Blindsided by VMware? How To Regroup and Come Out Ahead

FrogViews are Leapfrog’s top takeaways from the most informative articles on IT trends.

If you’re one of VMware’s 500,000 customers, you have some decisions to make…quickly.

VMware, now owned by Broadcom, recently announced it will no longer sell perpetual licenses (or related support) and will sell subscription licenses instead — which will cost customers significantly more in the long run.

Most of Leapfrog’s clients use VMware products and face tough choices along with most companies running virtualized environments. Last year, VMware virtualization infrastructure software accounted for 62.2% of the global market — companies across industries, sizes, and sectors worldwide are scrambling to figure out how to best address the new reality.

We share in their frustration and the opinions outlined in ITAM’s article, VMware stops selling perpetual licenses. Leapfrog’s advice? Make the best of the situation by accelerating your cloud adoption. 

Here’s what we recommend:

Choose one of these VMware transition approaches

Approach 1: Stop using VMware by moving to the cloud. 

This solution is optimal for companies already on the cusp of going serverless and all cloud. Now is the time to accelerate your plans and put servers behind you.

Approach 2: Reduce your dependence on VMware products. 

Move what you can to the cloud while improving your hardware efficiency. VMware licensing is based on the number of processors running your virtual footprint, but today’s processors are twice as powerful as older models. Sometimes, you can cut the number of servers and licenses you need by half if you buy new hardware.

Approach 3: Trade in your perpetual license for a VMware subscription.

If you have five or more servers and can’t migrate everything before your current license expires, capture some value from what you’ve already invested in VMware by moving to a new subscription product using its trade-in program that includes pricing incentives — but make as small a purchase as possible.

We do not recommend moving to a VMware alternative because it’s expensive to migrate and train your team on new skills.

Leapfrog is currently helping our clients determine their viable options and the related costs and other pros and cons. Your IT partner should be doing the same.

Expect to pay more — but how much more?

All VMware products are included in the transition to subscriptions (see the complete list here). Since the cost of moving to the subscription model depends on the number of licenses you need, work that cost into your annual operating expenses.

For smaller Leapfrog clients, it’s a $20K problem. But for larger ones, it’s a six-figure problem. 

The more a company has invested in the VMware platform, the greater the financial pain.

Enterprise and state-agency customers with 1,000 or more VMware licenses face costs 300% higher than before, according to a Leapfrog source. And migrating entirely from VMware for these companies could take up to 10 years.

What’s more, the price increases are especially difficult to swallow because many IT administrators feel VMware support and products have been declining.

Do you qualify for an exemption?

While most VMware customers must transition to the subscription model, a few qualify for exemptions.

In its initial announcement on December 11, 2023, VMware by Broadcom stated it was no longer selling perpetual licenses effective immediately. It has since amended its policy and allows customers with planned projects based on the traditional licensing approach to purchase new perpetual licenses and related support contracts until February 4, 2024. This change is an effort to enable these customers to move forward without reformulating their budgets.

However, as we’ve seen with two of our clients, renewing support on existing production implementations is not a backdoor.

One of our clients has a signed statement of work that includes a brand-new VMware hypervisor product. We were able to purchase the perpetual license for that product along with a one-year support contract before the February 4 deadline.

On the flip side, another client has six perpetual licenses with support contracts that end in July. When we attempted to renew their support contracts before the February 4 deadline, we were told that the product no longer exists. VMware is only offering new support contracts with the purchase of new perpetual licenses before February 4.

If you want continued VMware support, you must transition to VMware’s new subscription-based model. 

Leapfrog predicts more than half of VMware customers will aggressively move away from VMware, and VMware will lose many partners.

Who on your team is impacted most?

Right now, your CEO and CFO have the biggest headaches. 

They have to make the budgetary decisions — pay the higher cost of the new subscription model or accept the cost of migrating away from VMware. A no-cost option isn’t available.

Yet, the headaches extend beyond the budget. Your CIO and in-house tech team need to implement any changes, which consumes staff and other resources, and your IT partner has to deal with an unscheduled, time-consuming distraction that adds no value for their clients.

The value of this transition, therefore, lies in using this opportunity to accelerate your cloud adoption.

Top three questions from Leapfrog clients

Q: Can we keep running the VMware products we already have? Technically, you can own a license for as long as you like. But, in today’s world, information security is the biggest driver of technology updates. VMware is no longer selling support and Subscription (SnS) renewals either, which means you’re no longer entitled to patches and updates unless you subscribe.

Q: What if we just pay the subscription upcharge and get back to business? That sounds like the path of least resistance if you can afford it, but you’ll only buy a little time. Your cost will snowball because the subscription is expensive. What will the price be next year? Or the year after that? Leapfrog is unaware of an offer from VMware by Broadcom to guarantee a price point for the next five years.

Q: What if we migrate to another hypervisor platform? Migrating to a competing hypervisor platform (which allows multiple operating systems to share a single hardware host) is an enormous undertaking, expensive, and also risky — VMware’s trade-in offer is better. It offers the most mature hypervisor product in the marketplace and is the most stable, capable, and secure.

Make lemonade by accelerating cloud adoption

Exiting VMware technology to move to the cloud is probably not in most users’ 2024 budgets.

But, operating as much in the cloud as possible is the most modern business approach, and it offers benefits far beyond dealing with the VMware subscription issue.

It gives your company more flexibility, prepares you to leverage AI and business analytics, and enables you to better innovate and compete, among many other advantages.

Leapfrog is working closely with our clients to navigate VMware’s shift and help them transition. As their IT partner, we provide our best advice (short- and long-term), execute their decisions, run and manage their IT based on proven methodologies, and keep them as secure as possible. While not the most enjoyable part of our work, dealing with issues like effectively managing changes to provider business models has been in our wheelhouse for more than 25 years.