Broadcom's commitment to pivoting VMware from an a la carte purchasing model to a handful of subscription services that targets select customers is paying off for the company, according to CEO Hock Tan.
Around 70% of VMware's 10,000 most-invested customers have adopted the all-inclusive VMware Cloud Foundation (VCF) package by the close of Broadcom's first fiscal quarter for 2025, Tan said during a Broadcom earnings call March 6.
"As these customers consume VCF, we still see a further opportunity for future growth," he said to investors.
This future growth, however, is not without growing pains, given the reaction from customers and partners, which Broadcom acknowledges but also counters by claiming VCF is a better value than what competitors offer.
Since the acquisition, many VMware customers signed contracts while searching for alternatives, according to market competitors and industry analysts.
Kernel-based Virtual Machines (KVM), the Linux hypervisor, and other open source tools such as OpenStack are being eyed as enterprise substitutes, although adoption is slow, according to analysts.
Virtualization vendors are making their own spins on KVM-derived services to woo customers feeling left behind by Broadcom but looking to avoid another heartbreak over infrastructure lock-in.
VMware will likely remain the definitive enterprise virtualization platform on the market, said Jerome Wendt, president and lead analyst at Data Center Intelligence Group (DCIG).
VCF's comprehensive feature set, broad catalog of integrations and familiarity with enterprise customers ensures renewals for the foreseeable future, he said. Virtualization platforms derived from KVM might lack an ecosystem of additional services, comprehensive support packages and employee familiarity, meaning issues that arise could be disastrous for an enterprise.
That fear keeps many customers with VMware, regardless of cost, Wendt said.
"It's a question of: If we go offline, we will be on the 6 o'clock news?" he said. "With [those stakes], what's a few million dollars among friends?"
Immediate competition
Platform9 Systems, a private cloud vendor based in San Jose, Calif., is using the OpenStack platform for its own VCF-like offering called Private Cloud Director (PCD).
Broadcom's large customer focus has created new opportunities in the market, and Platform9 is aggressively pursuing VMware customers, according to Madhura Maskasky, Platform9 co-founder and vice president of product.
Maskasky and her fellow co-founders were former VMware employees who departed the company in 2013 to found Platform9.
"Some [customers] will stay with [VMware], some of them will leave, but it really opens a huge market for the rest of the ecosystem," she said. "[Customers] signed the three-year contract [with Broadcom] because they had a gun to their heads. However, even with that investment, they're committed to moving off of Broadcom."
Her company released Project vJailbreak last November, a free VM migration application for moving VMs from VMware to PCD or other KVM-compatible hypervisors. The PCD platform is available for free as a Community Edition, which has no official support offerings, or as an enterprise offering with support packages.
Although PCD has attempted to re-create much of vCenter, VMware's management console, and associated VMware platform capabilities, Maskasky said customers looking for alternatives will never find a perfect like-for-like match.
"If you're looking for a stack that's an almost 100% replacement for VMware, that's an impossible task," she said. "I don't think that's the right goal."
Customers should instead consider new platform architectures or cloud-native alternatives, like Kubernetes, to replace missing services, eliminate single-vendor lock in and modernize, Maskasky said.
Private cloud vendors, such as CloudSigma of Zug, Switzerland, are also bracing for a customer shift away from VMware.
CloudSigma offers private clouds worldwide and its own virtualization services using the KVM hypervisor instead of VMware, according to Robert Jenkin, co-founder and CEO of CloudSigma.
Although his company has offered official VMware services for customer workloads, he said most customers that haven't already bought into VMware are choosing alternative hypervisors or cloud native services.
"VMware was already in a mode where it was farming an existing customer base," Jenkin said. "What customers find in many cases is that they can't move off VMware because they have built in specific features and things that are very difficult to get rid of."
One feature CloudSigma lacked, for example, was an automated KVM restoration process, a gap filled by working with its disaster recovery partner, StorPool.
Even with those challenges, KVMs are still a better way to avoid a lock-in to a specific platform, he said. He suggests customers take inventory of what features they're looking for in VMware, as many are available through KVMs at a lower cost.
"When customers are building new systems, they tend to build them on the KVM side," he said.
Future developments
Implementing Maskasky's or Jenkin's suggestions within the enterprise will likely take time, but early adoption of KVM alternatives has already begun spreading among neophyte virtualization practitioners.
Following Broadcom's elimination of VMware education licensing last summer, some educators have begun turning to open source alternatives to avoid a similar challenge in the future, according to Brian Kirsch, network program chair at Milwaukee Area Technical College and an Informa TechTarget contributor.
His department ultimately went with Proxmox. An open source shift for educators could haunt Broadcom in the years to come, as new IT employees are already more willing to embrace open source technologies, he said.
"When you ignore everybody except your biggest 2,000 customers, it's going to be a problem," Kirsch said. "You're going to have this next generation [of IT] starting in 2026 that know KVM hypervisors a lot more."
Challenges holding back the adoption of KVM or other competitors come from the lack of strong documentation, support and user communities compared with VMware, he said.
Even as vendors and IT professionals tout the benefits of open source KVM platforms, enterprises would rather renew VMware by Broadcom, said Naveen Chhabra, an analyst at Forrester Research.
"There's only a small subsection of customers that will say, 'Yes, we're going to renew [VMware]' with a thumbs up," Chhabra said. "If [competitor] vendors have such a convincing product offering, why is it not blowing their [sales] numbers up like crazy? Customers are motivated to look for alternatives, but not all customers are looking for alternatives."
Virtualization competitors have not reached the VMware's level of maturity and feature parity, even if they've expedited internal developments, according to DCIG's Wendt.
"There's a lot of innovation going on in the background, but is any of that coming to market?" Wendt said. "[Customers] are just not really finding anything out there."
VMware Response
VMware executives are aware of the negative public sentiment surrounding VCF, said Drew Nielsen, head of cloud economics in the VCF Division at Broadcom.
"I've spoken with some customers who treat this as the five stages of grief," he said.
I've spoken with some customers who treat this as the five stages of grief.
Drew NielsenHead of cloud economics in the VCF Division, Broadcom
Although the collapse of VMware's catalog down to five discreet offerings might be overwhelming, customers should consider VCF as their all-inclusive infrastructure option over hybrid cloud deployments that include public cloud providers like AWS or Microsoft Azure, he said.
Customers using VCF's complete capability suite could see a cost reduction by up to 40% during a three-year contract compared with hybrid cloud alternatives, he said, factoring in better core and host deployments.
"If you want the full value of the VMware stack, you have to embrace it," he said. "I've talked to customers who want to mix and match -- that's not how this works."
VMware is looking to expand the availability of VCF personal use versions through the VMware User Group and educational certificate programs, he said.
"We're doing everything we can to make VCF more accessible and [let customers] learn about it, he said. "We will constantly evolve the value, tools and capabilities."
The value proposition made by Broadcom lines up with user experiences, according to Wendt. Customers who see the benefits are those willing to pay for VCF and use every component in the VMware stack, he said, citing his own research.
"If you use all those licenses and use them well, you can arguably lower your costs like they claim," Wendt said. "There's really no one else [equivalent in features]. Your total cost of ownership goes through the roof to find any suitable [replacement]."
Broadcom's VCF sales success, highlighted by Tan during the investor call, aligns with Wendt's own analysis: Customers are sticking with VMware for the moment regardless of cost.
Revenue for Infrastructure Software, Broadcom's division that includes VMware, was $6.7 billion, up 47% year on year, according to Tan during the earnings call earlier this month. He estimated that 60% of customers have changed from perpetual licenses to the subscription offerings.
VMware's success will remain a focus of Broadcom for the foreseeable future, as Tan said during at Q&A session in the call the company had no further acquisition plants at this time as VMware and AI chips would take priority.
"M&A? No. We're too busy doing AI and VMware at this point," he said.
Tim McCarthy is a news writer for Informa TechTarget covering cloud and data storage.
