A few weeks ago, Broadcom closed the VMware acquisition. Now, the company has started the process that we discussed back in May 2022’s piece announcing the acquisition. Now, VMware is moving away from perpetual licensing. We had a busy week last week, but we wanted to at least cover this one for folks.
Broadcom pulled an “effective immediately” halt to its perpetually licensed products. It also stopped the SnS “Support and Subscription” renewals for perpetual license products. The products that are impacted by the immediate transition to the subscription model are:
- VMware Cloud Foundation
- VMware vSphere
- VMware vSAN
- VMware NSX
- VMware HCX
- VMware Site Recovery Manager
- VMware vCloud Suite
- VMware Aria Suite
- VMware Aria Universal
- VMware Aria Automation
- VMware Aria Operations
- VMware Aria Operations for Logs
- VMware Aria Operations for Networks
(Souce: VMware)
VMware’s announcement said that this was good for customers, but really, this is the first step in the process. Subscriptions may sound like a pay-as-you-go service, but realistically, it becomes an easy way for VMware to increase pricing over time. Customers cannot skip versions and price increases. It is also very hard to move away from VMware. An organization has folks who are VMware admins who do not necessarily have experience with other offerings. Also, VMware’s offerings are in many ways unique.
This was all known beforehand. We noted at the outset:
“Broadcom’s playbook is to push for higher pricing in its acquisitions and across its portfolio to customers that have little ability to switch… Companies running VMware today have high switching costs, and so Broadcom likely knows that it can sell the same software and support for more without having many companies leave.” (Source: STH May 2022)
That is effectively what is happening here. Broadcom knows its new VMware franchise has high switching costs can can start extracting more money from the installed base.
Final Words
VMware has a cool technology stack. Its new owner is now on a path to get paid more for that stack. VMware customers have known this was going to happen for over a year and a half. While some customers have moved, or have plans to do so soon, most have not. This is just like many of the other businesses that Broadcom has acquired in the past.