VMware customers have reported seeing significant price increases since Broadcom acquired VMware late last year, with some customers now paying as much as 10 times more for the same services.
VMware enterprise customers told Business Insider that prices have increased by 175% and they have no choice but to “put their money and make a plan” because it’s not easy to switch to another service.
“We feel like we’re being held for ransom,” the person, who asked not to be named in order to speak freely, told BI.
Broadcom has made several changes since the acquisition to boost profitability, including bundling VMware products to “simplify the portfolio,” which could mean customers have less flexibility and have to pay for more products even if they don’t use all of them.
“Broadcom’s banquet is, ‘Eat what you want and pay for it all,'” says Craig Hinckley, CEO of cloud-management company CloudVolt. “Customers are saying, I don’t want the banquet. I don’t want the whole thing.”
Additionally, last December, Broadcom moved from a perpetual licensing model to a subscription model that gives customers access to support and the latest software versions, a move that will benefit Broadcom by allowing it to generate more annual recurring revenue.
Broadcom also focuses on and works directly with VMware’s 2,000 largest and most profitable customers, meaning customers such as nonprofits and small businesses may get overlooked and receive less support from VMware.
Rick Vanover, vice president of product strategy at Veeam, said switching from VMware to an alternative product isn’t something that customers can do overnight because it requires a “comprehensive overhaul.” And if employees have already been using VMware for a long time, it takes time to train them on the new technology, he added.
“For many organizations, funds are limited. This is an unexpected increase they have to deal with,” said David Rowe, chief product officer at Rimini Street, which provides support for software products including VMware.
Broadcom did not respond to a request for comment.
VMware price increase
Dave Russell, senior vice president and chief strategy officer at Veeam, said the company has seen a 300% price increase for VMware products it uses, which is consistent with what he’s been hearing from customers, some of whom are reporting even higher price increases.
Russell said most large companies have updated their VMware products and have time to decide whether to continue using them, while smaller customers are more sensitive to price changes.
“The majority of large companies have put themselves in a position to push aside any concerns,” Russell said, adding that some clients are considering whether alternatives are “feasible.”
Hinkley said CloudVault customers have seen VMware price increases ranging from 140% to 600%. One executive even said prices had increased 10 times. The range of price increases customers experience is wide, but it depends on factors such as their specific contracts with Broadcom and the products they use.
CloudBolt surveyed 300 IT decision makers in May and found that 73% expected prices to increase by at least 100% following Broadcom’s acquisition of VMware, and 95% of respondents believed the acquisition would have a disruptive impact on their company’s IT strategy.
“This is a problem so severe that it’s affecting the company’s performance,” Hinckley said. “Some companies can’t launch innovative projects. They’re paying for Broadcom’s banquets and starving.”
Transitioning to VMware Alternatives
Many customers are currently rethinking their entire IT strategy. In a CloudBolt survey, 87% of respondents said they will decide their next step in the next 12 months. So far, 40% said they will stay fully VMware-enabled, and 43% said they will maintain some VMware solutions.
While many customers plan to stay with VMware, many, especially smaller businesses, are considering alternatives. Some customers may need help moving away from VMware products and toward new solutions such as Nutanix, Microsoft, Docker, and Kubernetes open source cloud computing software.
Gartner predicts that 30% of customers will move away from VMware’s flagship hypervisor product to an alternative by 2028. Forrester also predicts that 20% of VMware customers will move away from the company.
Still, migrating away from VMware will be challenging for technical, organizational and support reasons. Rowe said the migration process could take anywhere from 18 months to four years because VMware’s products are tightly integrated into a company’s technology infrastructure and “required direct, hands-on work to replace.”
Additionally, it takes time to evaluate and select alternatives and test and integrate new products to ensure they work properly.
“Customers have a variety of VMware products installed, and some run their entire operations on VMware,” Rowe says. “The sheer size of the deployments is what’s stretching the timeline.”
Hinkley said longtime VMware customers have spent years developing code and automated processes within their IT infrastructure to run VMware products. Reevaluating those applications is a task that many customers don’t have the time or money to budget for, he added.
Additionally, many IT teams are focused on VMware, so moving to a different solution would require additional training and coordination across departments and external vendors.
“They’ve never operated outside of that ecosystem so there’s going to be a massive upskilling first before they can make it viable,” Hinkley said.
Competitors pounce
Since the VMware acquisition, some competitors have been inundated with customers seeking assistance.
“We’ve definitely seen an increase in conversations around new sales, conversations with customers, conversations around expanding our customer base,” said Steve Tuck, CEO and co-founder of Oxide Computer.
Several companies have launched alternative solutions: Rimini Street announced an alternative support program for VMware products earlier this year, which offers support, as well as security solutions, consulting and workarounds for customers with VMware licenses, now that Broadcom has deprioritized support for smaller customers.
Renee Wells, vice president of product strategy at Rimini Street, said clients have expressed relief at the launch.
“Some of them were looking to become independent because they couldn’t afford the high prices,” Wells said. “They were very frustrated and angry and felt like this might be one of their only options.”
Similarly, Virtuozzo CEO Alex Fine said that about 20 to 40 VMware customers have approached the company as a result of the price increases. He said that while many customers have chosen to “embrace” the price increases, VMware is no longer a viable option for many small and mid-sized customers. Even larger customers are looking for alternatives, he added.
“We rarely go to customers and say, ‘We want to sell you an alternative to VMware,'” Fine said. “That’s not our goal. Our goal is to provide a second solution, and then the customer decides.”
Nutanix CEO Rajiv Ramaswamy said customers were worried they wouldn’t get the support they needed as Broadcom cut costs, consolidated teams and laid off VMware staff.
At the same time, Ramaswamy said these changes are a big opportunity for Nutanix to win more VMware customers. Dell, which has had a strong partnership with VMware for many years, announced a new partnership with Nutanix in May.
“However, this will happen slowly. People cannot be relocated overnight even if they want to,” Ramaswamy said.
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