Since Broadcom acquired VMware on November 22, 2023, there have been significant changes that directly impact customers. One of the most significant changes is the transition from perpetual licensing to subscription models.

As of December 13, 2023, VMware has discontinued the sale of perpetual licenses, requiring customers to transition to subscription licenses for new purchases. Existing perpetual licenses with active support contracts will continue to be supported until the end of their contract term.

In addition to these licensing changes, Broadcom has significantly simplified VMware’s product portfolio. The number of available products has been reduced from thousands to four bundles, with the aim of making the offering more manageable for customers. This reduction was initially met with resistance, which led Broadcom to add an additional option to address customer concerns.

Another important development is the changes to OEM agreements. Initially, Broadcom terminated many of these agreements in order to renegotiate with partners. However, OEM agreements are now possible again on a limited basis, allowing customers to continue to purchase VMware licenses and support through certain partners. While this is a step in the right direction, the uncertainty surrounding these contracts still poses challenges for customers who rely on partners for their infrastructure.

Licensing Rules: Per Processor to Per Core

A specific example of the impact of these changes is the change in licensing rules from per processor to per core. Previously, VMware licenses were calculated based on the number of processors in a server. With the new rules, however, licensing is based on the number of cores within each processor. While this change helps Broadcom align more closely with other industry practices, it has a negative impact on customers, especially those with high-performance servers with a high number of cores per processor.

Why this change is detrimental to customers:

• Cost increases: Servers with modern high core density processors now require multiple licenses per processor, which significantly increases the total licensing cost. For customers with large data centers, this can result in much higher licensing expenses.
• Complexity in management: The transition to core-based licensing introduces additional administrative complexity, as organizations need to maintain accurate monitoring and reporting of the number of cores in use.
• Limitation of flexibility: Companies that have invested in powerful hardware are effectively “punished” with higher costs, discouraging them from upgrading to newer, higher-performance technologies.
• Unexpected costs for existing infrastructure: Customers who had already planned their hardware based on the old licensing terms are faced with unexpected additional costs, even without expanding their infrastructure.

Concerns and legal action

These developments have raised concerns among customers about potential price increases and the complexity of the new licensing models. Some organizations, such as AT&T, have taken legal action against Broadcom for allegedly trying to force them into expensive subscriptions. Although this case was eventually settled, it illustrates the tensions that have arisen due to Broadcom's new strategies.

What can customers do?

It is essential for customers to respond proactively to these changes. It is advisable to thoroughly evaluate current licensing agreements and support contracts and assess the impact of the transition to subscription models. In addition, it is important to stay informed of further announcements from Broadcom and VMware to make strategic decisions that align with the new reality.

While Broadcom states that these changes are intended to simplify product offerings and provide greater value to customers, it is critical for organizations to carefully assess the financial and operational implications and, if necessary, consider alternative solutions to ensure continuity and cost efficiency.

How BeSharp Experts can help

BeSharp experts can support clients in navigating these complex changes. Whether it is evaluating existing licensing agreements, optimizing licensing costs or developing a strategy for the transition to subscription models, BeSharp Experts offers customized solutions. In addition, BeSharp Experts helps companies understand the technical and financial impact of the transition to core-based licensing, so they can make informed decisions for their IT infrastructure.

Take action today!

The changes that VMware and Broadcom have implemented can have a significant impact on the cost and complexity of your IT infrastructure. It is essential to be prepared for this transition and to carefully evaluate your licensing agreements.

At BeSharp Experts, we are here to help you understand these new licensing models and optimize your licensing costs. Contact us today for a free consultation and learn how we can support you in navigating these changes. Click here to schedule an appointment and take the next step toward a more effective licensing strategy!