VMware users gripe over 3-year commitment to renew licenses

Chips and software giant Broadcom says it's 'flexible and open' on licensing terms, but customers disagree

VMware users continue to be unhappy with licensing changes since the virtualization giant was acquired by Broadcom, and are now complaining that they are being forced into three-year commitments when renewing vSphere licenses.

Following the takeover of Virtzilla at the end of 2023, Broadcom has shaken things up with a switch to "simplified" licensing and a preferred focus on larger enterprise customers.

However "simplified" meant ditching standalone support services and perpetual licenses, with customers instead being offered per-core subscriptions to bundles of software and support. Many protested that this led to a massive hike in the license fees they owed to Broadcom. The licensing changes have subsequently lost VMware some big name clients including insurance giant Geico and agriculture juggernaut John Deere over the past year.

Now, customers are claiming that if they want to renew existing vSphere licenses, they are required to stump up in advance for a three-year period rather than just renew for a single year.

One poster, "bschmidt25", on a Reddit VMware thread complained recently that Broadcom "only wants customers that are committed to them," and for that reason the company is only offering VMware users three-year commitments when it comes to renewals.

"They will only do annual payments if you go all VCF. If you want Enterprise Plus or Standard licenses, you need to pay three years up front," the poster "bschmidt25" states.

VCF here means VMware Cloud Foundation, which combines compute, storage and network virtualization with management and automation tools into one package that can (in theory) be deployed on either a customer's on-prem infrastructure or into a public cloud. The suite became VMware's flagship product following its assimilation by Broadcom, and the "simplification" of its product portfolio.

Yet many customers are users of the vSphere server virtualization platform, and had renewed their licence annually, which some had hoped to continue doing as they mulled a migration away from VMware to some alternative technology.

"We do annual renewals because of how our budget process works. We plan for 10 percent increases on software renewals every year. If it's more than that, the money needs to come from somewhere else," bschmidt25 says. "We already got hammered last year when our renewal went up 70 percent even after reducing our licensing. The numbers we got for VCF are nearly three times what we paid last year."

A second poster, "michaelnz29" believes this is a deliberate ploy by Broadcom, which knows many customers are planning to ditch VMware, and so is denying short-term licenses that would allow businesses to cover the migration period.

"They are aware that many of you are looking at alternatives, but it is going to take 6-12 months to migrate off, therefore only offering a three year deal means a couple of things, one you need support so you will most likely renew anyway," the poster writes. "The other, we have short memories; in 2 years' time (when you are revisiting the options) because you signed up for three years, you have forgotten the pain (they hope) and the new 'improved' pricing structure is part of your budget and you just pull the trigger and renew."

Another poster claims to have something of an explanation:

"I work for a [Value Added Reseller], a lot of what you get for quotes depends on the Broadcom rep assigned to your account. Any half decent VAR will work with you and make the case of what's right for you. They do have what they call "expected annual revenue" assigned to your account and the Broadcom rep is often very reluctant to reduce this number," said user "Darkcurse12."

"They have gone through several policies in the last year but one of the more recent ones was to require a three year annualized contract with cancellation terms. Meaning you sign a three year contract, pay year, but can cancel during that term with some caveats," the poster explained.

We asked Broadcom for a response to the complaint, but a company spokesperson simply directed us to a blog posted by CEO Hock Tan last year outlining its VMware strategy.

In it, the chips 'n' software giant claimed to be "flexible and open" on subscriptions, "with customers having choice when deciding the length of their subscriptions, whether they purchase directly from us at Broadcom or through channel partners. Either way, we will structure contract durations in alignment with our customers' journeys," Tan said.

Despite what Broadcom asserts, a VMware customer we contacted confirmed what the Reddit post claims.

"Yes, Broadcom scrapped the one year contracts and now only permit annual upfront payment on a three year term," the customer, who asked not be identified, told us.

Customers may face challenges if they do decide to ditch VMware for some alternative platform, analyst firm Gartner warned this week. This is because it is more than just a supplier of virtualization tech, but also management and orchestration tools plus software-defined network and storage platforms that customers may have also deployed. Migrations are likely to be a long, costly and risky project, especially for larger companies, it said.

Small wonder that VMware has turned out to be a money-making machine for Broadcom, as The Register reported at the end of last year. ®