Broadcom’s VMware Licensing Changes Decoded

Braden Stringer:

Welcome, everyone, to today’s webinar. We’re grateful to have you join us. We’re excited to present today on Broadcom’s VMware licensing changes. We’re especially grateful to our presenters, Chris and Benjamin, who have worked really hard to put this together, and it’s going to be great. The content is going to be really solid.

A quick introduction for our presenters: Benjamin is a senior consultant here at Anglepoint on our Specialty Licensing team. He does a lot of work with our VMware customers and is very involved in this, as you’ll see he has deep expertise. Chris is a principal consultant on our ITAM Program Transformation team. Chris has over 15 years of software asset management experience. He’s done multiple webinars for us and has very deep expertise in the world of SAM. We’re grateful to have both of them join us.

So let’s get started without any further ado. I’m going to pass it off to Benjamin, who will get started with our agenda. Thank you.

Benjamin Coon:

That’s perfect. For the agenda, we want to run through a couple of poll questions first. We’ve got two of those to go through just to ask the audience. Once we go through those poll questions, we’ll get into the actual meat and potatoes of the webinar.

First, we’ll talk about some of the licensing changes that Broadcom has announced that impact VMware. Then, we’ll talk about how these changes may affect you as you navigate your renewal. At the end, we’ll look into what else to watch for, go into some next steps, and then, as Brayden said, we’ll also make sure that we have time for a Q&A session to answer any questions that have come through.

With that, I think we can go to the next slide, and Chris, I believe, is back and can take this first poll question.

Chris Hayes:

Yep, no problem. I think we want everyone to just indicate, there should be a pop-up here. The poll question is: When was your organization last reviewed or last audited by VMware? Now, this Broadcom organization, the choices are within the last year, within the last 12 months, within the last two years, 12 to 24 months, more than 24 months ago, or if you’re in a specific role or function where you say, maybe I’m not too sure. We’d like to understand what this potential impact is.

We’ve got a good group and representation from a lot of different industries. Go into the poll and answer that, please. We’ll give you a little bit to do that. Then we can look at the results. Thanks. Alright, so we have results that, given time, we’re gonna do this a little bit rapid-fire. Looks like a lot of the respondents, the major answer was, I’m not sure. I think that’s good and bad question mark, right? I think if you’re not sure if the external organization of Broadcom, formerly VMware, has visited you, there has been an impact. If that’s hard to quantify, I think that might be something for those organizations. If you say, I’m not sure, talk to your SPVMC or sourcing procurement vendor management teams or to your IT asset management and SAM teams, right? This is a little bit more software asset management focus for this specific webinar. But if you’re saying, “Mhm, I don’t really know. I don’t know if there’s a huge financial risk. I don’t know if there was a penalty. I don’t know if we had an issue." That might be something to chase up.

And then it looks like the next answer is more than 2 years ago. What we’re seeing then is, for this 11 and 10 percent answer within the last year or 1 to 2 years, there is a potential, given any kind of acquisition, for increased audit activity. So that’s my section. What we’ll arm you for and what to watch out for, and what to watch out to arm you against. I think we’ve got one more poll question, Braden, if you want to go to that one, and then we’ll get into the content.

Alright, poll question number two. This is more concerning the contract and your strategic posture here. Does your organization have an upcoming Broadcom VMware renewal in the next 12 months? Yes, you do next year or within the next calendar year. No, you don’t. You’ve already renewed. You’ve been through that process or I’m not sure. Okay, great. I would assume the same, right? You’re here wanting to get some of this information from our expert teams. So it looks like the majority of people do have an upcoming renewal. So with that, I think we can get right into the content about kind of the changes, what this means for the organization. And then, like I said, later on, I will cover off what this means to you from an audit and risk perspective. Benjamin, go ahead. You’re on mute, Benjamin.

 

Benjamin Coon:

Thanks, Chris. Yep. Thank you for that, Chris. Over this past year, VMware by Broadcom has announced a number of changes to their licensing. And these changes can be categorized in three different ways. The first is a shift in their licensing model from a perpetual to a subscription model. The second is new product offerings that they’ve done by restructuring their product portfolio. And then the third category is a shift in their license metrics.

And so if we circle back to the perpetual to subscription model, effective immediately VMware is no longer offering perpetual licenses to their customers as well as they’re no longer offering their customers to renew support on those perpetual licenses. And so the challenge that organizations are now facing is whether they can operate with their existing perpetual licenses without receiving the support or is that support business critical and if so likely that change to a the subscription model and getting that support would be required.

One piece of information that might be helpful as you’re making that decision is an announcement that Broadcom’s CEO made last week. He did announce that Broadcom will be offering free zero-day security patches for some perpetual licenses. And so while that’s certainly great news for Broadcom’s customer base, I do want to caution that it’s not necessarily the silver bullet that it might initially seem.

It does only apply to supported versions of vSphere licenses. And so ultimately that could limit an organization’s ability to remain on just the perpetual licenses. Broadcom did announce that they will eventually roll it out to some additional products, but they didn’t mention which products that might be, nor did they give a timeline for that.

That is one thing to keep in mind. If we do look to the best practice here ultimately it’s important to really understand and know where you stand with your license compliance. And these best practices that we have if they’re utilized, we think can really help you as you make that decision.

And we recommend that you do complete periodic effective license positions that will help you understand your organization’s compliance status going into upcoming renewals, as well as we recommend that you implement a robust demand planning process that will pave the way for your optimization roadmap.

And the reason that this is that demand planning is so impactful is if you know that your investment in VMware is only increasing then it’s very likely that the support will be required. And so going to the subscription licenses and getting that support. What will be very helpful for you, whereas on the flip side, if you know that your demand is decreasing, and maybe even have plans to sunset your VMware environment at that point, it is possible that sticking with the perpetual licenses until you decommission the environment would give you enough that you need.

Which will bring if you want to move to the next slide, please. Thank you. So for the second category that we had, it’s a new product offerings. And VMware has announced two new product offerings. It’s the VMware Cloud Foundation, and then we’ll get to the next slide in a little bit, but it has the VMware vSphere Foundation.

And both of these products are bundles of various VMware technologies that have now been combined to offer a single solution. And the Cloud Foundation that we see on the screen right now, that’s a little bit more of the all-encompassing product Whereas when we get to it, you’ll see the vSphere Foundation is more of a simplified solution.

And so ultimately we are seeing that in larger organizations that have a larger VMware environment, the cloud foundation does generally offer more value but ultimately at the end of the day depending on your organization circumstances, optimization will likely occur by having both products in your environment and in utilizing both options.

So one thing to note as well, before we jump to the next slide that will be important to consider as you look at the two different product offerings is there are some products that are only offered in cloud foundation. So if we look, for example. The HCX enterprise or data services manager those are only offered with Cloud Foundation.

So if your organization might still have a smaller VMware footprint, but you do require some of those products that will help dictate. Which product offering you, you go to. So Brayden, if you want to move to the next slide, we can take a look at vSphere Foundation. As I said, it is more simplified view.

The important thing that I’ll highlight here is at the end of the day, once you’ve made the decision that you do want to renew support and you need support, you’re going to go to a subscription model. One decision you’ll need to make is whether or not you wish to swap or turn in the active perpetual licenses that you currently own in which case you can receive some credits, or do you want to just keep your perpetual licenses? You are allowed to operate both a perpetual license environment as well as a subscription license environment. But that does add some additional complexities and it is a breach of compliance to run the two different licensing models in the same environment. So what does that look like in the real world?

You wouldn’t be able to use a subscription vCenter server to optimize or look at and manage the vSphere licenses that you own that are perpetual, and on the flip side, you wouldn’t be able to use a perpetual vCenter server to monitor it. The subscription vSphere licenses that you are.

And Braden, if you want to jump to the next one. So the last of the changes that we noted is the license metric shift going from a CPU model to a core model. And so on the surface, this might look like a simple change. But if we dive a little bit deeper, it’s easy to see the complexities that start to come forth as we look at correctly licensing our environment.

So one such complexity is the minimum core requirement that Broadcom does require. Both when you’re purchasing licenses, and when you’re counting your licenses, Broadcom does require a minimum core requirement of 16. So how does that look like? So if we look at the table on the right side of the screen, we have two tables, an old and a new, and the old represents the prior CPU model and the new is the new core model and what the CPU model is, it was very straightforward.

You would sum up the CPUs in the environment and we get to 16 CPUs. But when we look at the core requirement, we have to look at two calculations. And so the first calculation is looking at the number of core licenses required per CPU. We multiply that by the number of CPUs per ESXi host, and then we multiply that by the number of ESXi hosts. And then the other calculation is taking 16 cores and multiplying that by the total number of CPUs in each ESXi host. And it’s important to note that Broadcom does require you to take whichever of the two calculations will result in the higher core count. To see how this works in practice, if we take a look at the lower table, the new table, and we’ll take a look at the top line we’ll look at the top left box and we’ll run through the calculation.

So if we take the first calculation, we take the eight cores that are required for CPU, We would then multiply that by the two CPUs, and each of these boxes are just representing a single ESXi host. So in this example, we would come to 16 cores. If we then look at the second calculation, it would take the 16 cores, we multiply the same two CPUs, and we get to 32 cores. So for this example we’d be required to implement the second calculation. If we then look at the middle box and we apply the same calculations again, we would first take the 20 cores per CPU, we multiply that by the four CPUs, and we come to 80 cores. And then if we apply the second calculation, we just take 16 cores, multiply that by the four CPUs, And we would get 64 cores. So in that standpoint, we actually want to utilize the first calculation. And then if we look at the final box on the top line, some of you might have already noticed or caught on that both of these calculations will get to the same core count will have 64 cores. And so in this example, ultimately, once you’ve done these calculations, we get to the 272 cores that are required.

So one thing that we do want to note is once you’ve done your core requirement calculations, don’t go into panic mode. An expert in this area can help determine what options you have. And as a little tip, when you’re looking to decide which of these calculations you need to run. Generally speaking, if the core requirement per CPU is below 16, you’d want to use the second calculation. And if it’s 16 or greater, the first calculation will be the one that gets you to the right answer. Brayden, if you want to move to the next slide. Awesome. The final thing is, so if you are an SPVM or a sourcing procurement vendor management, You might be asking yourself then what does all this mean? How does it affect you as you navigate your upcoming renewal with VMware by Broadcom? And should your approach change with any of this?

And so we would say generally, as with any major change, like an acquisition, it is always a good time to evaluate. Which VMware technologies you want to renew with Broadcom, but ultimately for how does this impact things, we do see that Broadcom has introduced these changes and they do want to see them through. And because of that, we aren’t seeing much wiggle room on pricing.

One area where there might be an opportunity for some discounts is by looking to combine your VMware agreement with your Broadcom and CD Technologies agreement. We have seen some indicators that mention that soon Broadcom will be offering that as a possibility and as one other kind of side note that goes with that, that we did want to call out for everyone, Broadcom did also announce last week that on Tuesday, April 30th there will be the transition from the VMware Customer Connect Portal to the Broadcom Support Portal.

And as of 5 p.m. that day, various reports will no longer be available. So we do recommend that you pull any reports or extracts from that VMware Customer Connect Portal before 5 p.m. Pacific on the 30th. So with that, to go back to that initial question of should anything change, we’d ultimately say that if you have a robust negotiation framework that you apply for your software contract negotiations, and at the end of the day, stick to it that none of these changes should change that framework that you have in place already. And with that, I will turn it over to Chris.

Chris Hayes:

Thanks, yeah, I’m seeing a lot of topics in the chat and I think we went into very detail, which is exactly where we wanted to end up here. So I’m going to go very quickly to leave some additional time for Q&A. So I think we have a question in the chat specifically about that portal switch over. So Benjamin, correct me if I’m wrong. I think that is April 30th. So before 5 p.m. Pacific on the 30th is when you need to run any kind of reports extracts. Get that data out. So just to repeat that. Essentially, I’m going to cover off a little bit more from the audit response and audit defense point of view what to watch out for.

This is not the 1st acquisition. This is not the last acquisition. This happens all the time, right? So when a publisher that you’re utilizing or even more complex in your organization, if it’s a strategic publisher that you’re reliant on when they get acquired, you can expect a few things, right?

So a request for information. Understanding your response posture in terms of your audit framework. Potentially, you have a new account team and that recommendation of making sure you’re prepared and doing your homework. Brayden, you can go to the next one, please. First thing audit response. It is important, not just for acquisition purposes, not just for audit defense purposes. It’s best practice. But in these scenarios, you need to have this aligned response framework. What I mean, there is everyone should know ahead of time what they’re doing, the steps involved and in a very detailed swim lane fashion, right?

This step precedes this step. And in parallel, we’re doing this and this role is doing this, right? And more importantly, it’s effectively communicated. One of the worst things I’ve seen happen is a centralized software asset management or ICS management function was very mature. And then satellite or siloed. The business function, giving information to a publisher or doing something that could harm the organization in terms of an audit. So have your framework and be aligned, but also communicating this is very important. Just a shameless plug here and some free information as well. If you’re just starting off in your SAM maturity journey. We do have an e-book so you can hit that link and then see how we would potentially respond and some other tips and tricks about managing a successful response to a compliance audit. Brayden, you can go to the next one, please. All right, information requests, right? So this is the real typical thing. Depending on your existing account team, a very common occurrence is to transition to a new account team, and they’re going to take advantage of that and ask things in that box that will sound nominally positive, right?

This is not an audit. This is. We want to help you optimize your agreement. If you can give us some information or in order to roll these products over and look at what your footprint would look like for a subscription licensing. Can you please send us blah, blah, blah information or report. So your best practice here is to make sure that SPVM, your sourcing procurement vendor management function, are in alignment with your software asset management team, and they know about this audit response framework, and they know that you should not provide any information to a publisher when they’re asking without approval, without checking. Hey, could this be an audit? What information are they trying to get?

Again, the worst-case scenario is Information is shared and bang, that triggers this soft audit. And then second, make sure you are having that constructive conversation around that audit or review terms and condition and language in the contract. I saw in chat there a couple asks for where does this specifically detail that you’re prohibited from running. Perpetual and subscription licensing, right? What are those specific terms and conditions?

So maybe that’s something that we can provide offline to the respondents. So you have that in your back pocket. So essentially, information requests. Align this with your software asset management team. Don’t share information outside of this process, no matter how good it sounds, right?

We just want to help you do this.

Braden, you can go to the next one. I’ll go a little bit quickly so we have some time for Q&A. Best practice here is if you’re approached, right? Oh, let’s see here. In this scenario, I’m Chris. I’m your new account rep. And it looks like Benjamin and team. We’re at VMware. Now we’re looking at a little bit different aspect. And was I correct in understanding we’re looking at your global footprint and global data?

If you’re in a review or you’re in discussions already, very much number one, control the written record. You want to be setting agendas. You want to be taking detailed meeting minutes. So this is from the software asset management team perspective. You want to include any conclusions, agreements, actions that were taken so you can refer back. Oh, no, actually. It was not global usage data. We were looking at. We were looking at a sub portion of the enterprise or this country, etc.

And then the second to that point, always follow through if they’re saying something from the publisher side, be it Broadcom, etc. This is applicable across the board. Don’t accept those half answers. Make sure that if there’s a deliverable or something they’re promising that they come through with that. Brayden, you can go to the next one, please.

Okay, this goes to the kind of running and looking at the impact from an ELP or effective license position point of view. Do your homework and understand, is this change good on balance? Is it bad? What do we have to look out for? How do we quantify that? That will help you optimize and then maximize your results.

And then last but not least, can you go to the next one, Braden? I think this was Benjamin’s point to discuss.

Benjamin Coon:

Yeah, thanks Chris. So the final point that we wanted to mention is angle points being more assessment. So we talked on this webinar about having EOPs as a best practice different framework in place. And as Chris mentioned, even you know that the audit response and having those frameworks in place. And one thing that’s great about this VMware assessment is it can really be tailored to fit your organization’s needs.

If you really only need help looking at your compliance position, and maybe the core requirements, we can look at that information. But if you recognize that maybe your organization could use a little bit more help with establishing a framework or with an audit response team. This can really be tailored to fit those needs.

And if you do have any questions or you want to reach out please do by reaching out to info at anglepoint. com. I do believe we do have the link in the chat. I do see it is there. So you can go to the link in the chat if you want to even just have a conversation with angle point about your VMware environment.

So with that, I think we can move to the Q&A. All right. I know we’re at the 30 minutes. We can, I think I saw Chris and I, we both can stay on a little bit longer to answer some of the questions that the respondents have. So we’ll jump into that. I can take one of the first questions that I saw.

One of the questions, it was by Jacek, it was what are the cost comparisons between the new the old and the new calculation method? And when it comes to the pricing here, it isn’t just a one-to-one ratio there are a lot of different things that will impact your renewal. A big one is going to be how many of the products within the bundles you were utilizing before.

If you weren’t utilizing many, but you need to go to the cloud foundation, your cost will likely be a lot higher. Whereas if you were utilizing a lot of the products that are already offered in the cloud foundation, your price increases won’t be quite as high, but it does vary from negotiation to negotiation. A big one is going to be how many of the products within the bundles you were utilizing before. If you weren’t utilizing many, but you need to go to the cloud foundation, your cost will likely be a lot higher. Whereas if you were utilizing a lot of the products that are already offered in the cloud foundation, your price increases won’t be quite as high, but it does vary from negotiation to negotiation.

And one of our big recommendations that we would have is when you are negotiating with Broadcom really try to get price transparency. Try to get unit pricing. Currently, we’re seeing across the industry a trend to go away from that and only give the contractual values. And that really impacts and makes it difficult especially in upcoming renewals to understand where the pricing has come from and what the changes are. So I hope that helped answer that question.

I saw one of the questions. Sorry. And then Chris, I’ll let you go. I saw one question that was in the comment. It mentioned it does be more not feel threatened by their competition and in doing this change. And that is one of the things that we would recommend while you’re reviewing the various technologies that you want to maybe renew with Broadcom.

We’d also recommend looking at what other options are available in the market to answer the question of, do they feel threatened? I say, from what we’ve seen so far in the various renewals and negotiations that we’ve helped. Our clients with it doesn’t appear that they do seem too threatened.

Unfortunately, this is a similar process that they have implemented when they’ve made other acquisitions. So we saw a very similar process when they acquired CA Technologies as well. This fits the book, if you will, for what Broadcom has done in the past, and I don’t think they felt too threatened, at least as of right now by other options in the market.

 

Chris Hayes:

Yeah, so I just wanted to say, the majority of these questions seem to be a bit more detailed and product-oriented, and we could potentially answer a few of these offline. I think, in general, to add on to what Benjamin was saying, your best defense and pushing back on a lot of this is hopefully, you as a software asset management or IT asset management team have that existing cadence and relationship with that SPVM, your sourcing procurement vendor management function, to really drive that negotiating tactic and value against publisher activities like this, right?

One of the best practices is to have that docket already across your strategic providers of your must-have language, your nice-to-have language, and then your never-ever-have language or red flags, right? And then one of the concepts there would be any kind of update in licensing model and cost change, etc., can be reviewed by the organization and then discussed and either accepted or rejected.

Now, a lot of you are probably saying, great that’s nice in theory and absolutely right. This is not a guarantee. And just because you’re saying, I don’t like this change, right? Sometimes the publishers, like in this instance, they forced through these price increases, the wholesale changes to new terms. The best recommendation is really to discuss this at the negotiating table, right?

If they’re saying we’re going to increase pricing and demonstrate that you have to move to a new licensing model, try to understand, at least from their side, that value proposition, right? What is this? Why is this good for me as a customer? And if you can clearly outline and demonstrate through those negotiations that this is just a wholesale price increase, and it’s not great. Then that’s a good point, right? What else can you give me as a result? Can we reduce pricing? Can we look at contractual terms or contractual period? Can you do other things as an organization that will help maximize that value for the spend, right?

If you want to have that long-term relationship, it has to be a give and take, right? So that’s how you structure that win approach relative to some of these changing terms and conditions. Thanks. Benjamin, I’ll let you pick off a couple of the other kind of product-oriented ones in the Q&A.

 

Benjamin Coon:

Yeah, one that I saw and I just answered it in the chat, but I think it’s probably helpful for everyone.

They mentioned: What is our interpretation of mixing the perpetual with the subscription environments, and how we’ve seen that applied is it goes down to the vCenter and ESXi host level. On your specific vCenters that you’re running your VMware software, you cannot mix the licenses from your subscription and perpetual environments or licenses, the keys. On to that level.

Let’s see about some of these other questions. So there’s a question on: Will there be any transition from perpetual to subscription like a one-to-two? We haven’t seen Broadcom give any clear indication on exactly what it is. They have mentioned that there is the ability to swap the licenses, and you can get the credits, like we mentioned as a buyback, if you will, but we haven’t seen necessarily anything completely standard on a, at least on a publicly available method. That ultimately would be a part of the negotiations when you’re talking with VMware by Broadcom to get that specific level of detail.

Let’s see. Yep. And that’s similar. I see another one that’s like: What is the credit when it’s converted? And how is that applied? So again, the credits will be ultimately something that needs to be determined through the discussions with Broadcom. I think it does, it’s based off of how much longer your support is. So if only have a couple of days of support, you’re not going to get quite as many credits as if you just renewed last month for a multi-year and now you’re switching. You’re going to get more credits that way. And the way that it’s applied is to your new contract that you’re going into for what we’ve seen. You can lower that initial subscription fee through those credits. But again, all of the specific fine details here and questions ultimately should be a part of your negotiation framework, the questions that you’re asking Broadcom during that process. And I think with that, I know we’re over time.

I know there’s a lot of questions here. There’s a lot of information. We can do our best to try to respond to some of them, maybe offline as well as we stated before. We do have that angle point contact. Please reach out to angle point. We’re happy to help answer some of these questions that are more specific to your environment. That’s probably one of the most important things. It really does vary. There’s a lot of factors that come into play with this. It isn’t just a standard approach. And because of that, we can give you more specific information when in discussions with your organization. Chris, is there anything else you’d like to add to that?

 

Chris Hayes:

Nope. Completely agree. From my point of view, right? If you’re suspecting that you’re entering a compliance topic or you have some specific questions about your environment relative to that move or the calculations of the switch, how that’s applied to you. Our teams are more than happy to talk it through with you. So please get in touch.