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How to Transform a Licensing Shakeup into Pricing Assurance with Azure

The technology industry has experienced a seismic shift following Broadcom’s acquisition of VMware, which led to immediate alterations to the product portfolio, licensing, and partner program. While the impact and scale of this change is relatively unprecedented, within this disruption lies the potential for opportunity. Have you wondered how you can turn this situation into an opportunity to lock in costs, whilst planning to modernise and maximise your investment in cloud?

In this article, I’ll guide you through these changes and highlight how Azure VMware Solution (AVS) paired with a strategic offer by Microsoft, could offer a viable, cost-effective alternative to avoid these price impacts. In addition, I’ll also discuss how LAB³ can support your business drivers, with a new offer designed to kick start your cloud adoption journey in light of these recent compelling events.

Understanding the VMWare Change & Impact

Broadcom’s acquisition of VMWare has introduced a new licensing model that significantly alters how VMware products will be priced. Under the new regime, VMware is moving towards a subscription-based model, and while that generally aligns with industry trends, also comes with notably higher costs.

There’s been a fair bit of commentary on this subject recently. One such report from Techmonitor states that “… some VMware customers face price hikes of 1,200%”. This dramatic increase is part of Broadcom’s strategy to leverage VMware’s extensive enterprise customer base to boost revenue through higher subscription fees.

Here’s the lowdown on the key changes:

🔑 Shift to Subscription licensing: VMware has phased out perpetual license sales and support renewals and has already shifted to a subscription-based model (from April 1, 2024). The new model is based on per-core licensing as opposed to the former per-socket basis (see illustration below).

🔑 Phasing out of Hybrid/Subscription Purchase Programs: Larger enterprises that are part of these programs are gradually being shifted to the new subscription structure.

🔑 Portfolio Simplification: VMware now offer two core services – VMware Cloud Foundation: for running business-critical and modern applications, and the simplified VMware vSphere Foundation: For small to mid-size customers with enterprise-grade workloads.

🔑 See this article for more info: VMware by Broadcom Dramatically Simplifies Offer Lineup and Licensing Model

Per the illustration below, the shift from per socket to per core, is likely to have a profound effect on IT budgets, especially for organisations heavily reliant on VMware virtualisation. The move to a subscription model can represent a substantial financial burden and will certainly prompt a re-evaluation in their current cloud and virtualisation strategies.

Typical 2-socket server pricing scenario. Scenarios and pricing will vary.

Making A Strategic Move With AVS

Microsoft are offering Azure VMware Solution (AVS) as a lifeline for VMware customers affected by these changes. AVS enables seamless migration of VMware workloads from their Software Defined Data Centres (SDDC) to Azure, without the need for application re-architecture or team re-skilling. It uses native vSphere technologies, can integrate with Azure services for added flexibility and scale, and is fully managed by Microsoft. We often see AVS as the preferred choice for organisations aiming for a quick data centre exit.

A key advantage of migrating to AVS now, is Microsoft’s promotional offer to lock in much lower prices for up to five years (through special Reserved Instances pricing). The offer would allow ample time to migrate and modernise your applications while still stabilising the potential impact on initial investments made in the VMware stack.

Consider the simplified comparison above which is based on the same sample set of 100 servers over 3 years (from the previous illustration). By shifting to AVS, you could save approximately $3.6 million**, or 61%, over three years. Once on AVS, this cost avoidance can then be reinvested into modernising your workloads with Azure native technologies – a recommended approach to maximise the cloud benefit. This strategy would not only provide the assurance of price stability, but would enable a rapid DC exit, and a subsequent modernisation program to proceed at a pace that best suits the organisation.

LAB³ Can Accelerate Your Transition

LAB³’s aim is to make this transition smooth for VMware customers. To get you started, we’re offering a comprehensive ROI analysis, powered by our proprietary Dr Migrate technology, at no cost. By uploading an RVtools extract from your existing VMWare environment, The tool will perform a Total Cost of Ownership analysis and provide insights to enable data driven migration decisions in line with your migration strategy.

Secondly, we’ve also devised an efficient per-server migration program to ensure a cost-effective transition to AVS. For example, say your organisation aims to move around 1000 servers to AVS (at approx. 100 servers per week); LAB³ can provide a cost-effective end-to-end migration solution that equates to approximately $148 per server* (including planning, design, deployment, piloting, and migration).

This offer, coupled with Microsoft’s stabilised hosting costs from the promotional price lock-in, aims to accelerate the realisation of your return on investment.

Capitalising on this offer provides the following key benefits creating a compelling business case for your migration strategy:

🔑 Simplified data driven planning and transition, achieving operational cost savings over time by moving to Azure.

🔑 Rapid migration of your workloads while maintaining consistency in your current VMware environment

🔑 Earlier enablement opportunities to modernise your applications to Azure Native once the VM platform migration is complete.

IT decision makers should act quickly to evaluate their current VMware usage before their licenses come up for renewal, understand the implications of the new licensing costs, and consider the logistical and strategic aspects of a migration to Azure. 

Given the time-bound nature of Microsoft’s offer and LAB³‘s free ROI assessment on offer, if your organisation is faced with these challenges, then now is a good time to get in touch with us and accelerate your cloud adoption journey.

ARE YOUR VMWARE LICENSES COMING UP FOR RENEWAL? 

GET A FREE ROI ANALYSIS IN JUST 3 BUSINESS DAYS

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Quote Source: https://techmonitor.ai/technology/cloud/vmware-takeover-by-broadcom-mistake

All pricing and figures based on Microsoft price modelling provided to Microsoft partners.

* Based on 3-year Reserve Instance pricing (AUD), and subject to Microsoft-funding support

** AVS estimate to support 100 servers based on 5 nodes of the “AV36P” instance type, PAYG based pricing (AUD)