How VMware's Policies and Prices Altered Following Its Acquisition of Broadcom

VMware has led the way in creating software for virtualizing x86 architecture since its founding in 1998. This software can unquestionably be regarded as the precursor to cloud services as they exist today. After three years, VMware delivered its flagship products, enabling server hardware virtualization and enabling users to run numerous systems on a single physical computer. The influence of these technologies on the market cannot be emphasized because many data centers have now altered their methods of operation. One may argue that VMware's efforts in facilitating the provision of IT services in a novel, almost 'cloud-based' format laid the groundwork for the development of cloud computing as we know it today. There is no denying that 2001 might be considered 'Year Zero,' which denotes the beginning of the era of cloud computing.

To grow its market share in the rapidly growing cloud computing industry, VMware has made strategic investments, developed several essential technologies, and progressively increased the range of products it offers. When things weren't going so well for the business, VMware underwent a number of ownership changes, first being owned by EMC and subsequently by Dell.

When Broadcom formally declared its intentions to acquire VMware in May 2022, Dell, a significant VMware stakeholder, consented to sell VMware to the latter company. The agreement took over 18 months and $61 billion to finalize. The EU, US, UK, and China all conducted probes and closely monitored the acquisition process. Furthermore, controversy developed because many devoted VMware customers were afraid that, given Broadcom's history, they would have to look elsewhere. Previously, Broadcom had acquired Symantec and CA Technologies, which led to the cancellation of some products and services and major user disruption.

Under the new leadership, VMware stopped selling perpetual licenses and switched to a subscription business model. Following that, they redesigned their product line and drastically reduced the amount of options available: over half of the capabilities were dropped, and the remaining features were combined into two bundles, VMware Cloud Foundation and VMware vSphere Foundation, along with an add-on. It goes without saying that none of the remaining features are offered for separate purchase.

Naturally, the perpetual licenses that were in place for VMware products did not expire, thus they could be used eternally 'technically.' But consumers were always required to acquire a Support and Subscription (SnS) contract on a subscription basis in order to receive updates, support, and new software versions. This implies that previous clients with perpetual licenses would not be eligible for new versions, direct support from VMware, or essential security updates if they did not have an ongoing SnS contract. Because of this, these licenses are seldom usable without continuous access to updates, support, and security patches, even though the perpetual license is still legal due to the lack of support and subscription contracts. Some long-time customers felt that they were being forced into a new model because of this strategy.

Let us take a brief overview of VMware's new bundles in relation to this new model. Visit VMware's blog to learn more about their products and services:

- **VMware Cloud Foundation**: With a full-stack infrastructure platform, VMware Cloud Foundation is the company's most complete offering. The full suite of Aria management and orchestration tools is integrated together with NSX, vSphere, and vSAN technologies.

- **VMware vSphere Foundation**: This solution integrates the Tanzu Kubernetes Grid and Aria Operations tools to optimize data center operations in typical vSphere systems.

- **Additional Services for VMware**: Extra storage, security, disaster recovery, generative artificial intelligence, and other requirements are covered by this service, which is offered for VMware vSphere Foundation and VMware Cloud Foundation.

Since VMware stated that this 'portfolio simplification will allow customers to extract more value from their VMware investment,' it is important to examine VMware pricing from the perspective of the customer.

VMware has shown to be a flexible solution over the years, serving individuals as well as small and large corporations. Furthermore, while large corporations did not appear to be impacted by this shift to more unified packages, small business owners who were utilizing lightweight VMware deployments bombarded the Internet with requests for renewals.

For instance, a small VMware partner reported on Reddit that their renewal expenses had increased five times, from $10,000 to $50,000. Another consumer expressed dissatisfaction, claiming that the cost of their vital service membership will be 25 times higher than their prior one. When their support contract expires in 12 months, another Redditor who represented a British university was anticipating an increase of up to 1250%, from £40,000 to £500,000 annually. It should be noted that each of the aforementioned examples reflects the user's own experience. But the pattern points in a very clear direction: Broadcom is increasing prices to maximize short-term revenue and pay off their large investments.

However, the modifications didn't stop there. With VMware resellers and service providers, Broadcom has redesigned its partnership structure. It has terminated current agreements and switched to an invite-only approach called the Broadcom Advantage Partner Program. It is claimed that by 'simplifying bundled offerings and increasing opportunities for service revenues,' this behavior will streamline operations and boost profitability. Like the price model alterations, these modifications have also caused smaller partners to express worry because of the new program's strict revenue requirements for enrollment.

Additionally, Broadcom is offering Google Cloud clients the ability to migrate their VMware Cloud Foundation licenses, giving them greater freedom and financial savings when it comes to running their VMware software both on-site and in cloud environments. It remains to be seen if Broadcom can get past the confusion caused by major price structure changes with this move.

Let's go back to Broadcom Software Investor Day in September 2021 before we wrap it up. In the event, Broadcom overtook Symantec and CA Technologies and outlined its go-to-market strategy and financial model for these recently acquired companies.

Symantec and CA Technologies had lower organic revenue growth, gross margin, and operating margin prior to their involvement, according to Broadcom's Investor Day slide. These indicators were enhanced after the acquisition at the price of lower R&D and marketing expenses, which is a direct result of Broadcom's go-to-market strategy. Due to the complicated and regulated nature of their individual sectors and the size of their branched IT departments, the largest key customers are targeted in a targeted manner, making them less inclined to transfer providers. By concentrating on these businesses, significant sales and marketing costs can be avoided, and research and development can be customized to fit the unique requirements of these important customers.

Due to all of this, these clients are compelled to think about their relocation choices and, as a result, seek out VMware's reliable cloud migration solution. Moving from VMware to any cloud platform can be done completely and seamlessly with the help of solutions like intucloud. It guarantees data integrity, security, and operational continuity throughout a seamless cloud migration. Businesses can effectively manage the challenges of moving VMware workloads to the cloud, save expenses, increase flexibility, and take full use of cloud infrastructure by utilizing intucloud.