings. These organizations should begin evaluating VMware's new subscription models and explore the available service offerings that might prove advantageous.

·???????? Move to Public Cloud or Hybrid Cloud Solutions: Organizations aiming for greater cloud integration might explore transitioning their VMware infrastructure to public cloud platforms such as AWS, Azure, or Google Cloud. Alternatively, they can consider a hybrid cloud approach where workloads less dependent on VMware are shifted to the cloud, while those deeply integrated with VMware continue to operate on VMware infrastructure under its new licensing model and services.

·???????? Switching to Alternative Platforms: Some may find it beneficial to switch to other virtualization platforms like Nutanix AHV, Proxmox, Hyper-V, Red Hat Virtualization, etc., which could offer greater flexibility and potential cost savings.

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How Cox Business/RapidScale Can Help

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These changes are creating a great deal of concern for IT organizations. The changes are disruptive from a process perspective and impactful on active technology budgets. As one of the 500 global Primary Partners that can offer licensing and support customer IT organizations with the new VCF products, Cox Business/RapidScale is in an ideal position to help lessen the impact of these changes for your business.

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·???????? Provide fixed-price licenses with full license support to use at your current hosting provider.

·???????? Help you migrate to our hosted cloud infrastructure, where VCF licenses are built in at pre-VCF costs.

·???????? Support your infrastructure migration to the public cloud (Azure, AWS or Google Cloud).

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Conclusion

The Broadcom acquisition of VMware is set to reshape the cloud computing industry in profound ways. As businesses and service providers navigate these changes, they will need to assess their dependence on VMware products and consider a range of strategic responses. Whether it involves sticking with VMware's new models, migrating to the cloud, or switching to alternative platforms, each organization will need to weigh its options to minimize disruptions and capitalize on new opportunities in this evolving landscape.

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Please contact me today to learn how we can help you prevent VMware license costs from spiraling out of control.