[German]In the last few days I have come across some information about VMware by Broadcom, which I would like to summarize in a small analysis here in the blog for the interested readership. On the one hand, it looks as if VMware by Broadcom is taking a very targeted approach to licensing and pricing and wants "the big fish" as customers. I also came across an article that sheds light on what alternatives there actually are apart from VMware Cloud Foundation (VCF) & Co.
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VMware wants the big fish
I reported extensively on the takeover of virtualization specialist VMware by Broadcom here in the blog (see links at the end of the article). For end customers, it is relevant that VMware discontinued perpetual licenses in spring 2024 and also discontinued the free ESXi server as a product (see Broadcom ends perpetual licenses for VMware products – End of the free ESXi server? Customers are being pushed to subscription licenses and preferably to the cloud, to VMware Cloud Foundation (VCF). End customers are often in for a "rude awakening" when license renewals and contract changes lead to drastic cost increases.
At the end of the day, the observer is left wondering whether this is just an investor tightening the thumbscrews to squeeze more than license costs out of customers to cover the insane VMware purchase price? Pay through gritted teeth and that's that? Colleagues from The Register have conducted an interview with Mark Boost, CEO of the British cloud provider Civo. I interpret it to mean that someone at Broadcom has carried out a Pareto analysis, according to which 20% of customers are responsible for 80% of sales. So they are focusing on these 20% of customers.
Mark Boost says that Broadcom's strategy seems to be to "ditch" most VMware customers and try to keep the biggest ones. The aim is to increase profits. Boost says it's very clear that Broadcom's focus is on about 600 customers that it wants to keep. And another 6,000 former customers seem worth keeping as well.
"Broadcom wants the big whales, the small fish are not interesting and will be thrown back into the sea," is the summarized "flowery" statement. Boost seems to have somehow obtained information from the strategic plans of VMware by Broadcom and said in the interview: "It was explicitly mentioned that hundreds of thousands of customers would be lost over time." The statements about price increases from Boost also fit into the scheme:
We have seen up to 10-fold price increases reported to us by customers. Typically, we hear from people who talk about three to five times higher prices on average. Time will tell if Broadcom can fight its way out of this hole. But a lot of this is intentional.
Anyone reading or listening to the interview with Mark Boost should come to the conclusion that VMware doesn't really care about small customers and their partners. Broadcom management expects VMware to achieve double-digit quarterly revenue growth in 2024, and the hope for "white label" solutions that I mentioned in the blog post VMware by Broadcom: (Vain) hope of the partners for a White Label "lifeline"? is likely to be in vain. VMware could or is likely to reduce its workforce (see my article Is Broadcom going downhill with its VMware measures? Silent layoffs and CISPE calls for EU measures). I would sum it up as follows: "The VMware virtualization issue is over for most customers, only the big players will have to swallow the new licenses".
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Searching for realistic migration paths
In view of the above realization (which is bitter for some customers), the question of "what to do" arises. I have already mentioned Proxmox (open source, see Bye, bye VMware ESXi: Field report on the migration to Proxmox) and Hyper-V (from Microsoft, see also the article Microsoft on the future of Windows Server 2025 Hyper-V) here in the blog.
But realistically speaking, it doesn't always look good for all VMware users with alternatives. Ultimately, every IT manager has to assess what works and where a switch is possible based on their own criteria. In this context, I came across another article VMware customer reaction to Broadcom may set the future of software licensing from The Register. It deals with the topic that after the takeover of VMware by Broadcom, only subscription solutions will be offered that include support and software licensing. It will all be more expensive for customers, but Broadcom argues that it will be "cheaper for customers at the end of the day" because they will no longer need two contracts and will be able to take more advantage of the VMware software stack.
I found it quite exciting, as it also raises the question of whether Broadcom will succeed with its attempt and whether other companies will follow suit. This would fundamentally change the future of software licensing. At present, it appears that the majority of VMware customers simply do not see these "golden benefits" and (in view of the price increases) are looking for alternatives.
The conclusion drawn in The Register article is that Broadcom "will probably achieve its goal" and has factored in the loss of customers. This was also the case with the Symantec takeover and it worked out. The article also concludes that the migration away from VMware to other solutions will be painful for customers. Let me summarize some key points from the analysis.
- There are probably not many particularly strong alternatives to Nutanix, a US company that offers virtualization solutions but also focuses on the cloud.
- There is Scale Computing, which positions itself as an alternative to VMware. However, The Register believes that they would have made it big long ago if they were a strong alternative.
Providers such as SoftIron are probably too small for large customers. The Register also does not consider the open source alternatives to VMware to be particularly tempting – even if these could certainly be an option for certain customers in my view.
- The Register writes that OpenStack a as a software project from various companies remains a difficult undertaking, without really explaining this in detail. The linked Wikipedia article writes that OpenStack is "considered extremely complex due to its size".
- According to The Register, Citrix's interest in server virtualization has been sporadic. The newly launched XenServer would certainly have to prove itself anew before attracting new customers. In addition, the hypervisor has been removed from the Citrix packages of its other products. In my eyes, Citrix is dead in this respect (see my article Massive price hike in license costs: Is Citrix now also copying the "Broadcom business approach"?).
- Proxmox, which I mentioned in the article Bye, bye VMware ESXi: Field report on the migration to Proxmox, and XCP-NG, have a "good reputation" as open source projects in The Register's article and should be suitable for smaller customers. But The Register writes that these products, even if their ecosystems, are not suitable for large customers.
The Register's conclusion in the article is that many vSphere users are sticking with VMware for the time being, despite excessive bills for licenses, while they wait for mature alternatives. Furthermore, VMware customers are not really organized enough to fight back. The CISPE has written a letter to the European Commission asking it to look into Broadcom's practices. But there is no sign that the EU will act.
The only uncertainty in this game is probably Microsoft. Many customers have Windows Server in use and can rely on Hyper-V to virtualize their workloads. With Windows Server 2025, Microsoft has announced further on-premises support (Microsoft on the future of Windows Server 2025 Hyper-V).
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