Broadcom ends VMware perpetual license sales, testing customers and partners

If it really is for the customers benefit just put the option out there and let them choose it. You aren't fooling anyone by forcing subscriptions down our throats. It's all about you making more money and extracting it from your hopefully captive user base. It might take a little while but I fully expect VMware to die off and be a shell of what it once was but they will get a few quarters of years of making more money so the C-Suite will have been successful.

Only paying when a new generation of the product comes out (or sometime after) motivates companies to give customers a reason to upgrade - helpful features, easier workflow, etc.

With subscription payments, they no longer really have to care about that, because customers have to keep paying, since if they don't, they can't simply keep using the version they have been, the entire system simply stops working (or at least that's how shareholders see it, especially big mutual funds, who only care about the short term).

Everything in our economy is currently geared towards short-term explosive growth or perpetual growth at all costs, regardless of how bad those goals are for the companies, or the economy as a whole, because that's what makes the most money for shareholders - and if the company looks like it can't keep that growth train going, they simply pull out and let it die.

It's a terrible system, and there should be regulations to stop it from happening, but since politicians are highly dependent on corporate contributions since Citizens United... Well, let's just say we're all pretty screwed.

Hardly anyone these days is looking beyond the next year or two, or beyond their immediate social and familial circle, just in general, and people are making the stupidest decisions because of it. The future is looking pretty damned bleak.

Ivan Pavlov

Ivan Pavlov1849 - 1936

Ivan Pavlov was born in a small village in central Russia. His family hoped that he would become a priest, and he went to a theological seminary. After reading Charles Darwin, he found that he cared more for scientific pursuits and left the seminary for the University of St. Petersburg. There he studied chemistry and physiology, and he received his doctorate in 1879. He continued his studies and began doing his own research in topics that interested him most: digestion and blood circulation. His work became well known, and he was appointed professor of physiology at the Imperial Medical Academy.

The work that made Pavlov a household name in psychology actually began as a study in digestion. He was looking at the digestive process in dogs, especially the interaction between salivation and the action of the stomach. He realized they were closely linked by reflexes in the autonomic nervous system. Without salivation, the stomach didn't get the message to start digesting. Pavlov wanted to see if external stimuli could affect this process, so he rang a metronome at the same time he gave the experimental dogs food. After a while, the dogs -- which before only salivated when they saw and ate their food -- would begin to salivate when the metronome sounded, even if no food were present. In 1903 Pavlov published his results calling this a "conditioned reflex," different from an innate reflex, such as yanking a hand back from a flame, in that it had to be learned. Pavlov called this learning process (in which the dog's nervous system comes to associate the sound of the metronome with the food, for example) "conditioning." He also found that the conditioned reflex will be repressed if the stimulus proves "wrong" too often. If the metronome sounds repeatedly and no food appears, eventually the dog stops salivating at the sound.

Pavlov was much more interested in physiology than psychology. He looked upon the young science of psychiatry a little dubiously. But he did think that conditioned reflexes could explain the behavior of psychotic people. For example, he suggested, those who withdrew from the world may associate all stimulus with possible injury or threat. His ideas played a large role in the behaviorist theory of psychology, introduced by John Watson around 1913.

Pavlov was held in extremely high regard in his country -- both as Russia and the Soviet Union -- and around the world. In 1904, he won the Nobel Prize in physiology/medicine for his research on digestion. He was outspoken and often at odds with the Soviet government later in his life, but his world renown, and work that his nation was proud of, kept him free from persecution. He worked actively in the lab until his death at age 87.

Broadcom ends VMware perpetual license sales, testing customers and partners

Broadcom has moved forward with plans to transition VMware, a virtualization and cloud computing company, into a subscription-based business. As of December 11, it no longer sells perpetual licenses with VMware products. VMware, whose $61 billion acquisition by Broadcom closed in November, also announced on Monday that it will no longer sell support and subscription (SnS) for VMware products with perpetual licenses. Moving forward, VMware will only offer term licenses or subscriptions, according to its VMware blog post.

VMware customers with perpetual licenses and active support contracts can continue using them. VMware "will continue to provide support as defined in contractual commitments," Krish Prasad, senior vice president and general manager for VMware's Cloud Foundation Division, wrote. But when customers' SnS terms end, they won't have any support.

Broadcom hopes this will force customers into subscriptions, and it's offering "upgrade pricing incentives" that weren't detailed in the blog for customers who switch from perpetual licensing to a subscription.

These are the products affected, per Prasad's blog:

Broadcom is looking to grow VMware's EBITDA (earnings before interest, taxes, depreciation, and amortization) from about $4.7 billion to about $8.5 billion in three years, largely through shifting the company's business model to subscriptions, Tom Krause, president of the Broadcom Software Group, said during a December 7 earnings call, per Forbes.

"This shift is the natural next step in our multi-year strategy to make it easier for customers to consume both our existing offerings and new innovations. VMware believes that a subscription model supports our customers with the innovation and flexibility they need as they undertake their digital transformations," VMware's blog said.

With changes effective immediately upon announcement, the news might sound abrupt. However, in May, soon after announcing its plans to acquire VMware, Broadcom CEO Hock Tan signaled a “rapid transition” to subscriptions.

At the time, Tan pointed to the importance of maintaining current VMware customers' happiness, as well as leveraging the VMware sales team already in place. However, after less than a month of the deal's close, reports point to concern among VMWare customers and partners.

VMware's blog said "the industry has already embraced subscription as the standard for cloud consumption." For years, software and even hardware vendors and investors have been pushing IT solution provider partners and customers toward recurring revenue models. However, VMware built much of its business on the perpetual license model. As noted by The Stack, VMware in February noted that perpetual licensing was the company's "most renowned model."

VMware's blog this week listed "continuous innovation" and "faster time to value" as customer benefits for subscription models but didn't detail how it came to those conclusions.

"Predictable investments" is also listed, but it's hard to imagine a more predictable expense than paying for something once and having supported access to it indefinitely (assuming you continue paying any support costs). Now, VMware and its partners will be left convincing customers that their finances can afford a new monthly expense for something they thought was paid for. For Broadcom, though, it's easier to see the benefits of turning VMware into more of a reliable and recurring revenue stream.

Additionally, Broadcom's layoffs of at least 2,837 VMware employees have brought uncertainty to the VMware brand. A CRN report in late November pointed to VMware partners hearing customer concern about potential price raises and a lack of support. C.R. Howdyshell, CEO of Advizex, which reportedly made $30 million in VMware-tied revenue in 2022, told the publication that partners and customers were experiencing "significant concern and chaos” around VMware sales. Another channel partner noted to CRN the layoff of a close VMware sales contact.

But Broadcom has made it clear that it wants to "complete the transition of all VMware by Broadcom solutions to subscription licenses," per Prasad's blog.

The company hopes to convince skeptical channel partners that they'll see the way, too. VMware, like many tech companies urging subscription models, pointed to "many partners" having success with subscription models already and "opportunity for partners to engage more strategically with customers and deliver higher-value services that drive customer success."

However, because there's no immediate customer benefit to the end of perpetual licenses, those impacted by VMware's change in business strategy have to assess how much they're willing to pay to access VMware products moving forward.