Within weeks of the acquisition in November 2023, Broadcom eliminated VMware’s perpetual licenses, consolidating the products into bundled packages with significantly higher costs.
Gartner reports that these pricing adjustments have caused VMware costs to rise as much as threefold for many clients. Some customers, such as AT&T, have seen price proposals jump by as much as 1,050 percent. AT&T has since filed a lawsuit against Broadcom over the price hikes and reduced support options.
IT providers like Encore Technologies and Lake Land College have cited price increases of 300 per cent or more, prompting them to explore alternatives like OpenNebula and Proxmox.
Encore’s DevOps manager, Bradley Bishop, explained that customers now pay for unwanted products bundled into Broadcom’s new VMware licensing structure.
“A lot of companies were forced to pay for things they did not want or need,” Bishop told Ars Technica.
Lake Land College’s James Westendorf noted that these changes have become unsustainable, especially for smaller organisations with limited budgets.
Smaller VMware customers, including nonprofits, hospitals, and educational institutions, have struggled to absorb the increased costs and transition to a subscription-based model. Broadcom’s shift appears to prioritise larger, enterprise-sized clients, leading many smaller customers to consider alternatives. Analysts at Gartner expect this trend to increase virtualization and devirtualisation efforts across the IT sector as customers seek options beyond VMware.
The backlash has also impacted Broadcom’s channel partners. In February, Broadcom ended VMware’s Partner Program, replacing it with Broadcom’s own, which cuts many smaller resellers from VMware’s distribution model. With delays in quoting new customers and higher prices for existing services, VMware’s smaller partners, like Members IT Group, have seen a downturn in VMware sales and client interest.
CTO Dean Colpitts’ current advice to his customers is to tell Broadcom to “buzz off” which is rather more polite than I think he means.
Despite the customer pushback, VMware’s $3.8 billion quarterly revenue contributed to a 47 per cent revenue boost for Broadcom in Q3 2024, with VMware Cloud Foundation sales increasing by 32 per cent over the previous quarter.
Broadcom appears focused on maximising revenue from VMware’s subscription model, aligning with its history of integrating acquisitions like CA Technologies and Symantec.
