Vmware changes drastically, will Broadcom pay the price?

Latest update time：2024-04-07

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Source : Content compiled from computerweekly by Semiconductor Industry Observation (ID: i cbank), thank you.

Broadcom's must-see series this year will be divided into three episodes, airing in June, September and the first few weeks of December, when Broadcom will reveal its financial results and perhaps reveal whether its software licensing model is viable.

As an aside, after absorbing VMware, Broadcom quickly decided to sell only subscriptions that included support and software bundles, claiming that costs would go down for customers currently using both products in the bundle and that the plan would allow Customers who effectively derive maximum value from the VMware stack and its products will be rewarded through increased agility and efficiency.

Many VMware customers don't like this plan. Some believe they now have to purchase products they may not want or are not ready to implement in order to obtain the products they currently use and rely on, pointing to price increases, some of which are significant. Bills reportedly jumped 500 or 600 percent, with licensing costs jumping from $17,000 to $470,000 and from $8 million to $100 million. You may even hear of an organization thinking that going back to bare metal might be cheaper than a new VMware license.

Broadcom told The Register that those complaining about the price increase didn't take into account the cost of support on top of VMware's old perpetual licenses.

However, the US conglomerate also promised shareholders that its VMware product portfolio will deliver double-digit revenue growth in 2024.

That's an unusual growth rate in the enterprise software industry, and even rarer in mature markets like virtualization and hybrid cloud that don't attract large numbers of new customers every year.

Therefore, every other business software vendor in the world will likely be watching to see if Broadcom can achieve its goals, because if it does, others will surely be tempted to copy its strategy.

These strategies are not unique. Private equity owners of cloud software groups and enterprise software companies are doing something similar.

But Broadcom is a public company. Every quarter it has to share its data and then explain itself to investors, and does so at its annual shareholder meeting.

So we'll find out soon enough whether Broadcom's plan works.

Regardless, some think Broadcom will be close to achieving its goals for three reasons.

One is that it could lose customers -- as it did when it acquired Symantec.

Another problem is that migrating from VMware is going to be painful, and the alternatives outside of Nutanix aren't very robust. If a company like Scale Computing was going to grow, it would have happened by now. For large buyers, suppliers like SoftIron may be too small.

Open source alternatives to VMware don't have much traction. OpenStack remains a challenging sprawl. Citrix's interest in server virtualization is so fragmented that a resurgent XenServer will certainly have to prove itself again to attract new customers, rather than those who were forced to adopt it because the hypervisor was removed from Citrix's other product bundles. Companies like XCP-NG and Proxmox have good reputations, although their ecosystems are not suitable for large buyers. While many vSphere users wait for alternatives to mature, they will stick with it despite rising costs.

The third reason we think Broadcom will succeed is that VMware users have not organized to fight back outside of Europe, where four user associations are asking the European Commission to review Broadcom's practices. There is no sign that Europe will take action, and even if it does, any ruling will be made in the future and most VMware customers will be required to adopt Broadcom's license.

So Broadcom is not threatened.

Except maybe Microsoft, since many VMware users will also be Windows Server customers and have some underutilized or unused Hyper-V entitlements that they can put into service to take on virtualization workloads.

You read that right: Microsoft evolved its dominant DNA for predatory licensing when it cornered the PC market in the 1980s, and it continues to show it today by lowering the price of its products when they run in Azure, and it may soon It will become the most unpleasant choice for VMware users.

Isn’t technology great?

Education industry faces huge VMware cost hike after Broadcom ends discounts

Educational institutions and charities are facing a sharp increase in VMware license fees after the new owner of virtualization vendor Broadcom withdrew plans to offer generous discounts to nonprofits.

Many customers are also facing additional costs associated with changes to currently sold VMware packages and changes to server licenses, which could put organizations deploying VMware on powerful multi-core on-premises servers at a disadvantage.

Academic license plans offer significant discounts off list price, and some education customers who have reached renewal point are receiving new license fees that more than double. Often, they are locked into VMware because their IT infrastructure relies on the software and they are not given time to migrate.

London Grid for Learning (LGfL) is a local government-owned not-for-profit organization in London that provides IT services and internet connectivity to more than 3,000 schools. It provides IT services vital to the education system in the capital and across England, such as admissions, free school meals, internet connectivity, security and web filtering. More than two million teachers, students and public sector workers across England are connected to the LGfL network every day, and its critical data center infrastructure is built around VMware products.

LGfL program manager Michael Eva said VMware provided the new pricing just six weeks before the April 2024 license renewal date. LGfL currently has a perpetual license, and Broadcom has also withdrawn this pricing model, forcing it to move to a subscription-based license.

LGfL purchased a three-year VMware license in 2021. The renewal price quoted to LGfL last month for the new three-year contract represents a 268% increase in cost.

If LGfL chooses not to adopt a three-year subscription license and only enter into an annual maintenance agreement to review alternative products, the price for a one-year renewal will still be 125% of the cost of the first three years of license and maintenance arrangements.

Eva described the price increase as a "blatant abuse of VMware's market position."

He said: "If LGfL decides not to renew the proposed subscription-based model, the app will cease to function, causing chaos and disruption to tens of thousands of classrooms across England."

"It is deeply concerning that suppliers can increase costs by hundreds of percentage points and not provide pricing until six weeks before renewal. This feels deeply unethical, especially as there is no reasonable time to research alternative solutions and Implement them without causing disruption to teaching or facing significant safety risks.”

If LGfL chooses not to renew its maintenance agreement, VMware platforms will no longer receive security patches, putting its virtual environments at serious risk.

LGfL's VMware implementation also manages a secure, filtered Internet service that children can use to connect to the network at school and at home. Without this, students will connect directly to the internet without filtering applied, which creates serious security issues.

The LGfL VMware environment also provides schools (both LGfL and non-LGfL customers) with a wide range of course content, as well as services for schools to claim pupil grants from central government for disadvantaged families.

LGfL has been a VMware user for over 10 years. Eva said as a not-for-profit the only way the organization could recoup the extra license fees was to charge cash-strapped schools more for their services, and that was not an option for LGfL.

Other academic institutions have experienced significant delays in working with academic resellers, requiring them to liaise with large VMware resellers who deal directly with Broadcom. Other licensing changes will affect IT departments that use VMware through cloud service providers, with sources saying licensing fees have increased by 1,200%.

Université Leuven in Belgium is another institution affected. Herman Moons, a member of the university's ICT management team, said KU Leuven is a large user of VMware and typically pays an annual license fee of 200,000 euros.

"We've invested heavily in virtualizing everything. We use VMware for our e-learning environment and our management environment. Our SAP systems run on VMware," he said. The university also uses VMware for its website and operates a VMware-based virtual desktop infrastructure (VDI).

Broadcom also changed VMware's pricing from per-socket licensing to per-core licensing.

Original link

https://www.computerweekly.com/news/366579593/Education-sector-facing-huge-VMware-cost-increases-after-Broadcom-ends-discounts

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