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| 4 minutes read

Cracking The Code: Navigating VMware's License Shift

Unveiling The Prelude

In a historic announcement, Broadcom Inc. unveiled its ambitious plan to purchase VMware, a technology giant, in May 2022. However, in November 2023, Broadcom released a barrage of announcements regarding VMware licensing and its channel partners, which not only shook the tech sector but also put VMware's clients into a state of profound confusion and fear. Broadcom's changes to VMware licensing pose a significant challenge to VMware clients, necessitating a rethinking of the overall strategy for firms that rely significantly on VMware software. These adjustments, which include favoring Subscription and Support (S&S) over perpetual licenses, discontinuing specific products, and escalating the prices of subscription models, contribute to a significant impediment for VMware customers.

Navigating Transformation: Client Challenges Amidst VMware's Evolution

Broadcom has launched on a revolutionary journey for VMware, transitioning from its traditional perpetual licensing model to a subscription-based one that better aligns with current market trends. However, their clients will likely face increasing expenditure in the long run. 

In addition to ending the sale of perpetual licenses, the company has announced that it would no longer provide support or subscription renewals for its perpetual offers.

Adding to the substantial shifts, Broadcom has opted to divest VMware's Carbon Black security software and end-user computing portfolio. This portfolio encompasses desktop virtualization, mobile device management, and application publishing software. 

As per most recent reports, Broadcom has unveiled innovative bundling strategies aimed at raising prices for a considerable number of customers in their latest announcement.

Thousands of additional resellers, distributors, and service providers affiliated with VMware were formally notified about the cessation of the partner program. This widespread communication signaled a significant shift in the collaborative landscape, impacting a diverse array of entities involved in the distribution, resale, and provision of services along with their customers dependent on them.

Another key aspect of Broadcom's publicly disclosed strategy for VMware involves transitioning its top revenue-generating customers to a direct sales approach. This entails the elimination of third-party resellers and the associated fees they receive for distributing VMware services.

Taking into account VMware's recent engagement with thousands of active reseller partners and several active cloud and managed service providers, Broadcom's strategy is expected to eliminate approximately millions of dollars in channel margins. This move is likely to trigger a reduction in the accessibility of channel-delivered VMware installation and support resources.

The removal of the channel partners has unleashed a substantial ripple effect, particularly affecting small businesses that heavily depended on these partners for essential support services. The absence of small channel partner support has intensified the challenges faced by small customers, compelling them to navigate through a period of uncertainty and explore alternative strategies to mitigate the impact on their business operations.

This introduced modification has catalyzed VMware customers to actively seek out alternative and competitive options available in the market. Faced with the need for seamless operations, customers are now exploring a broader spectrum of choices beyond VMware products to ensure the smooth functioning of their operations. This shift reflects a proactive response to adapt and optimize their technological landscape in the face of recent changes.

Breaking Free From The Norm: Discovering Dynamic Alternatives To VMware Products!

Microsoft's Hyper-V is a hypervisor-based virtualization platform that competes directly with VMware's solutions. Hyper-V is integrated into the Windows Server operating system and certain versions are also available as a standalone product.

In addition to Microsoft’s Hyper-V, many software companies provide hyper-converged infrastructure solutions, combining computing, storage, and virtualization on a single platform. They compete with VMware's solutions and offer a wide range of virtualization products.

Cloud Service Providers: While VMware is known for on-premises virtualization solutions, Cloud service providers offer cloud-based virtualization services through Amazon EC2, Microsoft Azure, and other services.  

VMware, positioned as a robust on-premises solution, is ideally tailored for entities that prioritize and adhere to stringent regulations concerning data privacy and security. It excels in meeting the elevated standards required by such organizations. However, for customers with less stringent on-premises criteria, the cloud emerges as a compelling alternative for transition. This flexibility allows businesses to align their IT infrastructure precisely with their unique requirements, ensuring a seamless balance between security measures and operational efficiency. The choice between on-premises and cloud solutions thus becomes a strategic decision tailored to the specific needs and compliance standards of each entity.

Ankura Unleashed: Your Gateway To Solutions And Success

Our Ankura team consists of experienced VMware specialists who understand the dramatic impact of recent changes on our clients' software and cloud landscapes. In the last year alone, we have proactively helped multiple clients secure attractive pricing, negotiate long-term agreements ahead of time, and effectively navigate the complex transition from perpetual to subscription licensing. As these developments continue, Ankura is ready to help your organization navigate the intricacies and ensure a smooth transition. If you want specialized insights and a tailored action plan to help you negotiate the changing terrain, contact our experts now.

© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.


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