After a year of lawsuits, customer confusion and a restructuring of the core business, VMware by Broadcom has much to prove in 2025 to avoid future irrelevancy in the data center.
One year after its acquisition, VMware by Broadcom has made a lasting mark on the legacy of the virtualization platform paragon through the actions of its parent company.
Broadcom, a chip manufacturer, acquired VMware's virtualization business for $61 billion in November 2023. The massive acquisition price tag left customers, analysts and VMware employees all but certain that massive changes for VMware were coming to recoup the cost.
Broadcom has changed its customers' relationship with a technology platform once considered the data center's fundament since the deal closed, according to industry analysts.
Lawsuits, licensing confusion and a culling of products have many customers considering alternative virtualization software or entirely new data center technologies like containers, said Steve McDowell, founder and principal analyst at NAND Research.
Broadcom is going to make their money back, no question, but it's the poor IT guy who is going to suffer.
Steve McDowellFounder and principal analyst, NAND Research
Finding the correct combination of technologies to re-create a current VMware environment isn't likely, leaving some customers forced to pay for bundled services without a mature alternative for the enterprise, he and other analysts said.
"Broadcom is going to make their money back, no question, but it's the poor IT guy who is going to suffer," McDowell said.
This year's changes
Broadcom helped to realize those concerns by culling VMware's 200 product portfolio down to a handful of subscription bundles. Broadcom also culled staff and restructuring its relationship with resale vendors during the year.
VMware Cloud Foundation (VCF), the most comprehensive of these packages, is now VMware's flagship offering, providing a complete, virtualized private cloud data center, according to Tan. VCF is the lone way to access most of the VMware ecosystem, including vSan storage, NSX networking tools and Data Services Manager.
Customers want to escape the high and unpredictable cost of using public cloud hyperscalers like AWS and Microsoft Azure, Tan said. VCF streamlines the cloud experience to provide the groundwork for massive enterprise workloads like telecom in VeloCloud, Kubernetes through VMware Tanzu and AI creation.
"You are all suffering from PTSD," Tan said during his keynote at the VMware Explore conference in August. "The private cloud is now the platform to drive your business and innovation."
Many new capabilities focused on building private clouds will come in the next version of VCF, known as VCF 9, which was announced at the conference but has no release date set.
Customer confusion and condemnation followed the VCF consolidation and marketing push, but Broadcom isn't one to back away for a business strategy, said Naveen Chhabra, an analyst at Forrester Research.
"Broadcom didn't invest $61 billion to not get something," Chhabra said. "They know customers are not knee deep, but hip deep [in VMware]."
Telecom giant AT&T sued Broadcom over support contract changes, stating in court filing it plans to switch away from VMware within the next few years. Analysts say they expect similar customer reactions as more approach their own contract renewals and react to the new sticker shock.
Chhabra said that other VMware customers he's spoken with have had support contact cut by Broadcom over the past year, leaving them to seek out third-party options rather than buy into the VCF ecosystem.
"I would not want to work with a company that is not prioritizing support," he said.
Support for VMware changes
However, Broadcom's sweeping changes to VMware's business aren't universally reviled.
Broadcom has worked significantly with the independent VMware User Group organization, according to Matt Heldstab, enterprise systems engineer at Minnesota State Colleges and Universities and the vice president of the International VMUG.
Tan attended several VMUG regional meetings, such as Boston, and wants to involve the organization far more in roadmap discussions, Heldstab said. This is far more hands-on than other corporate owners or leaders at VMWare in the past.
"They're saying that they want us to be a part of their vision, and that can only help us," Heldstab said. "We're in an independent company [so] that partnership is not guaranteed at all."
He doesn't argue that the cost of VMWare has increased, but these changes are similar to price hikes that enterprise IT customers have faced from vendors in the past several years.
"Infrastructure, along with public and private cloud cost changes are not limited to Broadcom," Heldstab said. "It's led us to the point where we need to be more creative in how we manage infrastructure."
One size doesn't fit all VMware customers have begun considering several virtualization alternatives both commercial and open source throughout 2024, according to research by Gartner analyst Paul Delory, published in October.
Major viable options highlighted in the report include hyperconverged infrastructure (HCI), public clouds and standalone hypervisors.
However, all these alternatives come with caveats related to performance, feature parity and difficulty, Delory cautioned.
"There is no like-for-like replacement for the VMware hypervisor on the market," he wrote. "Since no competing hypervisor on the market is at feature parity with VMware, the question is whether the possible alternatives are good enough at a lower price."
Nutanix is the most direct challenger to VMware as an HCI, offering both in terms of feature parity and marketing muscle, according to analysts, alongside Microsoft Azure Stack HCI and Scale Computing, according to the report.
HCI offerings can reach VCF's capabilities but are expensive to purchase compared with alternatives, Delory wrote.
Public clouds like AWS and Microsoft Azure offer the most capable and well-documented lift-and-shift process for many enterprise VMware workloads, with the opportunity to modernize into technologies like containers, Deloy wrote.
The challenge of moving to a cloud for virtualization is making sure the process isn't strictly a "lift and shift," according to Delory. Cloud migrations should include a more comprehensive cloud refactoring where VMs are eliminated or legacy applications are strictly supported.
Standalone hypervisors, like the open source Proxmox or Microsoft Hyper-V, can also substitute VMware for customers strictly using vCenter from VMware, he said. These hypervisors, however, may come up short since they lack a supporting ecosystem of software, such as the stability storage gains from VMware's vSphere Virtual Volumes.
Many organizations looking at VMware alternatives will likely adopt a combination of the above services, with some VMware investment remaining, said Scott Sinclair, an analyst at Informa TechTarget's Enterprise Strategy Group. Platform vendors such as AWS and Hewlett Packard Enterprise will see this as an opportunity to draw new customers into another ecosystem.
"If you are a VMware customer, you need to be looking for alternatives," Sinclair said. "Chances are you aren't going to find a one-to-one [replacement]"
Instead, more organizations are opting for hybrid deployments of containers, new HCI offerings and the remaining VMware infrastructure, according to Sinclair. A fate similar to how mainframes' purpose evolved in the data center, where the machines previously handled all enterprise computing now serve specific and legacy functions.
"Broadcom seems to be turning VMware into the new mainframe," he said. "Organizations need to understand you're not going to be VMware-only anymore, you're going to be evaluating multiple options and managing multiple environments."
Customers exiting VMware and bracing for a heterogeneous technology from clouds, containers or other hypervisors should anticipate a significant rework, Chhabra said. Reworking these applications to maintain the enterprise availability and security will likely be a multi-year project and require significant investment to fully convert.
"Saying 'let me run my application in containers' simply won't be enough for a majority of customers," he said. "Nobody wants to be caught off guard."
Virtual Cloud Future
Despite Broadcom's efforts in touting the data center of the future with VCF 9, McDowell anticipates more customers shifting away from VMware throughout 2025.
Broadcom has likely anticipated this attrition over time, by focusing their development efforts and marketing toward a handful of more valuable customer accounts, he said. The vendor started repackaging and expanding capabilities of lower priced bundles in late 2024, but those efforts aren't going to draw new blood.
"I don't think they're trying to turn VMware back into a growth business," McDowell said. "Over the past couple of months, they've course corrected, but their fundamental strategy hasn't shifted."
Heldstab said VMUG members are slightly more mixed in their opinions of VMware's future under Broadcom in his discussions at conferences and regional meetings. Some have sworn off the platform going forward, but others are taking a wait-and-see approach with the forthcoming VCF 9.
He and other VMware customers consider VCF 9 as a key decision point to stay with the platform or not. Many customers are simply purchasing VCF to maintain access to existing software, rather than using the private cloud or software-defined data center capabilities Broadcom touts, Helbstad said.
"I think you're going to see a lot more people be able to adopt the technology and import it into the software-defined data center," he said. "Until then, they're just going to buy VCF because they need keys."
Helbstad said Broadcom has partnered with VMUG to offer personal use versions of VCF for existing members and will actively participate in the forthcoming VMUG Connect event in April. These are all steps toward a positive change Broadcom is making to support VMware users, but some smaller licensees like schools could get left behind.
"I am seeing some pretty good academic discounts for VCF, but there are some smaller shops that are not seeing those discounts, and they're going to [need to] make hard decisions," he said.
Broadcom will likely keep customers around for years to come, McDowell said, but the relationship after 2024 is forever changed.
"Legacy applications are going to exist on VMware," McDowell said. "[Broadcom] priced this thing right under where the cost of switching is for a lot of these organizations. But for new development, [customers] should see this as an opportunity."
Tim McCarthy is a news writer for TechTarget Editorial covering cloud and data storage.
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