Observations
The Impact of Broadcom’s Licensing Changes on VMware Products
Broadcom’s acquisition of VMware in November 2023 has fundamentally altered VMware’s licensing and product landscape. Transitioning from perpetual to subscription-based licensing has led to recurring costs, replacing the one-time fees many mid-sized organisations relied upon. This shift aligns VMware with industry trends but has resulted in significant cost increases, with many IBRS clients experiencing increases of 200–240 per cent and one organisation reporting price hikes of well over 1000 per cent.
Additionally, Broadcom introduced core-based pricing, replacing the previous socket-based model. This change disproportionately impacts organisations with high-performance computing needs, as they must purchase a minimum number of cores, even if their workloads do not demand such capacity.
Broadcom has also discontinued entry-level products like the VMware Essentials Kit, popular among mid-sized organisations. This move forces businesses to adopt more expensive bundled solutions, often including features they do not need. The bundling of products, such as VMware Cloud Foundation and VMware vSphere Foundation, reduces flexibility and increases costs for organisations that previously relied on standalone solutions.
VMware’s offerings have been dramatically reduced from 168 products to just four main subscription bundles:
- VMware Cloud Foundation
- vSphere Foundation
- vSphere Standard
- vSphere Enterprise Plus
In addition, the restructuring of VMware’s partner programs has affected many smaller partners and resellers, reducing support options for small and mid-sized Australian and New Zealand clients. IBRS has spoken with several long-term VMware partners who have pivoted to helping clients move off VMware to alternative solutions or architectures and expects this trend to accelerate for the next 2 years.
The introduction of these changes in December 2023 created uncertainty in the market regarding the sustainability of VMware investments. In addition, concerns about Broadcom’s reduced investment in research and development (R&D), declining product quality, and compatibility issues with other solutions have been raised. For mid-sized organisations, 2024 was a year of reaction, with a strategic pivoting away from VMware. If not already underway, 2025 should be a year to reassess VMware’s role in ICT infrastructure and consider alternative solutions or new architectural approaches.
Some mid-sized organisations have reported disruptions to their ICT plans due to VMware’s abrupt changes in pricing and licensing. Projects that relied on VMware foundations have been postponed while alternative strategies are explored.
In some cases, organisations took advantage of the re-bundling of VMware services to get more VMware features and use these additions to justify the significant price increases. However, these organisations fully understood that this would only be workable for a single licensing cycle.
Why Mid-Sized Organisations Should Consider Alternatives
The evolving VMware landscape presents both risks and opportunities for mid-sized organisations. While VMware remains a leading player in the virtualisation market, the following factors make a compelling case for exploring alternatives.
Cost Optimisation
The new licensing model has significantly increased costs for mid-sized organisations. Alternatives often offer more competitive pricing structures, including open-source solutions that eliminate licensing fees. For example, Proxmox VE and KVM provide robust virtualisation capabilities without the financial burden of subscription-based licensing. It should be noted that open source options have their own costs, dependent on an organisation’s ICT environment: the cost of skills development, administration, patching, or potential use of a technology partner to manage the environment.
Flexibility and Modernisation
Exploring alternatives allows organisations to modernise their IT infrastructure. Many alternatives support containerisation and serverless architectures, enabling greater scalability and efficiency. Solutions like Red Hat OpenShift Virtualisation combine virtual machines (VMs) and containers on a single platform, offering a pathway to modern, Cloud-native architectures.
Reduced Vendor Lock-In
Broadcom’s bundling strategy increases dependency on VMware’s ecosystem, limiting organisations’ ability to adopt best-of-breed solutions. Alternatives like OpenStack and Nutanix AHV provide greater flexibility and integration capabilities, reducing vendor lock-in and enabling a more diverse technology stack.
Enhanced Features and Community Support
Open-source solutions like Proxmox VE and Ceph benefit from active community-driven development, offering customisation and rapid innovation. Commercial solutions like Microsoft Hyper-V and Nutanix AHV provide enterprise-grade features and robust support, catering to the specific needs of mid-sized organisations.
Risks of Transitioning to Alternatives
For capacity-constrained organisations, the impact of the VMware changes may adversely impact other long-scheduled initiatives and the timing of their benefits. Technology vendors often rely on uninformed fear, uncertainty, and doubt (FUD) about these matters to block the choice to change. For these reasons, a long-term cost-benefit analysis must look beyond initial/one-time trade-offs to support an informed decision. However, while the benefits of exploring alternatives are clear, organisations must also consider the associated risks:
Migration Complexity
Transitioning from VMware to an alternative platform can be resource-intensive and require significant system reengineering. IT teams may need to acquire new skills to manage alternative platforms, adding to the complexity. Clients’ reluctance to incur the costs and complexity of change works in Broadcom’s favour.
Despite the higher costs, many small and mid-sized organisations will decide to stay on VMware for the next licensing cycle to avoid the short-term risks and costs of change but will start exploring alternatives.
As a result, IBRS expects a second exodus of mid-sized firms from VMware in late 2026 through to mid-2027. This also means that the availability to tap VMware migration resources could be constrained during this period.
Compatibility and Support
Some alternatives may lack VMware’s mature support ecosystem and compatibility features. For example, open-source solutions like KVM may require additional effort to integrate with existing systems.
Performance and Reliability
Ensuring high availability and fault tolerance is critical for business-critical applications. While many alternatives offer competitive features, they may not match VMware’s proven track record in these areas. When evaluating alternatives, close attention must be paid to these issues, but only insofar as they match the risk profile of the business needs to which they apply.
Alternatives to VMware Products
The table below compares several open-source and commercial alternatives to VMware products, highlighting their key features, pricing, and suitability for mid-sized organisations. This is not expansive and reveals just the leading solutions in each area.
| VMware Product | Alternative | Type | Key Features | Suitability |
| vSphere | Proxmox VE | Open-Source | KVM and LXC integration, live migration, high availability, web-based interface. | Cost-effective for tech-savvy organisations. |
| Microsoft Hyper-V | Commercial | Live migration, replication, failover clustering, strong Windows integration. | Ideal for organisations using Microsoft products. | |
| Citrix Hypervisor | Open-Source | High scalability, disaster recovery, Active Directory integration. | Suitable for large-scale deployments. | |
| ESXi | XCP-ng | Open-Source | Xen-based, user-friendly, suitable for small to medium clusters. | Best for small to medium-sized organisations. |
| KVM | Open-Source | High performance, Linux integration. | Flexible for Linux-based environments. | |
| vSAN | Ceph | Open-Source | High performance, reliability, scalability. | Ideal for software-defined storage needs. |
| Nutanix AHV | Commercial
Subscription-based |
Hyperconverged infrastructure, simplified management. | Turnkey solution for mid-sized organisations. | |
| NSX | Open vSwitch | Open-Source | Network automation, standard management interfaces. | Suitable for Cloud-native environments. |
| Cilium | Open-Source | Networking, security, observability for Kubernetes. | Best for Kubernetes-based deployments. | |
| Horizon | Apache Guacamole | Open-Source | Clientless remote desktop gateway supports VNC, RDP, SSH. | Lightweight remote desktop solution. |
| Citrix Virtual Apps | Commercial
Subscription-based |
High-performance, scalable virtual app and desktop delivery. | Enterprise-grade remote desktop solution. |
Next Steps
- Conduct a Cost-Benefit Analysis: evaluate the financial implications of transitioning to an alternative platform, considering initial migration costs and long-term licence savings.
- Assess IT Team Capabilities: identify skill gaps within your IT team and invest in training to ensure a smooth transition to the chosen alternative.
- Pilot Alternative Solutions: implement a pilot programme to test selected alternatives’ performance, compatibility, and reliability before full-scale deployment.
- Engage Stakeholders: collaborate with enterprise and Cloud architects to align the transition strategy with organisational goals.
- Develop a Transition Roadmap: create a detailed plan outlining the steps, timelines, and resources required for migration, minimising disruption to business operations.
- Monitor and Optimise: continuously monitor the new platform’s performance and optimise configurations to maximise efficiency and cost-effectiveness.
