Broadcom's acquisition of VMware: Navigating the turbulences of licensing changes

In a bold move that rocked the tech industry, Broadcom completed its acquisition of VMware in December 2023. This acquisition has introduced a series of significant changes to VMware's software licensing, which took effect in February 2024. These adjustments are causing ripples across the industry, particularly among cloud service providers, and necessitate a careful reassessment of how companies use Broadcom products.

The impact of licensing changes on cloud services

The shift in licensing terms announced by Broadcom post-acquisition had become effective on April 1, 2024. This sudden change has left many cloud service providers in a state of uncertainty. With over 75% of some providers' revenues tied to VMware's virtualization technologies, the inability to license VMware software as before could spell big challenges for their businesses.

Broadcom's restructuring of product offerings and licensing terms included discontinuing some products without prior notice and rebundling others under new contracts. These changes were made without adding any new technical features or software improvements, leading to accusations of unfair practices that inflate customer costs. In their defense, Broadcom claims these changes are aimed at accelerating innovation and enhancing customer service efficiency. Despite these intentions, many customers feel burdened by costs for products they do not necessarily need.

The most notable changes in the licensing include

• Elimination of the possibility to acquire perpetual licenses.
• No extensions for existing maintenance of perpetual licenses.
• Requirement to switch to a subscription model for new licenses or maintenance support.
• Shift from CPU-based to core-based licensing metrics, with a minimum requirement of licensing 16 cores.
• Specific impact on vSphere products.

In response to customer reaction, Broadcom announced that customers with supported versions of vSphere on perpetual licenses would receive free access to zero-day security patches. Furthermore, the company assured that more VMware products would gradually be integrated into this initiative, and some support extensions were granted for renewals during the transitional phase.

Ultimate steps for customers moving forward

For VMware/Broadcom customers, the immediate recommendation is to discuss these changes with your partners to fully understand their impact on your license costs. Additionally, as part of the transition, Broadcom initiated the migration of customer data from the VMware portal to a new Broadcom portal, completed on April 30, with the new portal going live on May 5. Although the VMware portal remains accessible, its functionality has been significantly reduced.

Customers should verify their license inventories and contract details in the new Broadcom portal to ensure all information is accurately and completely transferred. This proactive approach will help mitigate any potential issues arising from the transition and ensure compliance with the new licensing terms.

Checklist: What VMware customers should do now

Don't know how and where to start? Perhaps the following tips will help you to bring a little more structure to your planning.

• Create transparency
  • Which VMware products are used where?
  • Which of the VMware products in use are affected by the change?
  • Collection of infrastructure data (server topologies, virtual servers, physical servers and the respective assigned hosts, number of CPUs, number of cores)
• Analyze the expected additional costs
  • Determine your current infrastructure and the associated license costs
  • Check how these costs develop with the changes
• Evaluate your planning and keep an eye on future costs
  • How will your infrastructure develop?
  • Are you planning an extension?
  • Or perhaps a dismantling of your IT landscape?
• Pay attention to indirect costs
  • You do not operate a large IT infrastructure with VMware and have already outsourced a lot to the cloud?
  • There are also additional costs for your cloud provider - whether due to rising license costs or migration to a VMware alternative. These costs are passed on to you.
  • So, talk to your cloud provider about these changes and the expected additional costs.
• Check alternatives
  • Are there alternative and cheaper technologies?
  • How expensive would migration be?
  • How long would the changeover take and what implications would this have for day-to-day operations?

These steps certainly do not cover all the relevant details. Each customer situation is too individual and the Broadcom portfolio too large for that. So, talk to all the experts internally and check any additional points that may need to be considered.

Conclusion

The acquisition of VMware by Broadcom marks a significant turning point in the cloud computing landscape. While aimed at fostering innovation and improving service delivery, the abrupt licensing changes have stirred concerns and uncertainties among cloud service providers and their customers. It is crucial for affected parties to stay informed and take proactive steps to adapt to these new conditions, ensuring their operations remain efficient and compliant under the new Broadcom regime.

How can USU support you?

With our tools and services, USU helps you to gain the necessary transparency about your status quo and to analyze expected additional costs. If you also need support in operational planning, we involve our partners, who contribute additional expertise.

USU SAM Services at a glance

• Out-of-the-box connectors that read and record all the necessary data from your infrastructure.
• Technology, which, in combination with a comprehensive vendor catalog and automatic calculation logic, automatically processes incoming data and makes results visible.
• Integrated dashboard and reports that provide you with the most important results
• Our services take care of all the necessary steps and use standardized procedures to achieve fast results.
• You receive complete transparency about your Broadcom usage, your current license inventories and contracts, as well as reports on costs, compliance and possible optimization approaches.
• USU supports you in continuously managing not only Broadcom, but all vendors in your portfolio. Be it for client, data center, SaaS or cloud providers.

Feel free to contact us for a quote.