Only a few weeks have passed since Broadcom completed the $61 billion acquisition of the business.
VMware, a cloud computing and virtualization company, recently joined the Broadcom family, but it is not wasting any time in implementing changes that its customers will find offensive. This week, VMware stopped selling perpetual licenses for its products, opting instead to offer monthly subscriptions in an effort to increase revenue.
VMware’s primary business is enterprise virtualization and cloud services, though it does make some consumer-facing products as well. The one-time licenses for these products could run into the thousands of dollars, and Support and Subscription (SnS) plans added even more to the cost; however, businesses could pay for the license once rather than on a monthly basis forever, which was something that seemed to be preferred by all. While an individual might object to paying hundreds or thousands of dollars for a software license, this is simply a cost of doing business for a company.
And if those buzzwords do not convince you, nothing will. As for actual benefits, they must have forgotten to include those in the blog post. VMware VP Krish Prasad stated, “The industry has already embraced subscription as the standard for cloud consumption.” He asserted that the company can deliver on customer priorities like continuous innovation, faster time to value, and predictable investments through subscription plans.
VMware says it is ready to assist its customers with this transition, offering to “trade-in” perpetual licenses to get discounts on monthly plans. We do not know anything about the discounts or the base subscription prices just yet—the VMware site still lists one-time license costs despite the changes taking effect immediately. For existing customers, nothing will change immediately. The perpetual licenses will continue to work, and the SnS contracts will be honored. However, the agreements will not be renewed once they expire, and the software versions covered by the license will eventually lose support.
We are excited to announce the completion of Broadcom’s acquisition of VMware, marking another important step forward in our efforts to build the world’s leading infrastructure technology company.
— VMware vSphere (@VMwarevSphere) December 7, 2023
Follow @Broadcom for further updates and read more here: https://t.co/6pQTnwzYbF pic.twitter.com/vpkybMv3bW
The shift to subscription-only products is arguably a response to VMware’s mandate to increase revenue; according to Ars Technica, the company made $4.7 billion in revenue last year. With subscriptions, Broadcom expects to reach $8.5 billion in revenue in three years. While monthly payments are usually a good deal for the seller, they are rarely a good deal for the buyer. That is a big gain for a company that fired thousands of employees following the acquisition. VMware may not do more, but it will definitely impose higher fees in 2024.