VMware Buyout: What Strategy Should You Adopt?

Aurélien Violet

Sep 29, 2024 • 5 min

VMware Buyout: What Strategy Should You Adopt?

Originally published on Le Monde Informatique.

In November 2023, Broadcom, the American semiconductor giant, officially acquired VMware, the virtualization specialist, for a sum of $69 billion. This massive transaction has already had significant repercussions for thousands of VMware clients worldwide. However, some CIOs and infrastructure leaders remain optimistic, viewing this as an opportunity to rethink their IT strategy, aiming for more sovereignty and long-term cost savings.

Monkey Enix pondering the impact of VMware’s acquisition

A Financially Driven Merger

Behind this acquisition lies Broadcom’s strategy of diversifying its business. Broadcom has already announced its goal of achieving a very short return on investment within three years. This merger, primarily driven by financial motives, has left many companies using VMware products wary of Broadcom’s takeover of the virtualization specialist.

In addition to the announcements made over the past few months, some customers fear Broadcom’s future decisions. Since acquiring CA Technologies in 2018 and Symantec in 2019, Broadcom has earned a reputation for regularly increasing software license fees.

Significant Impact on IT Budgets

According to Cigref (organization representing large French companies) estimates, factoring in the sale of some VMware activities and reductions in workforce and costs, in order to make the acquisition profitable within three years, the current customers’ bills could triple on average.

Since the beginning of the year, these projections are being confirmed on the ground. Many IT decision-makers are alarmed at the significant impact on their budgets. “Companies of all sizes are consulting with us because they are facing considerable price hikes. We are also seeing real disparities, depending on their infrastructure and the VMware services they use. The most affected are mid-sized and small businesses, with price increases sometimes going up by 15 times,” confirms Aurélien Violet, Chief Marketing Officer at Enix.

To reach such levels of increases, Broadcom has deeply revamped its offering: phasing out the perpetual license model in favor of subscription-based models; changing the unit used to calculate the number of licenses; and implementing bundles, which require customers to opt for a full package of VMware Cloud Foundation (VCF) or VMware vSphere Foundation (VVF) services, whether or not they use all of the components.

Innovation and Support Quality: Eroding Confidence

Beyond the short-term financial impact, customers fear significant changes in the product development roadmaps. VMware had invested heavily in recent years to develop cutting-edge solutions in virtualization, containers, hybrid cloud, and edge computing. Can businesses count on continued innovation and support quality under Broadcom’s leadership? This remains uncertain, despite Broadcom’s recent reassurances.

“Concerns from some CIOs about the future quality of VMware support seem premature. However, it is interesting to see that the subject of support and ensuring the RUN of their platforms is central to their considerations. This aspect could indeed evolve significantly if VMware shifts away from a proprietary single-vendor solution model,” emphasizes Enix’s marketing lead.

A Broader Look at Sovereignty?

Since VMware is the de facto standard in most on-premise or private cloud environments, its acquisition has raised questions about sovereignty and independence. “In contrast to deployment on the clouds of the three GAFAM giants, with on-premise platforms, many clients thought they were shielded from American whims. The current situation reveals the strong dependency some have built over the years by relying on a proprietary solution,” he adds.

This financial operation also encourages CIOs to rethink the concept of sovereignty, which is often viewed solely through the lens of data storage. “At Enix, we believe it is necessary to approach this concept more holistically. By relying on turnkey proprietary solutions, especially from a single vendor, you become a user rather than an actor, fully dependent on them. True sovereignty is above all about the ability to decide and act independently. To achieve that, you need to retain skills in-house or with trusted partners,” he explains.

An Opportunity to Revise Your IT Strategy

The impact on budgets is pushing CIOs to reconsider their overall IT strategy. Should they continue with VMware and accept the new pricing and offerings? Opt for other proprietary solutions with equivalent functionalities? Adopt more open, open-source-based solutions, reintegrating some skills internally or working with new partners? Or perhaps embrace more profound changes, such as migrating to the public cloud or moving to containers and Kubernetes?

“The right strategy will depend on many factors specific to each company: the architecture and servers making up their platforms; how teams use VMs; the services those VMs run; network or backup needs; whether there’s interest in moving to cloud-native; security and sovereignty concerns, and the expertise the company has in-house,” says Aurélien Violet.

This new context also presents an opportunity for many CIOs to question the use of turnkey, off-the-shelf solutions. “Beyond their desire to move away from a proprietary model, more and more companies are interested in open-source solutions to optimize their IT costs over the long term,” notes Aurélien Violet, before pointing out that “the demand for migration to our Proxmox cloud solution has significantly increased since VMware’s acquisition by Broadcom.”