Broadcom's answer to VMware pricing outrage: You're using it wrong

Customers dismayed by Broadcom's move to selling costly bundles such as VMware Cloud Foundation (VCF) will realize its value if they'd just use more of the components, the company's CTO says.

VMware, now a Broadcom subsidiary, is shifting away from selling perpetual licenses for individual products. It instead offers subscription bundles of software and support, such as its flagship VCF private cloud platform - version 9 of which was released this week.

The largest enterprise users seem content with this. Broadcom chief Hock Tan told investors this month that 87 percent of VMware's top 10,000 customers have signed up for VCF.

However some smaller and middle sized customers reacted negatively to the licensing changes, claiming their costs have increased by eight to 15 times since the Broadcom acquisition, and there are many stories of firms planning to migrate their workloads from VMware to an alternative platform in future because of this.

"A lot of those stories around cost don't play out when we actually get to sit down with the customer and talk to them about their situation, what they need, and what we're going to do with them," said Broadcom's EMEA chief technology officer, Joe Baguley.

"Initially people might go 'all the prices have gone up,' but those 87 percent of people that have renewed with us have renewed because they've chosen VCF as their strategy going forward," he claimed.

"When we sit down with customers and actually have a conversation about the cost that they expect, based on that and the value they're going to get out of it, that's really the key thing."

Baguley said some customers that have now gone with VCF maybe weren't using all of the component parts of the bundle before.

"They had bits and pieces of things, maybe just vSphere and... some of our automation tools. They're realizing when they get into the VCF product, what they can do with it that they couldn't do before; configuration management, security management, all the cost management, all the bits that they didn't buy before because they had another tool [which] already did that, but it didn't really because it wasn't integrated properly."

"The consistent feedback that I get from customers is: this is really cool. I didn't know I could do that," he said.

Yet this is exactly what many VMware users have complained about - the new VMware subscription bundles force them to pay extra for software components they don't need or want.

Baguley was speaking at a media event to promote its view of the cloud market following the launch of VCF 9.

Reg readers likely won't be surprised when Broadcom says that putting workloads into private cloud is now a priority for organizations, as some of the shine has come off the public cloud promise. And it has survey figures to back up its claims.

Published in its Private Cloud Outlook 2025 report [PDF], the results indicate that 53 percent of global firms say private cloud is their top priority for deploying new workloads over the next several years, and 69 percent are considering workload repatriation from public clouds.

Unpacking that, Broadcom isn't claiming corporates are retreating from the public cloud, or that it is going away, but it says many have enough experience now to realize that private cloud needs to be the cornerstone of their IT.

"If you're a serious enterprise today, you have to realize that the answer to everything is not a public cloud or a collection of public clouds," Baguley said. "It is the fact that you'll be using public clouds and you'll be using private cloud, because ultimately it comes down to one very simple thing, which is that you have to think about putting the right workload in the right place."

Organizations have been on a journey, according to Baguley, starting with legacy datacenters and their infrastructure silo issues, then a cloud-first phase until customers realize much of their cloud spend is wasted, then they start repatriating certain workloads, finally realizing they need a private cloud because it works out cheaper and more secure.

Large enterprises are the furthest along in this process, Baguley said, and these just happen to be Broadcom's target customers, hence the renewed focus on making VCF into a private cloud platform that can match public clouds on ease of use and as-a-service access.

"They've been through cloud-first, they're doing repatriation, and now they're all building private cloud. That's the 87 percent of our 10,000 top customers," he said.

If all this sounds a bit familiar, it's because it is pretty much the hybrid cloud strategy much of the IT industry have been extolling for the past decade or more, where companies have a private cloud as the center of their IT universe, supplemented by public cloud resources where appropriate.

So are 69 percent of organizations looking to repatriate workloads from the public cloud? It depends on how you interpret that, of course.

"Our data does agree with those numbers roughly, but when we asked how many of those considering it were actually doing repatriation the number dropped to circa 20 percent," said Omdia chief analyst Roy Illsley.

What appears to be happening is organizations are rebalancing which workloads run where, and in Europe and some other countries, sovereignty is the driver, Illsley told The Register.

"So yes, some workloads are moving from cloud, but equally more are moving to SaaS. The net is that on-premises is in slight decline, but the AI sovereignty movement will see it stop declining and it could increase its share, by a small amount, say 1-2 percent."

IDC's EMEA senior research director, Andrew Buss, told us the key point to start from is that wholesale migration to public cloud has never really been a thing, apart from a few examples.

"All our surveys in EMEA in the past five years have shown a majority preference to run workloads in private IT foremost, with around a third of organizations being quite balanced between making use of both public cloud and private IT, about 10 percent being strongly public cloud first, and only 1 to 2 percent being public cloud only in their approach."

"The big question is how will companies transform their private IT to a private cloud - [Broadcom CEO] Hock Tan likes to claim that within nine months, VMware converted VCF adoption from 10 percent of revenue to 70 percent. I am skeptical of the actual usage of the full features and functions of VCF and of the opinion a lot of this is shelfware that has been forced by aggressive sales and licensing bundling in many of these customers," Buss said.

Gartner warned earlier this year that a migration from VMware to an alternative platform would likely be "a long, costly, and risky project." However, this hasn't stopped some big firms such as Rackspace making the move in response to Broadcom's licensing changes. ®