# Broadcom’s VMware Acquisition: Escalating Costs and Client Dissent
In November 2023, Broadcom concluded its $69 billion purchase of VMware, a prominent player in virtualization technology. Almost immediately, Broadcom implemented extensive modifications to VMware’s pricing and licensing strategies, resulting in widespread frustration among customers and partners. As the situation evolves, the ramifications of these alterations are becoming more apparent, with numerous organizations expressing discontent over increasing expenses and changed business practices. This article examines the primary concerns driving clients away from VMware and investigates the larger implications for the IT sector.
## The Price Increases: A Significant Point of Dispute
One of the most notable changes made by Broadcom was the cessation of VMware’s perpetual license offerings, replacing them with subscription-based models. This transition has caused considerable price surges for many customers. According to Gartner’s 2024 *Hype Cycle for Data Center Infrastructure Technologies*, some VMware clients have experienced cost increases of up to 300%. In extreme cases, like that of AT&T, Broadcom reportedly suggested an astonishing 1,050% price increase, leading the telecom company to file a lawsuit against Broadcom regarding perpetual license support.
For smaller entities, including community colleges and nonprofit organizations, these price increases are especially burdensome. James Westendorf, Director of Technical Services at Illinois’ Lake Land College, pointed out that VMware costs for the institution had tripled without any added features or benefits. As a public college, Lake Land must tightly manage its budget, and such a severe price spike has compelled the institution to explore alternatives to VMware.
In a similar vein, Bradley Bishop, DevOps manager at IT support firm Encore Technologies, mentioned that VMware’s revised pricing model forced his company to pay for features they neither desired nor needed. Consequently, Encore has started transitioning to OpenNebula, an open-source substitute for VMware.
## Broadcom’s Emphasis on Major Enterprises
While smaller organizations grapple with the rising expenses, larger firms seem better positioned to absorb the increases. For instance, IT company Veeam experienced a 300% uptick in VMware costs, yet its internal services have remained mostly unaffected. This disparity has sparked speculation that Broadcom is favoring its largest clients, a notion supported by Broadcom’s decision to handle approximately 2,000 of VMware’s biggest accounts directly, excluding channel partners from the equation.
Andrew Lerner, a well-regarded VP analyst at Gartner, remarked that nonprofit entities, hospitals, and school districts have been among the most severely impacted by Broadcom’s modifications. These smaller and mid-sized clients find it increasingly challenging to manage VMware’s new pricing structure, prompting many to seek alternative solutions.
## The Difficulty of Transitioning from VMware
Despite the rising discontent, moving away from VMware is no simple process. VMware’s technology is intricately integrated into numerous organizations’ IT ecosystems, and transitioning to a different platform can be both time-consuming and expensive. For instance, Lake Land College is currently evaluating Proxmox as a viable alternative to VMware. However, Westendorf stressed that switching hypervisors necessitates extensive stability testing and proof of concepts to guarantee a seamless transition.
Encore Technologies has also encountered hurdles in its migration efforts. The company experimented with eight different products before choosing OpenNebula, but the transition of its infrastructure has been slow and labor-intensive. As of October 2024, Encore had migrated approximately 60% of its infrastructure, aiming to complete the transition by the year’s end.
## The Emergence of Revirtualization and Devirtualization
Broadcom’s acquisition of VMware has also fueled broader trends within the IT industry, including revirtualization and devirtualization. Revirtualization entails substituting one hypervisor-based virtualization technology for another, while devirtualization involves shifting workloads from virtualized settings back to physical hosts.
According to Gartner, revirtualization has penetrated 5 to 20% of the target market, with Broadcom’s acquisition of VMware acting as a pivotal factor. The move from perpetual licenses to subscription models, along with rising expenses, has encouraged many organizations to reevaluate their dependence on VMware.
Devirtualization, although less prevalent, is likewise gaining momentum. Gartner estimates that under 1% of the target market has embraced devirtualization, but this trend is projected to increase over the next five to ten years. Fiscal concerns and the aspiration for greater control over IT infrastructure are propelling this shift.
## The Consequences for VMware Channel Partners
Broadcom’s alterations have impacted not just VMware clients but also its channel partners. In February 2024, Broadcom discontinued VMware’s Partner Program, replacing it with its own. This action, paired with the decision to take VMware’s largest customers direct, has left many smaller partners feeling marginalized.
Encore Technologies, which had been a VMware channel partner for more than eight years, found itself acquiring VMware products through one of Broadcom’s selected Premier Partners to continue supporting its clientele. However, Bishop noted that the majority of Encore’s customers
