[German]Broadcom President and CEO Hock Tan was still boasting to investors that the license conversion strategy at VMware would see new sales increases every quarter by the end of the year. Now it looks as if it is slowly dawning on those responsible at Broadcom that they have caused massive annoyance among VMware customers with their "crowbar policy" and that the "cash register ringing" by switching licensing to cloud and subscription solutions may not work out quite as well as the business leaders had planned. And a reader has pointed out licensing oddities at VMware to me.
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Some background
Broadcom had bought the virtualization provider VMware for the crazy sum of 61 billion US dollars (see Broadcom acquires VMware for 61 billion US-$). The money had to be flushed back into the company's coffers, so Broadcom's management began to restructure VMware. No stone was left unturned:
- VMware OEM partners have been locled (see Contracts for all VMware partners terminated by Broadcom for 2024)
- and customers are being switched to subscription solutions and cloud contracts for VMware virtualization products (see Broadcom ends perpetual licenses for VMware products – End of the free ESXi server?).
The bottom line is that this means a serious cost increase for customers (see VMware product portfolio: Licensing internals; and Lenovo has been out since Feb. 27, 2024 and my German blog post Der Fluch der neuen Broadcom/VMware VCF-Lizenzierung in der Praxis). I have reported on these connections and the consequences several times here in the blog (see article links at the end of the post).
The picture that emerged for me was that VMware customers are currently thinking about switching to other providers. Didn't really challenge the managers at Broadcom. Recently there was an investor conference in which Broadcom informed investors about its own sales expectations.
As part of Broadcom's Q1 2024 earnings announcement, President and CEO Hock Tan said: "This is simply a result of our strategy with VMware. We are focused on upselling customers – especially those who are already running their compute workloads with vSphere virtualization tools – to upgrade to VMware Cloud Foundation." Tan anticipated "double-digit percentage revenue growth quarter over quarter through the end of the fiscal year" (see my German blog post Broadcom erwartet 2024 bei VMware quartalsweises Umsatzwachstum im zweistelligen Prozentbereich). The article VVMware by Broadcom: the first 100 day, where the first 100 days of VMware by Broadcom were discussed, says the same.
First doubts as to whether this is going well
I had already read somewhere the other day that things might not be going as smoothly as hoped at Broadcom. Now Christine Hall points to the article After 114 days of change, Broadcom CEO acknowledges VMware-related "unease" from ArsTechnica in the following Mastodon post.
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So it's not 100 days since the takeover by Broadcom, but 114 days. And the message from Ars Technica is that Hock Tan, CEO and President of Broadcom, has acknowledged the "unease of VMware customers and partners" following the sweeping changes to VMware's product and licensing policies. Ars Technica refers to Tan's blog post above, where he pointed out that Broadcom spent 18 months evaluating and buying VMware.
According to Han, there is still a lot to do, but the company has made "significant progress". But the sentence "Of course, we recognize that this level of change has understandably created some unease among our customers and partners. " is seen as an admission that things are not going as smoothly as expected – and that customers are not "jumping at the new product and license offers with flying colors". The entire passage reads:
Of course, we recognize that this level of change has understandably created some unease among our customers and partners. But all of these moves have been with the goals of innovating faster, meeting our customers' needs more effectively, and making it easier to do business with us.
It looks as if Broadcom's actions have caused unrest and quite a bit of anger among customers and partners. Ars Technica writes that Broadcom has taken over the 2,000 most important VMware customers from VMware sales partners following the purchase of VMware, for example. This does not bring joy to the partners, whose business model has just been taken away from them. Those who are still partners would do well to rescale their business orientation. And the 2800 jobs that have been lost at VMware are also likely to have consequences.
VMware license oddities
Under the title "Curious new VMware license world", a blog reader contacted us by e-mail and described a new licensing experience at VMware. The reader unfortunately had to order a Vmware license due to an acute need and ordered a "96 Core vSphere Standard" license from their VMware partner in his company. He noticed an oddity with the new Vmware licenses, as he writes. The license was delivered very promptly, just 24 hours after the order was placed. According to the reader, the whole thing "looked good at first", as he documents with the following screenshot:
The reader wrote: "What is interesting here is that the vCenter instances were probably also increased by the 'per core subscription'." The reader then imported and assigned the licenses. This shows an even more interesting picture:
The reader wrote: So currently when you order a '96 Core vSphere Standard Subscription' you get a total of:
96 instances of vCenter Server Standard
96 CPU á 32 Core = 3072 Core
Probably a bit more cores than expected. I touched on the financial consequences of various license deals above – and similar stories can also be found in various forums. I'm curious to see how the whole thing develops and whether customers will really stay with VMware or leave. Especially hosters who have licensed with ESXi are likely to have massive problems when licenses have to be renewed.
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Stop spreading unnecessary FUD on Broadcom 🤡. Their infrastructure software business grew 150% Y/Y thanks to VMWare. If partners are upset Hock took the business away from them. Tell them to a cry a little harder for me HAHAHAHAHA 🤣🤣🤣. That's the sweet sound of capitalism. You either get on board or go somewhere else. Nobody is forcing anyone to buy Broadcom's software. By the time everyone migrates Broadcom will have made billions. Hock tan is playing chess while everyone else is playing checkers.
We have to wait and see … ;-)
Abusing market position is not capitalism, it's extortion. They lied to regulators, partners, and end users.
VMware by Broadcom= Backup Exec. it may take a little time but they have irreparably damaged their brand.
Jacking prices through the roof is equivalent to playing chess? If you stole my top customers I would do virtually anything to make you pay. Making enemies with your partners isn't chess, it isn't even checkers, it's sheer stupidity.
We have a few clusters totaling around 50+ 4-way hypervisors. We are aggressively moving to Hyper-V (including a POC of Azure Stack HCI). We are ahead of schedule with an estimated completion before Q3 2024. We were already licensing these hosts with Microsoft Server Datacenter Edition to cover all VMs on the hosts. Our costs will drop significantly. Microsoft is the true winner here.
They absolutely destroyed vmware. As soon as we can find a reply we are gone
Organizations that primarily use vCenter, ESXi, with large vSAN installations are getting screwed. VMware vSphere Foundation aligns with my orgranization's needs, but the vSAN per TB charge will increase our VMware renewal by 71%. So ADIOS vSAN. For the cost of one year vSAN capacity charge from VMware, we will buy the equivalent of All-Flash SAN storage to add to our existing SAN.
Hey John,
What about Broadcom telling everyone that their millions of dollars invested in perpetual licenses now have to be paid for again and the underhanded way Broadcom quietly rebranded to nullify all existing VMware contracts?
Broadcom deserve to be hated and will be losing a lot of customers
RIP VMware, it was good knowing you
new schema will cause huge problems. Main advantage of vmware vs AWS/Azure/etc is that you get hardware and install licenses and have working forever system, no unredictable costs. If you must renew, you jump to AWS / etc instead as you cant be sure how much you spend every year. It makes Vmware unattractive vs public clouds. Users will jump off this train and never return. VMware is great technology, but Broadcom management can kill it.
With the elimination of ROBO licensing our renewal has jumped more than 600%. Downgrading to a lower model will still increase the renewal 300%, less features. It's a foundational product, the backbone of datacenters and remote offices, as well as MSP's. But that's not the worst part. Governments, emergency services, non profits all use this product in a way that Broadcom is essentially extorted them with nearly 900% increases. Who's paying for those increases?
Hock Tan is the Martin Shkreli of Tech.
If Broadcom had considered a consumption based model for powered on cpu's / cores the community would have been more at ease as this would have been a retrofit of the ram based model. In essence if one looks a little deeper into the actual usage the cpu's are normally only consuming approximately between 45 and 55 percent of the CPU. Instead they chose to force consumers to license all powered on cpu's making the service extremely expensive. Consumers have made large infrastructure investments that will not necessarily fit into alternative offerings.
Broadcom is a bully in the industry. The number of times they have been fined for bad business practices is more than anyone else I'm aware of. Their sales play dirty in other markets too. There was a sales guy that. called a coworker repeatedly over the weekend on his personal phone and threatened to not sell older parts to us because we decided to not use their new parts in the next platform being developed.