More than two years after Broadcom's acquisition of VMware, the situation for the virtualization company's customers remains complex. A new report from CloudBolt Software, titled "The Mass Exodus That Never Was The Beginning of the Squeeze," sheds light on the difficulties companies are facing. CloudBolt, a provider of hybrid cloud management platforms, surveyed 302 IT leaders at North American companies with at least 1,000 employees, revealing a far from rosy picture.
Impact of the Broadcom Acquisition
Broadcom's acquisition of VMware, completed in November 2023, has generated a wave of changes that 88% of respondents still describe as "disruptive." The main disruptive factors have been price increases (89%), uncertainty about Broadcom's plans (85%), concerns about support quality (78%), VMware's shift from perpetual licenses to subscriptions (72%), changes to VMware's partner program (68%), and the requirement to bundle products (65%).
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Although the CloudBolt survey paints a less dramatic picture than initial forecasts of price increases of up to 1,000%, companies are still struggling with pricing changes. 14% of respondents said VMware costs have at least doubled, while 12% reported increases between 50% and 99%, 33% between 24% and 49%, and 31% less than 25%. 85% of respondents are concerned that VMware will become even more expensive.
Ongoing Migrations and Challenges
The changes introduced by Broadcom are particularly unfavorable for small and medium-sized businesses (SMBs). Gartner had previously predicted that 35% of VMware workloads would migrate elsewhere by 2028. The CloudBolt survey also examined how respondents are migrating workloads from VMware. Currently, 36% of participants stated they have migrated between 1% and 24% of their environment from VMware. Another 32% have migrated between 25% and 49%, 10% between 50% and 74%, and 2% 75% or more of workloads. 5% of respondents have not migrated from VMware at all.
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Among the migrated workloads, 72% moved to public cloud infrastructure as a service, followed by Microsoft Hyper-V/Azure (43% of respondents). Overall, 86% of respondents "are actively reducing their VMware footprint," states the CloudBolt report. Mark Zembal, Chief Marketing Officer of CloudBolt, said that while the fear has subsided, the pressure has not eased, and most teams are now taking practical steps to build leverage and optionality, although for some this includes the awareness that a portion of their estate will never move from VMware.
While bundled products, fewer options, resellers, and higher prices make VMware harder to justify for many, especially SMB customers, migration is a lengthy process with its own costs, including time spent researching alternatives and building relevant skills. Multi-platform complexity (52%) and the skills gap (33%) are at the top of the list of migration challenges reported by CloudBolt. The report states that as organizations diversify away from VMware, they inherit the operational burden of managing multiple platforms with different operational and governance models.
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As companies determine the best ways to limit their dependence on VMware, Broadcom can still profit from smaller companies it does not deem necessary long-term. Broadcom's strategy was never to keep every customer, but to maximize value from those still on the platform while the market slowly diversifies. The model anticipates turnover and is built to make the economics work regardless. Broadcom has done the math, and that's okay.
