The technology sector has regularly experienced mergers, acquisitions, and divestitures. These shifts can often alter IT strategies and infrastructure budgets. For instance, Broadcom's 2023 acquisition of VMware had a significant impact on virtualization and cloud computing, prompting organizations to reassess and adjust their IT plans and vendor partnerships.
Understanding the Impact: What’s Changed?
The VMware Broadcom acquisition and subsequent changes have affected various aspects of IT Operations and Budgets. I have summarized the impact into six key themes.
- Subscription-Based Licensing: VMware has changed its licensing approach from a one-time purchase to a subscription model. This shift has led to increased license costs for many customers, sometimes up to 7 times their current budget.
- Simplification of Product Portfolio: VMware has unified its extensive and modular product suite into four comprehensive bundles: VMware Cloud Foundation (VCF), VMware vSphere Foundation (VVF), VMware Standard, and VMware Essentials. This approach limits the flexibility to acquire only the necessary standalone products, potentially leading customers to purchase more costly bundles with features that may be unnecessary.
- Socket-driven Licensing Metric: VMware has transitioned from socket-based licensing to a core-based licensing model, mandating a minimum purchase of 72 cores per product instance, effective April 2025, an increase from the previous minimum of 32 cores. This transition has notably increased costs for small and medium-sized businesses (SMBs) and customers operating high-core-density workloads.
- Service Provider Impact: Broadcom has restructured VMware’s channel ecosystem, resulting in the exclusion of several existing partners. Consequently, customers are put in a position where they must explore new alternative partnerships and establish new agreements with the remaining limited partners.
- Support to Enterprises: There are concerns about declining support quality and increased resolution times, reportedly due to internal organizational restructuring within VMware, which is affecting business uptime for VMware workloads.
- Sunsetting of Products: Several products, such as VMware Horizon, VMware on Cloud (AWS/Azure), and VxRail, are being divested, de-emphasized, or phased out. This has created urgency for organizations to revisit their hybrid cloud strategies and evaluate alternative solutions to reduce vendor lock-ins.
Assessment: Evaluating Financial and Technical Implications
Organizations need to understand the current VMware dependencies and assess the financial and technical impact of these changes.
Plan Roadmap: Strategizing for Reduced VMware Dependency
Organizations must build a balanced roadmap to address risk, flexibility, and reduce cost impact.
- Evaluate Virtualization Alternatives: Consider enterprise-grade virtualization options, such as Azure Stack, AWS Outpost, Nutanix AHV, Red Hat KVM, and OpenStack. Conduct proof-of-concepts (POC) or Pilot programs at an early stage to assess feasibility.
- Adopt a Hybrid Cloud Strategy: Migrate workloads to hyperscalers using an IaaS/PaaS model, such as AWS, Azure, GCP, or OCI.
- Adopt Containerization: Transition suitable workloads to containerized environments using platforms such as Kubernetes.
- Upskill Teams: Invest in training programs to equip IT teams with the necessary skills to effectively manage new platforms and technologies.
- Leverage Strategic Partners: Engage IT service providers with experience in these programs for assessment and migration.
How are We Engaging with Our Customers?
At Tech Mahindra, we are helping our customers navigate the following challenges. Our VMware Exit and Hybrid Cloud Advisory Services include:
- Assessment of current VMware usage, licensing, and spend
- Identifying and benchmarking viable alternatives
- Defining a phased migration roadmap aligned with business priorities
- Setting up CoE and governance to manage the change.
Our goal is to reduce technical risk, reduce/minimize the cost impact, and provide flexibility without disrupting your business operations.
The acquisition has forced enterprises to revisit their IT roadmap and hybrid cloud strategy. By planning and evaluating alternatives, organizations can navigate this transition effectively, ensuring higher resilience and reduced budget impact in their IT operations.
