The Broadcom overhaul of its VMware licensing structure signaled a major transformation in how businesses procure and manage VMware solutions.
The move, which swept away the familiar comfort of a perpetual license and replaced it with a subscription-based model, wasn’t just a minor pivot for Broadcom. It was part of a greater change within the industry heavyweight’s strategic direction while reshaping how its customers plan and operate their IT environments.
VMware Licensing: What’s Changed?
In late 2023, Broadcom announced it would discontinue perpetual licensing for VMware products, moving exclusively to a subscription-based sales model. This approach modernized the revenue framework of VMware, ensuring more predictable income and promoting broader adoption of subscription services.
This change still impacts customers today. Leading research bodies suggest that in 2025, navigating the shift will be long, expensive, and risky for customers. This isn’t reassuring, although we think finding a low-risk and low-cost VMware alternative is possible.
Why Did Broadcom Move VMware Licensing to Subscriptions?
Broadcom targets significant revenue growth, aiming to boost VMware’s contribution to its pro forma EBITDA to $8.5 billion within three years by leaning into recurring subscription revenue. Additionally, the current broader technology landscape increasingly favors subscription models for their flexibility, scalability, and continuous delivery of updates and innovations. Subscription models reduce the complexity of license management and enable Broadcom to deliver more integrated, comprehensive solutions.
You could say that Broadcom is betting big on subscriptions. It provides the predictable cash flow of subscription services, making it a logical choice for Broadcom. In fact, thought leaders emphasize the prevalence of subscription-based models across many types of industries and businesses, not just the technology sector.
But what does it mean for customers?
How Does the New VMware Licensing Increase Expenses for Customers?
Customers who previously relied on perpetual licenses may face increased costs with the switch to subscriptions. Broadcom is predicted to focus more on ensuring licensing compliance, which may lead to more frequent audits, and businesses will likely feel pushed to transition to subscription plans, even if the costs are higher or less efficient overall.
This is something to be cautious of in today’s market. Many customers may resist the switch to subscriptions, viewing them as more expensive than the traditional perpetual licenses. Businesses that carefully managed costs under the old model may feel pressured by recurring fees, potentially leading to dissatisfaction or exploring alternative solutions. Broadcom’s challenge will be to demonstrate enough value in the subscription model to justify the potentially higher ongoing costs.
What is the 3-year Commitment to Renewals (or 3-year Lock-in)?
The 3-year commitment to renewals relates to renewals of existing vSphere licenses. This requires users of vSphere to commit in advance for a three-year period, essentially ‘locking in’ costs and requiring an upfront payment. Previously, many customers renewed annually, providing more flexibility.
This has spiked a rise in businesses searching for VMware vSphere alternatives. While Broadcom controls its end of the deal, customers might be surprised to know that managing a migration from VMware isn’t as difficult as it may seem.
How to Avoid the 3-year Commitment of VMware Licensing
Since the news of Broadcom’s changes in 2023, vendors have had time to develop and promote new solutions that offer an alternative to VMware products and licensing. To stay relevant, these vendors evolved quickly, demonstrating that they can deliver purpose-built, dependable, and cost-effective solutions.
To avoid the 3-year commitment of VMware licensing, search for purpose-built and cost-effective solutions that aren’t dependent on VMware. Preferably, a provider with demonstrable experience navigating IT infrastructures away from VMware licenses.
Now that Broadcom’s VMware licensing decisions have matured, there are many vendors offering alternatives. These vendors offer a lower total cost of ownership compared to VMware vSphere’s new subscription-based pricing. Ideally, they should include software utilities that simplify VM migrations from vSphere to their platform. Download a copy of the 2024-25 DCIG TOP 5 SMB/Edge VMware vSphere Alternatives Report to learn more about the leading vendors.
