VMware Users Adjust to Broadcom Subscription Licensing
Last year, just after Broadcom closed its $69 billion acquisition of VMware, the company had a surprise for users: It would be consolidating its product line of virtualization tools, and customers would be moved to a subscription model, rather than the perpetual licenses that the software was previously sold under.
The reaction was mixed at best.
This week, cloud native service provider Civo released results of a survey that suggested that most VMware users were unhappy with the new licensing arrangement, with 51.9% of current customers are considering dropping the platform altogether.
Indeed, many customers feared dramatic increases in what they had to pay for the software.
A number of competitors have all been polishing up their alternative virtualization platforms, such as Civo, Mirantas (with an OpenStack stack), Red Hat (with OpenShift) and Nutanix.
But are customers actually willing to jump ship? And would the move, especially with the work it involves, be really necessary?
A Nudge to the Virtual Private Cloud
At VMware Explore last month, Broadcom heartily encouraged customers to upgrade from the company’s flagship vSphere virtualization platform to the all-encompassing Virtual Cloud Foundation (VCF), designed to virtualize all the software operations of a data center, including compute, networking and security.
At the show, VMware positioned VCF as a lower-cost alternative to public cloud such as Amazon Web Services, one that would provide the tools needed to build their own private clouds.
The results have been mixed thus far. The VMware User Group (VMUG) commanded a stage out on the show floor and held a series of discussions to help users better understand and accept the new licensing terms. Leading the conversation was Matt Heldstab, a systems engineer for Minnesota State Colleges and Universities and a VMUG vice president.
“Distributed resource management is hard to do” —Chris Wolf, @Broadcom, on reasons to use VMware Private AI #VMwareExplore pic.twitter.com/1hUeZzwwfA
— Joab Jackson (@Joab_Jackson) August 27, 2024
Heldstab asked how many many of those in the audience of about 100 or so have already moved from the old perpetual license to the new subscription model. A scattering of hands were raised.
He then asked how many had upgraded to VCF.
Nobody raised their hands.
Opportunity Arrives as a Challenge
Like many in attendance, Tamecka McKay, CIO for the City of Fort Lauderdale, got her start with VMware, learning the company’s technologies to work up the ranks of IT.
As such, she admitted that when she learned of the licensing changes, “there was a little something in me that died,” she said, during the VMUG panel. “I had to go through a mourning period.”
But McKay counseled VMware users to be positive, that “sometimes change is good, and sometimes change can be disruptive.”
“As I hear the vision, and as I see the opportunities that are afforded us with this change, I’m feeling more and more positive about what’s happening,” she said.
Fort Lauderdale’s IT department has had a rough few years. The city lost two of its data centers due to flooding, which gave the IT department the opportunity to consolidate and “clean up” its environment.
The original environment would have been a “lot more expensive” to license, she said. But by optimizing the environment (and getting rid of a bit of technical debt), adding newer tools and upskilling the staff, the resulting cost of the new licensing turned out to be not that much more expensive.
And that was the theme the VMUG reinforced to users: That by right-sizing and updating, the resulting price increases would be less than feared, or, at the least, worth the additional investment.
A VMware pricing summary from the VEEAM Community site.
Justin Sider, CIO of defense contractor Belay Technologies and a member on the VMUG board of directors, had a similar experience (though no natural disasters) that he shared during the panel. Belay was running, on behalf of its own clients, thousands of servers, with tens of thousands of CPU cores, all covered by thousands of VMware licenses.
Seeing the change coming, Belay worked to consolidate its servers, ultimately reducing the costs of infrastructure.
Sider also noted that, unlike many other VMware customers, Belay enjoyed responsive VMware salespeople. Other customers, such as Fort Lauderdale, have indicated that VMware was slow to return quotes under the new licensing, with the VMware sales folks, under the gun with such changes, presumably focusing their efforts on customers whose contracts are terminating in the near future.
“Our renewal is not until January 2025, and we are still waiting for our quote,” McKay noted at the conference.
Right-Size Your Infrastructure
Heldstab noted that the subscription model is different than the perpetual license, which required upfront purchases costs and about 20% yearly for ongoing maintenance.
So users are comparing just the lower renewal costs with the full yearly subscription costs, which naturally are higher than the maintenance subscriptions that customers were used to.
But by changing the subscription model, Heldstab noted, VMware is moving to a practice that other enterprise software providers, such as Citrix, Palo Alto Networks and many others now embrace.
Heldstab’s first piece of advice for VMware users is to “right-size your infrastructure,” he said.
“If your clusters are running at 10% CPU, you’re not going to be happy with your contract; you are oversubscribed. You have way too many CPU cycles that you don’t need,” he told the audience.
“The bottom line is, they didn’t need those resources anyway”
— Matt Heldstab, VMUG vice president
Heldstab, who oversees VMware deployments at about 24 schools, helped many of these locations get a handle on their server usage.
Fake News?
Jeffrey Gregor, GM of OVHcloud US
The grumbling about subscription licensing made for some good headlines, but are companies really moving off the platform? One company that doesn’t think so is European-based cloud provider OVHCloud.
The company has been a partner with VMware since 2011, and has been instrumental in helping define the model for offering VSphere as a service.
The acquisition also shook up the VMware partner world, with Broadcom dropping many VMware partners for a handful of “pinnacle partners,” of which OVHCloud remains.
“The headlines didn’t reflect the reality of what was going on,” said Jeffrey Gregor, general manager of OVHcloud US in a TNS interview at the event. A few made their displeasure known, but the vast majority of users that OVHcloud were in contact with were more accepting of the changes.
OVHcloud conducted a survey of 250 current VMware users and found that, despite the changes, 91% plan to stay with the company’s technologies. And, of those planning to stay, 83% were happy with the changes.
OVHCloud Survey results.
Of that 83%, 46% said that the changes are spurring them to make some changes in their infrastructure, which they felt had to be done at any rate. About 37% indicated that they were going to move to a subscription model anyway, and 17% percent said they did not like the changes but the platform still “best meets their business needs,” Gregor said.
The cloud provider also asked VMware users that if they were going to move, regardless if they were actually moving, what platform would they move to. About 51% said they would move to a similar platform, such as Nutanix. About a third would go to the public cloud, and 14% would develop a homegrown solution, such as using another hypervisor on bare metal.
More results from the OVHCloud survey.
OVHcloud offers a set of managed vSphere services, so the company also asked about on-premises versus cloud usage. Two-thirds of respondents said they would move their workloads to the cloud, either completely or partially. Only 38% plan to stay on premises even as they move to a subscription model.
With OVH you can set up a private VMware cloud. You can also install VMware on bare metal services. And in October, the company will offer a managed solution based on shared resources. This version will help customers who have small workloads that might need only a fraction of a single license.
“They’re really priced out of this new model where you have to license all the cores on a host if you want it as a dedicated resource. So what we’re doing is building out a mutualized solution where we can just sell VMware virtual machines to address that long tail of the market there,” Gregor said.
One Way or Another
In the firing line: Umesh Mahajan, Broadcom VP & GM, application networking and security.
The move to a yearly subscription was a necessary one, said Umesh Mahajan, Broadcom’s vice president and general manager of application networking and security, in an interview with TNS.
“Almost the entire software industry has moved to a subscription model. You can’t sell it once and then go hungry the rest of your life,” he said.
Perpetual licenses still require long-term support “and we would charge for that,” he said, and so the customers would pay anyway.
And in many cases now, customers paid for licenses they don’t even use. And if they wanted new features, they would have to pay for those under a new SKU (stock keeping unit), which led to a proliferation of SKUs that got confusing for customers.
A single subscription model, which would include all the features available, makes pricing simpler,and offers the ability to drop a service if it is not being used, Mahajan said.
“We know we sold them a subscription license,” Mahajan said. “If the customer doesn’t see value and doesn’t deploy it, they won’t renew it, so we are working our butts off to make sure the customer deploys it. Otherwise, this customer will be gone.”
“We are serious business people. We’re here to help you run your business more effectively. We’re not here to show you bright shiny objects”— @Broadcom CEO Hock Tan, kicking off #VMwareExplore pic.twitter.com/NYMiXBu2iA
— Joab Jackson (@Joab_Jackson) August 27, 2024
Disclosure: Broadcom paid travel/lodging for the reporter to attend this conference.
