VMware partners that invest in learning the vendor's new storage and networking technologies may soon get a shot at potentially lucrative professional services projects.

In a pilot program unveiled Tuesday at VMware's partner conference in San Francisco, VMware will let services-savvy partners which meet its requirements sell and deliver professional services to customers.

VMware has its own professional services organization, but with new products like NSX, VSAN and vCloud Air now on the market, it's looking to leverage partners' services muscle to meet expected future demand.

"We've grown up as a company that needs professional services. Now, for scale, they need to [bring] partners into the services value channel. Partners that make the investment will get rewards," Dave O'Callaghan, senior vice president of channels and alliances, said in a press conference at the event.

VMware will bring a "limited number" of partners into the program during the first half of the year, and plans to expand its scope in the second half, the Palo Alto, Calif.-based vendor said in a press release.

[Related: VMware Execs Say Software-Defined Data Center Is A 'Bridge To The Future' For Customers]

VMware says partners with skills that span the whole VMware software-defined data center portfolio get priority consideration for the program. While most every partner knows vSphere server virtualization, a lesser number are up to speed on VMware's storage and networking technologies.

Partners in the program will sell services to customers directly, owning the billing relationship. They'll also have free access to VMware's software-defined data center experts, as well as discounted training and other benefits.

Jason Silva, principal at Revel Technology, a Houston-based solution provider and VMware channel partner, told CRN he was impressed that VMware is launching a channel program specifically for professional services.

"VMware for years had ESX," Silver said. "Now it has NSX, AirWatch, and other new things that need to be integrated. I think VMware is trying to round out its partners' professional services capabilities so that they are not just relying on VMware's own professional services."

Getting certified and up to speed on professional services for VMware's growing solution set is a big differentiator for channel partners, Silva said. "This will be beneficial to us," he said. "This is not just a discount on products. They will need to show they are dedicated to the solution set."

In another sign of VMware's commitment, the vendor has hired a new vice president specifically for the program, Silva said. "This is the first time VMware had someone specific to professional services through the channel," he said.

VMware, which plans to make a big channel push with Airwatch this year, also launched a mobility competency for partners. And in Q2, VMware says it plans to launch a software-defined data center competency.

The Broadcom Investment Thesis

After Broadcom Inc. (NASDAQ:AVGO) benefited from the market environment in 2023, 2024 will be the year of transformation for the company. With the acquisition of VMware (VMW) finally approved, a new era begins. Prior to 2024, sales were 79% semiconductor or hardware and only 21% software, but with the new acquisition, the projection for 2024 is that software will be 40%. And that is the turning point.

Prior to the VMware deal, the top 5 end customers accounted for 35% of net revenues and WT Microelectronics alone accounted for 20% of net revenues. Therefore, the deal minimized the risk of this constellation. Especially since Apple has plans to build its own chips and could disappear as a customer in the future. While they still have a long-term contract with Broadcom, things can change quickly in this industry, and with the new revenue from VMware, Broadcom is no longer as dependent on the top 5 customers.

VMware, with its mission-critical cloud software that is the foundation for many applications, seems to have good synergies with Broadcom's portfolio. It also helps Broadcom in the generative AI market because

Since I find AMD very interesting and think that they can steal market share from NVIDIA, you can read my latest article about them here if you are interested in the battle between the two giants in the GPU market.

Broadcom, which went from being a hardware company to a semiconductor company and is now transitioning to being half software and half semiconductor/hardware, has a large portfolio of many small electronic parts that they use every day without even realizing it. Just the fact that 99.9% of all Internet traffic passes through at least one Broadcom chip is crazy when you think about it. That sounds like a big moat to me.

Broadcom has built a strong ecosystem and deep industry expertise. The combination of storage, Ethernet, PCIe, and Fiber Channel means that many customers are dependent on Broadcom. Broadcom is the market leader in Wi-Fi, with nearly 80% of the infrastructure relying on Broadcom, 1 billion Broadcom DSL connections installed worldwide, and Broadcom server storage is used by a very large portion of enterprise server customers.

And thanks to high reliability, which is very important for mission-critical tasks, low latency, and high power efficiency in the desired areas, Broadcom is very popular with its customers. And the focus on software and especially data centers should pay off in the coming years.

Broadcom's Metrics and Balance Sheet

The most significant change is the increase in net debt from $25 billion to $70 billion to $80 billion as a result of the VMware deal. But as they can see in the picture above, this is part of Broadcom's strategy. They buy strong companies with debt, then Improve their margins, and then deleverage the balance sheet. And historically they have been very successful with this strategy.

And for me personally, the current level of debt is higher than I would like. I usually prefer companies that have no more than 4 times net income as net debt. However, since Broadcast's net income was only $14 billion in its last report, this is not the case. But they have to adjust the net income for the income that VMware will generate in 2024, and if they add that in, the net income could be over $20 billion, which would make the debt situation more comfortable.

In addition, Broadcom has plans to divest Carbon Black and EVC, and depending on how that goes, that could generate revenue. And FCF is also very strong at $17 billion. And if they adjust that for SBC, which is $2.7 billion, they get an SBC-adjusted FCF of about $15.3 billion. That should be enough to satisfy shareholders, buy growth, and ease the balance sheet.

ROIC And Capital Allocation

Broadcom has done a fantastic job in terms of ROIC over the last couple of years. They have taken it from the low single digits to 22%. And if they look at Broadcom's WACC, which I calculate to be about 9% based on a 4.5% cost of debt and a 9% cost of equity, they get a ROIC-WACC spread of 13%. A very strong number. Broadcom is clearly creating value through its M&A activity and also through organic growth. But maybe the ROIC will be a little bit lower now for the first year or two after the VMware acquisition, and then hopefully it will go back up.

With a large portion of FCF devoted to dividends and their phenomenal growth, shareholders have been handsomely rewarded. In addition, Broadcom has repurchased a lot of stock, further demonstrating that Broadcom's management is very shareholder-friendly.

Unfortunately, the buybacks were more to offset the dilution from SBC than to significantly reduce the share count. Still, Broadcom has been able to grow EPS and create shareholder value, even though the share count has increased since 2019. Their capital allocation in the form of M&A has simply been outstanding. Hock Tan's playbook of buying companies, cutting costs, and making them more profitable has been successful in recent years, but synergies are often overestimated and M&A is a tough playing field. But his track record is extraordinary when it comes to the success rate of his acquisitions. A clear case of exceptional management where most would fail.

However, it will be interesting to see how the large increase in shares outstanding from the VMware deal will affect EPS.

Broadcom's Reverse DCF

An excellent tool for determining whether a company is fairly valued is a reverse DCF. This involves looking at what is included in the stock price. And if they take the TTM diluted EPS of $32.98, they see that the stock is currently pricing in a 12% EPS growth rate over the next 10 years. But the historical EPS CAGR over the last 10 years is a whopping 31.15%. Well above the required target.

I do not think that Broadcom will achieve the same rate in the next 10 years, but I can definitely see them achieving a CAGR between 15% and 20% if the VMware integration goes well. This would make the shares look somewhat undervalued in this context.

What could EPS look like in 5 years?

EPS estimates also see a 16% CAGR over the next 5 years through October 2028, further fueling the positive outlook. If EPS is $80 to $85 in 5 years, the stock could trade over $2000 depending on the multiple. I don't think Broadcom has that much room for multiple expansion, but even a 25x multiple would supply the stock almost 100% upside.

Risks

The risks of Apple producing its chips in the future have been discussed, but I think the two biggest risks are definitely TSMC (TSM) and the M&A activities. TSMC produces 90% of Broadcom's wafers and also produces for almost every competitor. This gives it unparalleled market power and pricing leverage. Broadcom needs TSMC's products, and TSMC can almost dictate prices because no other company can currently deliver the same level of quality. The advantage in terms of know-how is simply very large at the moment.

The second risk is that Broadcom is a serial acquirer and will likely need new M&A targets to fuel growth as VMware ages. VMware has brought in significant recurring revenue, but what is the impact of this really big software acquisition? And will there be enough attractive targets left that won't be blocked by antitrust regulators?

And Hock Tan's age, 72, is a risk because he is responsible for much of the success. Will the success story continue when he retires? A difficult question to answer.

Conclusion

All in all, the stock looks undervalued from a long-term perspective. Over the next 5 to 10 years, the VMware deal and data center focus should drive strong earnings growth. And given the company's shareholder-friendly management, the dividend should continue to grow strongly to reward shareholders. Even if the multiple comes down a bit, earnings growth and dividend increases should be enough to support returns.

But it is important to remember that this is the largest and most transformative acquisition in Broadcom's history. And just because everything worked so well in the past does not mean it will work as well in the future.

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Broadcom, under the leadership of CEO Hock E. Tan, recently closed its $69B acquisition of VMware. Post-acquisition, Broadcom is moving quickly in undertaking several critical initiatives with VMware that, while likely beneficial to Broadcom shareholders over the long term, are causing uncertainty among many VMware customers.

Transition to Subscription Model

One of Broadcom’s primary strategies to drive revenue growth is shifting VMware's business model from a perpetual license to a subscription-based one. This change aims to provide more predictable and stable revenue streams and aligns with the broader industry trend towards subscription services.

The move, as described by Tom Krause, president of the Broadcom Software Group, during the company’s most recent earnings call, is central to Broadcom’s plan to boost VMware’s contribution to its pro forma EBITDA to approximately $8.5 billion within three years, a considerable increase from VMware’s current production of about $4.7 billion. The emphasis on subscriptions is a key component of this ambitious growth target.

Broadcom's move to subscription models could lead to slower short-term growth for VMware and necessitate restructuring contracts from perpetual to subscription. VMware's strategy includes a trajectory of accelerated growth. The move to higher-value software stacks and subscription sales is expected to drive revenue growth over the next three years.

This transition could also affect VMware's customer relationships, as customers may push back against the shift to subscriptions, which are generally perceived as more expensive than perpetual licenses. VMware's expansion beyond infrastructure management with products like Tanzu could face hurdles if customers pause or reconsider their investments amid these changes.

Selling off Desktop & Carbon Black

During its earnings call, the company revealed plans to divest VMware's end-user computing portfolio and its Carbon Black security software unit. This strategic move aligns with Broadcom's stated intent to concentrate VMware's resources and efforts on creating global private and hybrid cloud environments tailored for large enterprises.

The end-user computing portfolio, encompassing desktop virtualization, application publishing, and mobile device management, alongside Carbon Black, a security software unit, are identified as non-core assets and are set to be separated from VMware's main business.

Broadcom expressed a commitment to finding suitable buyers for these units, ensuring they find "good homes," considering that many of their customers overlap with those of VMware's core products. This decision reflects Broadcom's broader strategy to refine VMware's product offerings and focus on areas that align with its vision of developing high-value cloud infrastructure solutions for global enterprises.

The company said that the moves are essential to redirect VMware's efforts towards its primary business of creating private and hybrid cloud environments, which is crucial for large enterprise customers worldwide.

Layoffs

Just days after it closed its acquisition, news emerged that Broadcom is set to lay off at least 2,837 VMware employees. This includes a substantial number at its Palo Alto campus in California, accounting for 1,267 employees, and 577 at its Austin facility.

It's important to note that the real number of layoffs could exceed these figures since not all layoffs must be reported through WARN notices. The total workforce of VMware globally is around 38,300 employees.

The layoffs are officially attributed to "economic" reasons, although Broadcom has not provided further specifics or justifications. Despite these layoffs, VMware remains a central piece in Broadcom's strategy for its enterprise software segment.

Analyst’s Take

You can look at a company from the perspective of the customer or the stockholder. I’m not a financial analyst, so I’m going to interpret Broadcom’s actions with a view of how those actions might impact an IT organization; after all, the IT practitioner is most directly impacted.

Broadcom's acquisition of VMware represents a strategic pivot that underscores the semiconductor giant's intensified focus on enterprise software. Transitioning VMware towards subscription models is a savvy move that aligns with broader market trends. But this shift may test customer loyalty, as subscription models often imply higher costs over time than perpetual licenses.

The decision to divest VMware's end-user computing and Carbon Black units clearly indicates that Broadcom seeks to sharpen VMware's focus on its core competencies in cloud environments. Such divestitures could streamline operations while also raising questions about future innovation and support for VMware's broader product suite.

Layoffs following the acquisition, while delivering operational cost savings, may have a broader impact on VMware’s innovation trajectory and customer service capabilities. This reduction in force, ostensibly for economic reasons, could introduce risks related to execution and market perception.

Predicting how Broadcom's moves will impact VMware products and services over the long term is impossible. The swiftness with which Broadcom instituted layoffs and product divestitures raises questions about how it will guide VMware forward.

As in any period of uncertainty involving technologies fundamental to critical IT infrastructure, IT organizations are well-advised to comprehensively analyze the risks involved before committing to any significant VMware deployment or renewing long-term license agreements. IT buyers should look to mitigate risks with a dual-vendor approach where feasible.

Many VMware customers are already adopting alternative solutions. Nutanix, VMware’s closest competitor, revealed record growth in its most recent earnings. While much of Nutanix’s growth was driven by its own strategic initiatives, CEO Rajiv Ramaswami acknowledged that the company did “close some additional deals” explicitly because of uncertainty about how the acquisition will unfold.

With the industry watching, Broadcom's stewardship of VMware in the coming fiscal year will be a critical test of its strategic vision for enterprise software dominance. While Broadcom is clearly focused on getting the financial aspects of the acquisition quickly under control, how the company will deliver long-term value to its VMware customers will become clearer.

Until there's clarity, however, IT organizations should continue to act with caution. Mitigating risk, after all, is the number one job for enterprise IT.

Disclosure: Steve McDowell is an industry analyst, and NAND Research an industry analyst firm, that engages in, or has engaged in, research, analysis, and advisory services with many technology companies, which may include those mentioned in this article. Mr. McDowell does not hold any equity positions with any company mentioned in this article.

If VMware is causing a Blue Screen error on Windows 11/10, the following tips could be handy for you. There are different reasons why your host computer fails to load the VMware virtual machine. This article explains some of the most common causes and solutions to mitigate this issue within moments.

If VMware causes a Blue Screen on Windows 11/10, follow these steps:

1. Update VMware
2. Low computer resource
3. Turn off Hyper-V
4. Disable other virtual machines
5. Corrupt ISO file

To know more about these steps, continue reading.

1] Update VMware

It is probably the very first thing you need to check. There could be times when VMware might fail to make your virtual machine up and running due to a glitch or bug. If you have recently updated your VMware app, it might come with a bug that could cause the aforementioned issue.

In most cases, companies recognize the bug and roll out an update almost immediately. If the same thing happens with your VMware installation, chances are they have already released an update. That is why it is recommended to check the official statement and install the update if anything has been released.

2] Low computer resource

Although the official statement says something about the 1.3GHz processor and 2GB of RAM, you might not be able to run a virtual machine smoothly or at all, having such resources. It is always recommended to configure much better hardware than the mentioned one.

If you have an old x64 architecture, you might not be able to run VMware virtual machines. In other words, there is a high chance of getting the blue screen error on the host computer while running the virtual OS. That is why it is recommended to have a better hardware configuration to bypass the BSOD

Pro tip: You can open Task Manager alongside VMware to check which app is consuming more RAM and other resources. Then, you can close such unnecessary apps to assign more CPU resources to VMware.

3] Turn off Hyper-V

Hyper-V is a Level 1 hypervisor that makes the host computer into a virtual PC. On the other hand, VMware is a Level 2 hypervisor that uses the host computer to build the virtual machine. That is why if you enabled Hyper-V earlier, you might not be able to use VMware or VirtualBox-like virtual machine apps simultaneously. You must disable either of them. In other words, if you want to use VMware, you need to disable Hyper-V.

To disable Hyper-V in Windows 11/10, do the following:

• Click on the Taskbar search box.
• Search for windows features.
• Click on the individual search result.
• Remove the tick from the Hyper-V checkbox.
• Click the OK button.
• Let it finish all the processes.
• Restart your computer.

Once done, you will be able to use VMware without any BSOD.

4] Disable other virtual machines

Many people often use multiple virtual machine apps, such as VirtualBox, VMware, etc., simultaneously. In most situations, such workflow might cause a blue screen error on your computer. That is why it is recommended to disable other virtual machine software. For that purpose, you can take the help of the Task Manager to terminate all the dependencies.

5] download ISO file again

If VMware causes a blue screen while installing the virtual machine OS, it is suggested to download the ISO file again. If the ISO comes with some corrupt files, there is a chance of getting BSOD while using that ISO in the virtual machine. You can follow this guide to download Windows 11/10 ISO directly.

Read: How to fix VMware Internal Error while powering on

Can VMware cause BSOD?

Yes, VMware can cause BSOD on Windows 11/10 PC. As said earlier, there could be countless reasons why you might get a blue screen error due to having VMware on your computer. For your information, some common reasons are mentioned in this article, and it is recommended to follow them to get rid of this issue.

Is VMware compatible with Windows 11?

Yes, VMware is compatible with Windows 11. If you have successfully installed Windows 11 without compromising the official system requirements, you can easily install VMware on your computer. As per the official statement, VMware requires a minimum of 2GB RAM along with 1.3GHz clock speed. On the other hand, it runs on almost all the x64 architecture without any problem.

Read: VMware does not support the user level monitor of this host.

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In a 2015 interview, Bill Gates imagined a world where Artificially Intelligent Tutoring Systems (AITS) have transformed learning. He spoke of AI-powered tutors offering a personalized approach for each student. They could work with a kid struggling to wrap his head around algebra while his classmates moved on to something more advanced; they could work with a grandmother determined to learn a new language.

These systems wouldn’t replace teachers. Rather, they’d enhance human teachers’ abilities to tailor lessons to each student without knocking their class schedule off track. Educators would no longer have to “teach to the middle,” as so often happens when the students in a classroom have a range of skill levels and learning abilities. Now all of those students can sit in the same classroom, with the same teacher, and learn at their own pace.

“The real power of artificial intelligence for education is in the way that they can use it to process vast amounts of data about learners, about teachers, about teaching and learning interactions,” said Rose Luckin, a professor of learning-centered design at University College London. “[It can] help teachers understand their students more accurately, more effectively.”

Luckin doesn’t think AI will replace teachers anytime soon. Instead, she said, it will free up teachers’ time to do what they do best: build relationships with students. She’s started experimenting with these systems in real classrooms, using them to teach various subjects. “AI is doing some of the very labor-intensive data collection and analysis that is best done by technology, leaving the teacher to do the human interaction that’s much better done by humans,” she said. “You keep the bit that the humans are particularly good at, and then you try and automate the support within that system.”

That personalized attention could supply students the added confidence that some need to complete their education. Just look at what happened in a study conducted at City University of New York (CUNY): When associate’s degree students were paired with an experienced advisor who met with them on a regular basis, drop-out rates were cut in half.

Given the costs of having an experienced advisor regularly available to students, it’s not always realistic. But AI could be the experienced advisor, powered by learnings from big data.

One of the organizations Luckin consults for, Third Space Learning, wants to use AI to evaluate how well their tutors teach students. Each tutor is currently evaluated once a week by a human, which requires a lot of human resources—an expensive task.

“You still get the high-quality human-to-human, tutor-to-student interaction, but the evaluation of that interaction will be, in the future, done by an AI. And in addition, the evaluation that’s done automatically will be used to tailor the continuing professional development of that tutor,” Luckin said.

AI can fill the gaps in subject areas in which a teacher doesn’t have a particular expertise or help train teachers when there is a skill shortage in the job market, too.

According to Gates, introducing AI to educational settings will benefit learners of all ages. “For a lot of subjects, as people get older, they are not willing to take that learning risk where they are confused,” Gates said. “The idea that you could talk to a [virtual] advisor that would understand different misconceptions and arbitrary linguistics around it, that’ll certainly come in the next decade.”

The Possibility Report is an ongoing series about how technology is changing their understanding of the world around us. This article is part of LEARN, their discussion on how emerging technologies promise to change the educational experience as they know it, from elementary schools to prisons and everywhere between.

Science fiction writers love playing with virtual worlds that harness theoretical physics for real-world applications and make it possible for characters to go beyond the reality they experience here on Earth. Star Trek’s holodeck, dreamed up by series creator Gene Roddenberry after he met with a holography researcher in the 1970s, is a prime example.

In the Star Trek holodeck, holographic images are projected to create simulations of locations, objects, and people that appear to be real and touchable. But when the holodeck’s program ends, the simulations fade and Captain Picard is standing in a gridded, enclosed room.

Researchers at New York University (NYU), including computer science professor Ken Perlin, are trying to make the holodeck a reality. “It’s been inspired by that sense of freedom—basically the promise of the idea that they don’t need to be bound by the rules of the particular physical reality they happen to be inhabiting,” Perlin said.

The goal of the NYU Holodeck is to create an immersive world that spans the virtual and the physical, allowing people to collaborate even if they’re thousands of miles from each other. “We’re going to say, ‘Well, I want to collaborate with you, and we’re going to be exploring a molecule together, or flying around in the universe, or looking at a cell or walking around a structural model of the economy, or whatever problem it is that they need to solve,” Perlin said.

The NYU Holodeck was announced in September 2016, and one of the team’s current goals is to find the least intrusive way possible for people to inhabit the same physical space in virtual reality. That involves developing precision object-tracking technology, as well as working out conceptual kinks, such as the best way to hand a physical object to a person in a virtual environment.

This type of technology could have a profound effect on medicine. Perlin cited examples of a neurosurgeon using the NYU Holodeck to do preoperative planning, or medical students watching a diagram, floating in the air, that animates a procedure. Doctors in Provo, Utah, are already working with the HoloLens for similar purposes, converting 2-D medical images into 3-D projected holograms that can be used both to train medical students and to clarify procedures for patients.

But Perlin also knows there are unconceived possibilities for the Holodeck. “There will be things that they will be able to do, for example, in the realm of the teacher–student relationship that we’re not even thinking of yet,” he said.

For example, EchoPixel has introduced interactive 3-D holograms to select hospitals across the country, allowing doctors to turn data from 2-D CT and MRI scans into 3-D interactive images that can be manipulated as if they were real body parts. This technology has already proven effective, with doctors detecting more congenital heart defects in 40 percent less time. There is also optimism among doctors that this noninvasive examination technique could encourage patients to come in for checkups more frequently.

Not only could virtual and holographic advances make medicine more efficient, but they could also help doctors make their patients more comfortable and more involved—two adjectives rarely associated with medicine. The incorporation of virtual, manipulated, and interactive simulations of the body and its treatment could help doctors see more and see better. It could also augment transparency between them and their patients.

The Possibility Report is an ongoing series about how technology is changing their understanding of the world around us. This article is part of HEAL, their discussion about the ways technology can be used to heal human bodies, animal populations, and the entire planet.

Broadcom Inc. is accelerating a plan to strong-arm VMware customers into signing up for subscriptions by killing off older, on-premises perpetual licenses to use the popular virtualization software.

New customers will no longer be able to purchase a perpetual license, while existing customers will be prevented from acquiring support and software updates. In an blog post published over the weekend that was first spotted by The Stack, VMware Senior Vice President Krish Prasad stated that the initiative is part of a plan to “complete the transition of all VMware by Broadcom solutions to subscription licenses.”

In a short blog post earlier this year, VMware described its perpetual licenses as being among the “most renowned” in the software industry. When customers acquire a perpetual license, they gain a license key that enables them to access the associated software forever, since the key will never expire.

However, support and software updates are licensed separately and do expire, meaning that customers with a perpetual license will not be able to renew these essential aspects. So if they don’t switch to a subscription, they’ll no longer receive support or updates for VMware’s virtualization software.

VMware detailed a long list of products for which perpetual licenses are being discontinued, including VMware Cloud Foundation, vSphere, VMware vSAN, NSX, HCX, Site Recovery Manager, vCloud Suite, Aria Suite, Aria Universal, Aria Automation, Aria Operations, Aria Operations for Logs and Aria Operations for Networks.

In the blog post, VMware explained that customers can continue using their perpetual licenses with active support contracts. However, it also said it’s encouraging them to review their inventories of perpetual licenses, including the renewal and expiration dates of their support services.

Broadcom plots transformation

The move to end perpetual licenses comes shortly after Broadcom closed on its long-planned $69 billion acquisition of VMware last month. Since closing, the chipmaker has wasted no time in streamlining the company’s operations in an effort to make it more profitable.

For instance, just one day after, it announced it will be restructuring the company into four divisions that are each responsible for a different subset of its products. Then this month, it revealed that more than 1,800 employees would be laid off as part of a plan to boost the company’s profitability.

Broadcom has set itself a goal of doubling VMware’s earnings before interest, taxes, depreciation and amortization to $8.5 billion within three years. As part of that effort, Broadcom will relocate its own headquarters from its current campus in San Jose to VMware’s 1.6 million-square-foot head office in Palo Alto.

VMware had announced it would be transitioning to a subscription model one year prior to the completion of its acquisition, justifying the decision by saying that the industry has already embraced subscriptions as the standard for cloud consumption. According to Prasad, the subscription model will bring customers benefits including continuous innovation, faster time to value, predictable investments and more. He added that the company will work with existing customers to “trade in” their perpetual products “in exchange for the new subscription products, with upgrade pricing incentives.”

One of those incentives involves VMware Cloud Foundation, which Broadcom has previously said will be the main focus of its investment strategy in the company. To sweeten the deal for customers who are reluctant to switch to subscriptions, it will reduce the list price of Cloud Foundation subscriptions by half, and introduce higher support service levels, offering “enhanced support for activating the solution and lifecycle management.”

An opportunity for VMware’s rivals?

Although the move isn’t unexpected, it’s likely to irk a number of VMware customers, which have been well catered to by the company’s buy-once and use-forever model. They’re now effectively being forced to switch to a “buy-never but pay-forever” model, and the move may push some to consider alternatives to VMware’s virtualization offerings.

“Of course, existing customers who have perpetual licenses will not be particularly eager on moving to subscriptions,” said Holger Mueller of Constellation Research Inc. “As usual with license changes, this opens the door to competitors. VMware will have to convince its customers of the benefits of its subscription model, with higher innovation and commercial elasticity.”

Several VMware rivals have stepped up their efforts to poach customers away from the company since Broadcom’s deal was announced. They include Nutanix Inc., which recently criticized the chipmaker, saying that its business model has always been to “maximize acquired assets in two to three years,” adding that VMware’s customers “will feel this.” Others argue that Nutanix’s solutions are also expensive, and say they comes with increased complexity. Even so, analysts say Nutanix has already enticed a number of VMware customers to its platform.

Alternatives for smaller companies include the open-source XCP-ng, Proxmox and Canonical Ltd.’s MicroCloud platform.

Image: VMware