VMware Customers: Prepare to Bundle Up

Many industry pundits and customers were more than a little surprised to see VMware announce that pricing could be 50% less expensive under a new Broadcom pricing plan. A price decrease? That wasn’t the expected Broadcom playbook and seemed incongruous with Broadcom’s published plans to almost double VMware profitability as measured by EBITDA.¹

The elimination of standalone options, replaced by high priced bundles, along with the move to a capacity-based vSAN^TM licensing model, means that prices will likely vary substantially from a customer’s historical perpetual license experience. It will now be more important than ever for customers to plan carefully around their infrastructure assumptions.

Breaking Down the Assumptions

There is somewhat limited public information, but now that the vSphere Foundation^TM price has been publicly shared at $135/core², we’re able to work up the potential impact some users could expect to see as prices change relative to prior published perpetual licenses.

We used the following assumptions:

1.  5-Year Term - We encourage customers to compare offers using term durations that match real-world usage. We believe that Broadcom based their cost comparisons on a 3-year subscription term which minimizes cost impacts. We find that customers normally expect a typical 5-year refresh cycle for depreciating assets.
2.  24 Core CPUs - We assume an average of 24 cores per CPU even though much higher core count CPUs are available and would make the pricing impact more dramatic.
3.  We compare list prices without factoring in discounting. We expect discounts on subscription licenses would be lower than discounts on perpetual licenses and this would exacerbate the impact of the new licensing model.

Three Impact Scenarios to Consider

Let’s explore three new “VMware by Broadcom” bundles to see what’s potentially in store for customers.

1. Standalone vSphere Ent+ Users – It seems that vSphere Ent+ is no longer offered as a standalone product. Customers using distributed resource scheduling (DRS) and distributed switch features are now required to purchase bundled offerings at higher prices.
   
   A customer now buying the “vSphere Foundation” bundle will now get VMware vSAN^TM and VMware vRealize^TM entitlements they don’t obviously need.
   
   
   Chart 1: vSphere Ent+ users estimated to pay more than 2x over 5 years
   
   Our Assessment: Expect a 2x increase over 5 years. The chart above shows the price difference between Perpetual and Subscription licensing for a 3YR and 5YR duration for a typical 24-core CPU. The increase in price over 3YR is around 1.5X vs longer terms will have over 2X price increase. This problem only gets worse assuming a 32-core CPU over a 5YR term where the increase will likely be closer to 3X before we factor in any discounts.
   
   Legacy 3-tier infrastructure just got a whole lot more expensive now that SAN/NAS users seemingly must buy the vSphere Foundation bundle just to get vSphere Ent+. Beyond this estimated increase, there’s a risk of shelfware for unneeded vSAN entitlements.
   
   
2.  For the vSAN User –This user will get a capacity-limited vSAN with entitlements dramatically below the 40TiB-50TiB typical of today’s HCI user. In the vSphere Foundation bundle, a user with two 24 core CPUs will have a paltry 4.8TiB / node and can expect to pay a capacity premium in addition to the 2x vSphere Ent+ premium.
   
   Furthermore, vSAN users are no longer able to purchase Aria Suite Enterprise, NSX Networking, Firewall, Firewall with ATP, 24x7 Global support, or access to an SRE as standalone products. These all require a bump up to the new VMware Cloud Foundation™ (VCF) bundle.
   
   We’ll need to hear from Broadcom on the $/TiB adder to give an accurate estimate of the impact for a typical user.
   
   
3. Standalone product customers who are now pushed to VCF. VMware has promoted a 50% price reduction for existing VCF users, in part by removing functionality from the new bundle. We think a more appropriate comparison is for those customers who would have bought individual products that are no longer offered.
   
   Customers who have been purchasing standalone Aria Suite or NSX Security Suite, for example, will now pay $350/core for the VCF bundle rather than individual product prices. These users will need to carefully compare the new bundle price with their historical purchase prices.
   
   Customers should also take note that the VCF bundle will require installation and maintenance resources since the bundle requires that the full stack VCF be deployed and managed using VMware SDDC Manager^TM.

The Devil is in the Details

Pricing is a complicated area and list price comparisons are only so useful. Nutanix has a team of dedicated cloud economists ready to help customers evaluate the impact of “bundling up” with Broadcom. We have helped nearly 25,000 customers explore new ways to build out hybrid multicloud infrastructure, which can include running Nutanix with VMware.

For many of our joint customers, this new Broadcom pricing action might be just the nudge required to join the majority of our customers already running our enterprise-grade AHV® hypervisor. And we now offer even more flexibility and choice in what features customers can select.

We look forward to helping you blaze a new trail for new workloads with transparent pricing and a commitment to support excellence and product innovation.

Further reading: 8 Reasons Why Nutanix is the Better Alternative to VMware