With VMware’s customer base facing up to 800% price hikes, Broadcom’s $69B acquisition has become a strategic inflection point for enterprise IT leaders. The shift has triggered widespread reevaluation of virtualization strategies, especially as Broadcom transitions VMware’s licensing from perpetual to subscription-based models. According to Avasant’s benchmark data, over 70% of enterprises are now actively exploring mitigation strategies, including hybrid cloud adoption and alternative hypervisor platforms,to offset cost escalations and maintain operational continuity. For organizations deeply embedded in VMware’s ecosystem, understanding these changes and responding with agility is no longer optional; it’s essential.
The New Licensing Reality: Subscription-Only, Bundled, and Cost-Intensive
Broadcom’s pivot to subscription-only licensing, eliminating perpetual licenses as of December 2023, is a deliberate play and publicly stated goal by Broadcom to double VMware’s revenue from $4.7 billion to $8.5 billion over three years. While this model promises continuous innovation and predictable spend, it also introduces steep cost escalations and diminished flexibility. Figure 1 highlights the key changes.
Figure 1 Key Changes to Licensing Model
These changes are not just operational; they are strategic. They impact budgeting, procurement, and the agility of your IT infrastructure.
Executive Strategies for Mitigating Risks from Broadcom’s VMware Overhaul
Broadcom’s acquisition of VMware has catalyzed a fundamental shift in the virtualization market that demands more than reactive cost management. This is a strategic moment for enterprise leaders to reassess licensing governance, vendor dependencies, and infrastructure agility. The pricing and licensing changes introduced post-acquisition are not merely operational adjustments; they represent a structural redefinition of how virtual infrastructure is consumed and monetized. Drawing on Avasant’s proprietary research and client benchmarks, the following strategies offer a data-backed framework for CIOs, CFOs, and sourcing executives to mitigate risk, preserve flexibility, and optimize long-term value in a rapidly evolving vendor landscape.
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- Conduct a Comprehensive Audit of VMware Licensing and Utilization: Enterprises must begin with a forensic-level audit of their VMware estate. This includes cataloging all active and legacy licenses, mapping them to actual usage (CPU cores, memory, storage), and identifying underutilized or over-provisioned assets. Avasant’s benchmarking data shows that up to 27% of VMware environments are over-licensed due to legacy procurement practices. Organizations can uncover significant cost avoidance opportunities by right-sizing entitlements before entering renewal negotiations.
- Negotiate with Precision and Leverage Broadcom’s Broader Portfolio: With reported price increases ranging from 100% to 800%, negotiation is no longer optional; it’s a strategic imperative. Enterprises should benchmark their current agreements against Avasant’s proprietary pricing intelligence, which reveals that clients who engaged in structured negotiations with Broadcom achieved average savings of 18% on multiyear contracts. Leverage Broadcom’s broader product interests (e.g., Symantec, CA Technologies) to create cross-portfolio negotiation leverage.
- Evaluate and Pilot Alternative Hypervisor and Cloud-Native Platforms: Diversification is a hedge against vendor lock-in. Avasant’s IT and Apps Managed Services Pricing and Solution Trends: H1 2025 indicates that 42% of enterprises actively evaluate alternatives such as Nutanix AHV, Microsoft Hyper-V, and KVM-based solutions. For cloud-native workloads, Kubernetes and container orchestration platforms offer compelling TCO advantages. Transitioning requires careful planning. Avasant’s sourcing advisory teams can support RFP development, vendor selection, and phased migration roadmaps.
- Develop a Long-Term Licensing Strategy Aligned with Business Objectives: Broadcom is incentivizing 3–5-year commitments with tiered discounts. While this may offer short-term relief, enterprises must model long-term TCO scenarios. Avasant’s financial modeling tools help clients simulate cost trajectories under various licensing constructs, factoring in growth, consolidation, and hybrid cloud adoption. Strategic alignment is key. Lock-in should never outpace innovation.
- Elevate Licensing Governance to the Executive Level: VMware’s licensing changes have financial and operational implications that demand C-suite oversight. CIOs, CFOs, and Chief Procurement Officers must jointly own the response strategy. Avasant recommends establishing a cross-functional licensing governance board to oversee negotiations, compliance, and vendor risk. This ensures decisions are not made in silos and are aligned with enterprise transformation goals.
- Continuously Monitor Market Signals and Peer Benchmarks: The VMware landscape is fluid. Enterprises must stay informed through trusted sources. Avasant’s Supplier Intelligence Platform provides real-time updates on licensing changes, peer benchmarks, and vendor sentiment. Clients who actively monitor market signals and peer benchmarks are more likely to renegotiate favorable terms and avoid compliance pitfalls, as suggested by trends in Avasant’s IT and Apps Managed Services Pricing and Solution Trends: H1 2025.
Strategic Licensing Governance and Alternative Platform Evaluation
Broadcom’s acquisition of VMware has ushered in a new era of subscription-based licensing, fundamentally altering how enterprises manage virtualization. While this shift promises streamlined portfolios and continuous innovation, it also introduces cost pressures and operational constraints that demand strategic oversight.
To stay ahead, organizations must implement rigorous licensing governance—starting with comprehensive audits to understand current entitlements and usage. Proactive negotiation with Broadcom is essential, not only to manage costs but also to preserve flexibility in deployment models.
In parallel, enterprises should evaluate alternative virtualization platforms that may offer better alignment with evolving business needs. This includes assessing open-source solutions, hybrid cloud architectures, and emerging container-based environments. Diversifying technology stacks can reduce dependency and create leverage in vendor discussions.
Adapting to a New Era of Virtualization
As the virtualization landscape evolves, executive leadership must be actively engaged in shaping the organization’s response. This is not just a technical shift, it’s a strategic inflection point that affects long-term IT investments, agility, and competitiveness.
As Broadcom reshapes the virtualization landscape, will your enterprise adapt with agility—or be locked into legacy?
By Tracell Frederick, Manager, and David Acklin, Senior Director