Broadcom Ends VMware Perpetual License Sales, Shifting Customers and Partners to Subscription Model

In a major shake-up for the virtualization market, Broadcom has announced  that it is ending the sale of perpetual licenses for VMware products. Moving forward, VMware solutions will only be available via subscription licensing. This marks a significant shift for VMware customers and partners who have relied on perpetual licenses for years. In this article, we'll dive into the details of this change, the impact it will have, and key things VMware users need to know.

Why is Broadcom ending perpetual licenses for VMware?

Broadcom acquired VMware last year for a whopping $69 billion, is making a significant move by ending the sale of perpetual licenses for VMware's large portfolio of virtualization and cloud products. This change comes as part of Broadcom's larger strategy to align VMware with the industry's growing preference of subscription-based licensing and consumption models.

In a recent statement, Broadcom CEO Hock Tan emphasized that the decision to move away from perpetual licenses is driven by the belief that the industry has already widely adopted subscription as the standard for cloud consumption. Tan argued that this transition will unlock several key benefits for VMware customers.

Tan highlighted that subscription licensing enables faster time to value. By providing customers with immediate access to the latest versions of VMware software and features, organizations can more quickly deploy and leverage new capabilities to drive their business objectives. This contrasts with the perpetual model, where customers often face delays in accessing new releases and innovations.

Second, the subscription approach allows for continuous innovation. With perpetual licenses, customers typically have to wait for major version upgrades to access new features and enhancements. However, under a subscription model, VMware can deliver ongoing updates, improvements, and new capabilities as they become available. This ensures customers can take advantage of the latest and greatest features in virtualization and cloud technology immediately.

Finally, Tan emphasized that the move to subscription will provide customers with more predictable license spend. Perpetual licenses often involve significant upfront costs, followed by additional charges for maintenance and support. In contrast, subscription licensing allows customers to spread costs over time with a more consistent and predictable pricing structure, making it easier for organizations to budget and plan for their VMware investments.

What does the end of perpetual licensing mean for current VMware customers?

The end of perpetual licensing for VMware products has significant implications for existing customers who have invested in this licensing model over the years. While Broadcom has assured customers that they can continue using their perpetual licenses, the long-term viability of this approach is now in question.

Under the perpetual licensing model, customers pay a one-time fee to gain indefinite access to a specific version of VMware software. This has been a popular choice for organizations that prefer a capital expenditure (CapEx) approach to IT investments and want to avoid ongoing subscription costs.

However, with Broadcom's decision to end the sale of new perpetual licenses, customers relying on this model will face several challenges. Most notably, they will eventually lose access to crucial support services and software updates unless they transition to subscription licenses.

VMware software, like most enterprise IT solutions, requires ongoing maintenance, security patches, and updates to ensure optimal performance, compatibility, and protection against vulnerabilities. Without access to these updates, customers risk running outdated and potentially insecure versions of VMware products, which can expose their organizations to stability issues and cyber threats.

Broadcom has stated that it will continue to provide support for perpetual licenses in accordance with existing contractual agreements. This means that customers with active support contracts will still receive assistance and updates for a defined period. However, once these contracts expire, customers will need to either renew their support agreements or transition to subscription licenses to maintain access to updates and support.

To encourage customers to make the switch, Broadcom is actively promoting the benefits of exchanging perpetual licenses for new subscription offerings. They are positioning subscription licenses as the best path forward for customers to ensure ongoing access to the latest VMware innovations, features, and support services.

While the exact details and incentives for transitioning from perpetual to subscription licenses are still being determined, Broadcom has emphasized that it will work closely with customers to facilitate a smooth migration.

How will the transition from perpetual to subscription licensing work?

Transitioning VMware customers from perpetual licenses to subscription-based licensing is a complex process that will require careful planning and execution by Broadcom. To ensure a smooth migration, Broadcom has outlined a high-level approach for working with customers to convert their existing on-premises perpetual licenses to subscription licenses.

At the heart of this transition process is a focus on customers who currently hold perpetual licenses with active support contracts. These customers represent a significant portion of VMware's installed base and are the primary target for Broadcom's migration efforts.

Broadcom has stated that it will actively engage with these customers to help them understand the benefits of moving to subscription licenses and guide them through the conversion process. This will involve a combination of communication, education, and incentives to motivate customers to make the switch.

One of the key strategies Broadcom plans to employ is the use of upgrade pricing incentives. While the specifics of these incentives have not yet been fully disclosed, the goal is to make the transition to subscription licenses more attractive and cost-effective for customers.

These incentives may take various forms, such as discounted pricing for subscription licenses, credits for unused support on perpetual licenses, or bundled offerings that combine VMware products and services. By providing compelling financial reasons to move to subscription licenses, Broadcom aims to accelerate the migration process and minimize resistance from customers.

What are the benefits of moving from perpetual licenses to subscription?

Broadcom's decision to shift VMware licensing from perpetual to subscription aligns with the growing trend of cloud consumption and software-as-a-service (SaaS) models in the IT industry. According to Broadcom, this move offers several compelling benefits for VMware customers.

One of the primary advantages of subscription licensing is faster time-to-value. With perpetual licenses, customers often face lengthy procurement cycles, upfront capital investments, and extended deployment timelines. 

Under a subscription model, customers can easily scale their VMware deployments up or down based on their changing business needs, without the need for additional license purchases or complex negotiations. 

With perpetual licenses, customers typically have to wait for major version releases to access new features and capabilities, which can occur on an infrequent or irregular basis. In a subscription model, VMware can deliver a steady stream of updates, bug fixes, and new functionalities to customers as part of their regular subscription fee. 

Subscription licensing also offers more predictable costs compared to the perpetual model. With perpetual licenses, customers often face significant upfront costs for software licenses, followed by additional annual maintenance and support fees. Under a subscription model, customers pay a recurring fee, typically on a monthly or annual basis, which covers both access to the software and ongoing support and maintenance. This predictable and consistent cost structure makes it easier for organizations to plan and budget for their VMware investments over time.

What products are impacted by VMware's perpetual license changes?

Broadcom's decision to end perpetual licensing for VMware products has far-reaching implications, as it appears to apply to VMware's entire product portfolio. 

At the core of VMware's product lineup is vSphere, the company's flagship server virtualization platform. vSphere has been a mainstay in data centers for over two decades, enabling organizations to consolidate their physical servers, improve hardware utilization, and simplify IT management. With the end of perpetual licensing, customers will need to transition their vSphere deployments to subscription-based licensing to continue receiving updates and support.

Another key product affected by this change is vSAN, VMware's software-defined storage solution. vSAN is an integral part of VMware's hyperconverged infrastructure (HCI) offerings, allowing organizations to create storage pools using local disks on their vSphere hosts. Many customers have adopted vSAN as a cost-effective and scalable alternative to traditional storage arrays. The shift to subscription licensing means that vSAN customers will need to reassess their storage strategies and consider the implications of moving to a subscription model.

NSX, VMware's network virtualization and security platform, is also impacted by the licensing change. NSX has gained significant traction in recent years as organizations look to create more agile, secure, and automated network environments. With NSX, customers can create virtual networks, implement micro-segmentation, and enforce granular security policies across their VMware environments. The transition to subscription licensing will require NSX customers to re-evaluate their network virtualization strategies and budget for ongoing subscription costs.

VMware's vRealize Suite, a comprehensive cloud management platform, is another key offering affected by the move away from perpetual licenses. vRealize includes a range of tools for automating and optimizing the delivery of IT services across multiple clouds and platforms. Customers using vRealize for tasks such as self-service provisioning, performance monitoring, and cost management will need to plan for the transition to subscription-based licensing.

How are VMware partners and the channel impacted?

VMware's decision to end perpetual licensing and move to a subscription-based model will have a significant impact on the company's extensive ecosystem of partners and channel organizations. Many of these partners have built their businesses around selling VMware perpetual licenses and providing related professional services, and the shift to subscription licensing will require them to adapt and evolve their business models.

Historically VMware partners have played a crucial role in the company's success, acting as trusted advisors to customers and helping them navigate the complexities of licensing, deployment, and ongoing management of VMware solutions. Under the perpetual licensing model, partners have generated revenue through upfront license sales, as well as recurring revenue from maintenance and support contracts.

The move to subscription licensing will disrupt this traditional partner model, as customers will no longer make large, one-time investments in perpetual licenses. Instead, they will pay for VMware software on a recurring basis, typically through monthly or annual subscription fees. This shift will require partners to rethink their sales strategies, revenue models, and customer engagement approaches.

What alternatives to VMware are available?

The shift to subscription-based licensing for VMware products has prompted some organizations to explore alternative solutions for virtualization and cloud management. For those not ready or willing to move to a subscription model, there are several options to consider.

One popular alternative is Microsoft Hyper-V, a virtualization platform that comes as a built-in feature of Windows Server. Hyper-V provides a robust set of virtualization capabilities, including virtual machine management, live migration, and storage management. As a Microsoft product, Hyper-V integrates well with other Microsoft technologies, such as System Center and Azure, making it an attractive option for organizations heavily invested in the Microsoft ecosystem.

Another alternative is Nutanix AHV (Acropolis Hypervisor), a virtualization solution that is part of Nutanix's Enterprise Cloud Platform. AHV is built on top of the open-source KVM (Kernel-based Virtual Machine) hypervisor and offers a range of advanced features, such as built-in data protection, load balancing, and one-click upgrades. Nutanix AHV is known for its simplicity, scalability, and tight integration with Nutanix's hyperconverged infrastructure offerings.

Open-source virtualization solutions, such as KVM and Xen, are also viable alternatives for some organizations. KVM is a popular choice, as it is included in many Linux distributions and provides a stable and performant virtualization platform. Xen, another open-source hypervisor, is known for its security features and is used by many cloud providers, including Amazon Web Services (AWS).

For organizations looking for open-source cloud management platforms, OpenStack is a well-established option. OpenStack is a collection of open-source tools that enable the creation and management of private and public clouds. It offers a wide range of services, including compute, storage, networking, and identity management, and has a large and active community of developers and users.

It's also worth noting that transitioning away from VMware may not be the only option for organizations seeking to mitigate the impact of the new subscription-based licensing model. In fact, HPE Aruba Networking has recently introduced a network solution that could help organizations save on their VMware software budget while still leveraging VMware's virtualization platform.

HPE Aruba's CX-10000 switch is designed to deliver distributed firewall services and micro-segmentation capabilities at the Top of Rack (TOR) level, without the need for VMware's Distributed Firewall licenses. This means that organizations can achieve advanced security features, such as micro-segmentation and Zero Trust security, without incurring the significant cost increase associated with VMware's new vSphere Cloud Foundation (VCF) offering. By deploying the CX-10000 switch, organizations can potentially save hundreds of thousands of dollars in VMware licensing costs while still benefiting from enterprise-level security features.

What's the bottom line on Broadcom ending VMware perpetual licenses?

The acquisition of VMware by Broadcom has brought quick and major licensing changes, marking the end of VMware's long-standing perpetual license model that many customers and partners have relied on. While current licenses will still function, VMware users will need to assess the impact, evaluate their options, and likely begin to factor in a transition to subscription pricing over time.

The key things to keep in mind are:

• VMware perpetual licenses are no longer available for purchase
• Existing perpetual licenses will eventually lose access to support and updates
• Broadcom will provide tools and incentives to help transition customers to subscription
• Subscription benefits include ongoing innovation, opex pricing, and potentially higher support
• Partners will need to adjust their business models and focus on value-added services
• Alternatives to VMware are available but require careful assessment
• Customers should review perpetual license inventory and plan their licensing strategy accordingly

The shift away from perpetual licensing is a major change for the virtualization market that has been largely defined by VMware for the past two decades. While many see subscription as the future, the transition will take time and require customers and partners to be proactive in evolving their approach to VMware investments and deployments. Broadcom is betting big on SaaS and subscription revenue, but will need to balance the interests of VMware's loyal installed base as it executes this licensing model transformation.