VMware’s recent acquisition by Broadcom has jilted the enterprise space, especially for long-time VMware users that are now faced with an entirely new operational dynamic imposed by Broadcom’s changes to VMware’s licensing models.

Naveen Chhabra, principal analyst at Forrester Research, recently helmed a report that attempts to provide a template those exposed enterprises can follow as they navigate their new VMware reality. That report notes that Broadcom’s changes impact “all the classic five ‘P’s’ of product marketing – product, pricing (and packaging), place, promotion and people (partners).”

“One VMware client shared that they’re experiencing a 500% price increase based on their current use of VMware products and how it maps to the new licensing and packaging,” the report notes on the impact of those changes.

Chhabra, in an interview with SDxCentral, said that these pricing changes were not unexpected and that he and his team had predicted 20% of the world’s largest enterprises “will start to exit – read these words very carefully – will start to exit the VMware stack.”

“They will not do a full replacement overnight, but in parts, they will start to move away,” Chhabra said. “I clearly see that happening right now and I don't need to go another five months to claim that that prediction was true. It is happening.”

The report also touched on challenges brought on by Broadcom altering VMware’s distribution structure. This was highlighted by Broadcom’s recent move to take over VMware distribution from Amazon Web Services (AWS).

“Another VMware client exclusively works with one channel partner, and as that partner is no longer a VMware reseller, the client needs to establish new business relations,” the report notes, adding that, “understand that even one change could be untenable in your relationship with VMware.”

What’s my VMware exposure?

To work through these challenges, Chhabra’s first recommendation is for organizations to understand their exact exposure to VMware infrastructure.

“Without that, you're blindfolded here,” Chhabra told SDxCentral in an interview. “Start discussing both internally as well as with your partners, providers and [VMware] competitors. Without that initial discovery, you're flying blindfolded.”

This can be especially challenging for larger organizations that might have broad exposure to VMware’s extensive product portfolio.

“VMware products were bought by many different stakeholders within an organization even though everything rolls up to a CIO,” Chhabra said. “Think about the networking team. The networking team doesn't talk to the server team. They don't talk to the storage team. And we have had products for all three of them. And now, when the new bundles have been announced or new product packages have been announced, all the existing products, whether it was NSX for networking or vSAN for storage or vSphere for a virtualization specialist or a server specialist, all of those products have been condensed into one package. Now you need to buy one package, regardless of how much you use internally, so that's another reason why you need to take stock and you have an opportunity for optimization.”

This exposure can also bleed into platform dependencies that spread across an organization.

“When I talk to the clients, I'm telling them that with dependencies it might not be easy to simply replace or swap a VMware hypervisor with another hypervisor because of the ecosystem impact, because of the ecosystem effect,” Chhabra said. “I think the power of VMware is not because of the VMware technology, it is because of the network effect. It's both the north and south ecosystem partnerships that VMware had developed over the years, and that brings power to the VMware options.”

That optimization opportunity requires an organization to have an accurate handle on its exposure so it can take the steps necessary to rationalize that VMware exposure going forward.

“That is where I am helping a lot of clients in identifying the opportunity for optimization,” Chhabra said. “This is how you communicate to VMware; this is what you ask; this is what you tell VMware, and then make a decision.”

VMware competitors are very aware of the situation and have been actively positioning their alternatives. Chhabra cited recent work by vendors like Citrix and Microsoft “to seed the market,” but that has also added to the potential “chaos.”

“Let's say the way you patch VMware is not the same as you patch a Citrix or a Microsoft environment,” Chhabra said. “Their philosophy, their patch release cycle, and so on is very different and hence you also need to think about skills.”

Does it make sense to leave VMware?

Should all of those stars align toward a move out of the VMware ecosystem, Chhabra said timing will be critical. He noted that while the VMware issue is top of mind for many of his clients, “unfortunately, very few of them are proactive.”

“Almost all other tech decision makers, they are within one year to six weeks of decision making,” Chhabra said. “They don't have much time left and most all of them are seeing the impact in terms of the pricing because they have to execute, they have to make a decision in the next five, six weeks or five, six months.”

One challenge enterprises might face as they look for alternatives is the possibility some of those other vendors might follow Broadcom’s path in changing up legacy licensing models. Chhabra said this could mean changes like higher prices or lower discounts.

“Why would competitors leave money on the table,” Chhabra explained, noting that those VMware rivals are expecting an influx of interested parties. He added this could mimic what happened to the real estate market during the pandemic when sellers were in the driver’s seat.

“VMware has the moat of increasing prices and its competitors will not reduce the price just because they want to attract VMware customers,” Chhabra noted.

This model was highlighted by Nutanix CEO Rajiv Ramaswami, who during the vendor’s most recent earnings call touted “a significant multi-year opportunity for us to win new customers and to gain share” due to Broadcom’s changes to VMware’s licensing structure.

Microsoft recently moved to offer new licensing benefits and discounts to help VMware users migrate and run their workloads on the hyperscaler’s Azure VMware Solutions service.

The migration program is offering users access to reserved instances at a set price over a set term of one, three or five years. These reserved instances are basically a way for a customer to pay upfront for the use of instances to run an application in Azure as opposed to a pay-as-you-go model, with the benefit of the reserved model charging less per instance.

Microsoft is incentivizing the reserve push by offering a 20% discount on Azure VMware Solution for customers purchasing a new one-year reserve instance term if that purchase is made before the end of the year. The hyperscaler noted the five-year option will only be available for purchase through the end of June.

Microsoft is also providing up to $120,000 in Azure credit for customers that purchase a new reserved instance plan. This credit can be used for the Azure VMware Solution or other Azure services.

Chhabra added that broadly, Broadcom’s moves with VMware are going to cause upheaval in the market and add stress to already over-stressed enterprise IT departments. This could benefit Broadcom if enterprises find it makes more sense to stay the course, or rivals if enterprises take the time to seek alternatives.

“People have to get accustomed to it,” Chhabra said. “It is yet another vendor, yet another reality and it might not be a smooth road. It might have bends, curves, ups and downs, but eventually, if you can't bite the cost, you better move.”