In November 2023, Broadcom bought VMware and immediately set off a licensing crisis. We’re talking 150-1000%+ price increases across the industry. The economics of enterprise virtualisation have fundamentally changed.
If you’re running VMware, you’re now dealing with 72-core minimum requirements, distributors walking away from the product, and pressure to figure out whether you’re staying or going. This is part of the broader VMware exodus affecting thousands of organisations worldwide.
In this article we’re going to break down what actually changed, why it matters to your budget, and what your options are. By the end you’ll understand the full scope of the changes, how to calculate your actual cost impact, and when it makes sense to negotiate versus when it’s time to migrate.
What Exactly Changed With VMware Licensing After Broadcom’s Acquisition?
Broadcom acquired VMware in November 2023. The first thing they did was restructure the entire licensing model. Perpetual licensing is now completely eliminated. If you used to own your licenses outright – pay once, own forever – that’s gone. Now you subscribe annually or sign multi-year deals.
The new subscription model comes with a mandatory 72-core minimum. Your organisation must license a minimum of 72 cores no matter how many CPU cores you’re actually using. For SMBs, this has dramatically increased baseline costs.
Broadcom reduced VMware product offerings from 168 products to four main bundles: VMware Cloud Foundation, vSphere Foundation, vSphere Standard, and vSphere Enterprise Plus. The bundled packaging means you’re forced into VMware Cloud Foundation bundles even if all you need is vSphere or vSAN. You’re paying for features you don’t use.
Real examples? 150-1000%+ cost jumps at renewal. AT&T faced price increase proposals reaching 1050% under the new subscription model.
Here’s the timeline: announced November 2023, fully implemented for renewals by mid-2024. Effective April 10, 2025, the 72-core minimum affects smaller deployments, with some customers experiencing 4x or 5x cost increases.
And there’s more. Broadcom introduced a 20% penalty for late renewals if you don’t renew subscriptions by their anniversary date. This is pure pressure to keep you locked in.
The shift from perpetual ownership to annual rental has fundamentally changed ROI calculations and budget planning. As Keith Townsend, The CTO Advisor, points out, the question isn’t just about replacing the ESXi hypervisor anymore—it’s about the entire VMware experience. That means the operational model, the control plane, the API, the ecosystem.
LicenseQ puts it plainly: licensing is now an architectural decision. Does this model fit your 5-10 year infrastructure strategy?
Why Did Broadcom Eliminate Perpetual Licensing?
Broadcom’s business model shift is simple: move from one-time transactions to recurring revenue. Predictable revenue streams generate higher lifetime value. The subscription model creates higher customer lifetime value and better valuation multiples for the parent company.
Licensing strategy became inseparable from long-term platform strategy. The question for you became whether to double down on VMware under the new subscription model or start evaluating alternatives.
This mirrors the broader enterprise software trend. Microsoft did it. Adobe did it. SaaS and subscription models are everywhere. The subscription approach bundles support, updates, and features into a single payment rather than separating them out, which increases average customer spend. Recurring revenue also enables more accurate financial forecasting and investor confidence in growth projections.
Broadcom’s infrastructure software strategy includes bundling VMware with other properties they’ve acquired – CA Technologies, Brocade, and others. This is about market consolidation and extracting maximum value from acquired customer bases.
Perpetual licensing let you control upgrade timing. Subscriptions force you to participate in upgrades. The old model created “install and forget” customers who only paid support fees. The new model ensures you’re actively engaged whether you like it or not.
When customers complained about VMware price hikes, Broadcom EMEA CTO’s response suggested that customers simply aren’t using VMware Cloud Foundation properly to get its full advantages. This response tells you everything you need to know about their negotiating posture.
The transition is creating pressure for you to evaluate alternatives. And that’s creating negotiation leverage.
What Is the 72-Core Minimum Requirement and How Does It Affect Licensing Costs?
The 72-core minimum requirement means you must license a minimum of 72 processor cores no matter how small your actual hypervisor deployment is. This eliminates the cost advantage of running lean, efficient infrastructure.
An organisation with 20 cores must pay for 72. If you’re running a 120-core shop you pay based on actual usage, but if you’re under that threshold, you’re hit with the minimum. This creates a fixed cost floor.
For organisations in the 20-50 core range, this often makes alternatives like Proxmox or KVM economically superior. Smaller IT teams are experiencing disproportionate impact compared to larger enterprises.
How to calculate it: core count includes all CPU cores in licensed servers – both virtual and physical hosts – multiplied by socket count in some scenarios. Count your total core count (cores per socket × socket count × number of servers), apply the 72-core minimum if you’re under that threshold, then multiply by per-core pricing.
Some enterprise customers have reported negotiating modifications to core minimums, but this isn’t guaranteed. Broadcom initially provided exemptions for EU customers due to regulatory considerations. Specific product editions (vSphere Foundation) have different minimums than standard editions.
The 72-core minimum changes what used to be a consumption-based model into a fixed minimum cost. You’re paying for capacity you don’t use.
How Much Do VMware Prices Typically Increase at Renewal?
Industry reports are documenting 150% increases for small customers. Organisations on perpetual licenses transitioning to subscription are facing 1000%+ increases.
A company that was previously paying USD 50,000 annually for perpetual plus maintenance is now paying USD 150,000+ for the equivalent subscription. A mid-sized European financial services provider saw costs jump from approximately 180,000 EUR annual maintenance to 400,000 EUR for VMware Cloud Foundation. These aren’t theoretical percentages—they’re real budget impacts hitting real companies.
How much your price increases depends on your previous licensing tier, your product mix (vSphere vs. Cloud Foundation), your support level, and your organisation size. Broadcom uses your prior-year customer spend as a baseline, then applies percentage increases rather than starting from scratch.
Subscription pricing includes annual escalation – typically 5-10% – so your year-two costs will exceed year-one despite the same usage. When you compare costs over multiple years you’ll see subscription escalation compounding year-over-year. What looks reasonable in year 1 becomes expensive by year 3.
Understanding the full financial impact of staying versus leaving requires a comprehensive cost analysis. Multi-year deals offer slight discounts – typically 5-10% off annual pricing – and lock in escalation rates. This can be valuable if you’re committed to staying with VMware, but even locked-in pricing is often higher than alternatives.
Open-source hypervisors charge zero licensing fees. Managed alternatives like Nutanix and Microsoft have lower per-core costs.
Organisations that were budgeting for infrastructure refresh costs are suddenly facing unexpected licensing cost explosions at renewal time. The financial shock is what’s driving the migration evaluation wave.
What Are the Main Hypervisor Alternatives to VMware?
When you’re evaluating whether to stay with VMware, understanding your replacement platform options becomes essential. Here are the major alternatives:
Proxmox VE is an open-source hypervisor based on KVM with web-based management. No licensing fees. Adoption is surging among SMBs. Proxmox support subscriptions start at under USD 1000 annually for a small cluster, which is far more accessible than enterprise VMware pricing. Some organisations are reporting they’ve cut virtualisation costs by more than 80% after moving to open-source platforms.
Microsoft Hyper-V is Windows-native and included in Windows Server. It’s cost-effective for Windows-dominant environments with seamless integration to Active Directory and PowerShell. Features include live migration, high availability, and Shielded VMs for extra security.
Nutanix AHV is a commercial hyperconverged infrastructure alternative. Its bundled licensing model differs from VMware’s per-core approach. Often this becomes a single-vendor relationship for both hardware and software.
XCP-ng is community-supported and derived from Citrix‘s XenServer. It’s a balance of open-source cost and enterprise features. Uses Xen Orchestra for web-based management. It appeals to service providers and HPC research labs thanks to its security model, bare-metal performance, and strong ecosystem integrations.
KVM (Kernel-based Virtual Machine) is Linux-native and open-source. It requires more technical expertise but has zero cost. It serves as the foundation for Proxmox and other platforms. KVM is the hypervisor core rather than a standalone product, which means you’ll need to select a supported platform, support model, and operating framework around it.
Public cloud services like AWS, Azure, and GCP let you shift workloads from on-premise hypervisors to managed cloud infrastructure. Containers on alternative platforms can run 2-3x more workloads per server compared to traditional VMs and they launch in seconds rather than minutes.
Cost comparison needs to include more than just licensing – you also need to factor in migration effort, staff retraining, and operational differences. Proxmox and XCP-ng are gaining adoption specifically because of the VMware pricing crisis. Community support and professional support are improving rapidly.
No single alternative matches all VMware features. Your choice depends on workload characteristics, team capability, and risk tolerance.
How Do I Calculate My Actual VMware Licensing Costs Under the New Model?
Your environment’s total core count forms the foundation. This includes all CPU cores in licensed servers – both virtualised and physical hosts. The count reflects cores per socket multiplied by socket count across all servers.
The 72-core minimum threshold creates a cost floor. Organisations with fewer than 72 cores must license 72 cores regardless of actual usage. This transforms the economics for smaller deployments.
Per-core pricing varies by edition—Standard, Enterprise, or Cloud Foundation. Each tier includes different feature sets with corresponding price points. Support multipliers typically add 30-50% to base license costs and they’re not optional.
Annual escalation compounds over time. Most subscriptions include 5-10% annual increases. Your year-two costs will exceed year-one despite identical usage. Three-year projections reveal how escalation impacts total cost of ownership.
Adjacent products bundled into subscriptions – vSAN, NSX, Aria – add to the total. Each component carries its own licensing and support costs.
The calculation reveals hidden costs that many organisations only discover at renewal. Support costs are often overlooked. They’re not optional and they add 30-50% to license costs. A three-year projection shows the escalation impact. What looks reasonable in year 1 becomes expensive by year 3.
When Should I Negotiate With Broadcom Versus Migrate Away?
Your negotiation leverage depends on a few factors: organisation size, total VMware footprint, willingness to commit multi-year, and how far along you are in evaluating alternatives.
Effective negotiation tactics include demonstrating you’re seriously evaluating credible alternatives, referencing competitive pricing, and offering multi-year lock-in in exchange for a discount. Negotiation works best when you’re operating from a position of demonstrated credible alternatives. Generic complaints don’t move Broadcom. Enterprise customers have reported securing better pricing through direct engagement and referencing published alternatives.
Here’s the migration threshold: when your 3-year total cost of migration plus new hypervisor costs is less than your 3-year projected VMware costs, migration becomes economically justified.
SMBs have limited leverage individually but strong leverage collectively. Your leverage is demonstrating you’ve evaluated alternatives and you’re willing to migrate. Leverage competition: use cost comparisons from Nutanix, Hyper-V, or cloud providers to strengthen your negotiating position.
Different organisation sizes have different leverage. Enterprises have more negotiating power than SMBs.
As Keith Townsend notes, VMware renewals are now higher stakes. The negotiation table is where strategy meets execution.
Some organisations are negotiating partial migration—keeping VMware for critical workloads, migrating less-critical systems to alternatives.
Migration decisions need to account for hidden costs like staff training, operational learning curve, and potential downtime, not just licensing.
What Support and Features Are Included in Subscription Licensing?
Support included: annual technical support with response time SLAs and access to Broadcom’s knowledge base and community forums.
Feature access: all software updates and patches are included in the subscription. There’s no separation of maintenance updates versus feature upgrades.
Entitlements clarity: subscription licensing includes a defined number of hosts, vSAN capacity, or consumption units depending on the product.
Feature parity issue: the subscription model bundles features that used to be à la carte in the perpetual model. You may be paying for features you don’t need. Subscriptions don’t offer anything perpetual. Old perpetual licenses often included a perpetual support option.
Transparency challenge: Broadcom’s published documentation doesn’t always clearly specify what’s included. You’ll need clarification from sales teams.
Hidden feature bundling means you may be paying for advanced features like Distributed Resource Scheduler (DRS) that you don’t use. Support SLAs matter in production environments. Understanding response times is necessary.
Audit the bundled features before renewal to identify which features you actually use versus which you’re overpaying for.
Why Are So Many Companies Leaving VMware Right Now?
Primary trigger: 150-1000%+ pricing increases are making it economically unjustifiable for many organisations to stay. This is the core driver behind the VMware migration wave that’s fundamentally reshaping virtualisation infrastructure decisions.
Distributor exodus: Ingram Micro and other major distributors exited their VMware relationships post-acquisition, signalling market dissatisfaction. This removes established support channels and creates uncertainty about ongoing service.
Alternative hypervisors like Proxmox matured at exactly the moment the VMware pricing crisis hit, creating viable migration paths. The ROI for migration became positive for organisations that were previously locked in by switching costs.
The “exodus” messaging becomes self-reinforcing. Each public announcement of a migration makes other organisations consider moving too.
VMware partners in storage and networking are seeing customer migration momentum, which creates pressure for them to support alternatives.
Market shift evidence: 2024 surveys show 40%+ of enterprises actively evaluating alternatives. Gartner’s Peer Community survey: 74% of IT leaders are currently exploring VMware alternatives. Gartner predicts 35% of VMware workloads will migrate to alternative platforms by 2028.
RunZero noted: “Over the last year, we’ve seen a massive increase in deployed Proxmox VE systems” with VMware customers being forced to seek alternatives due to Broadcom’s licensing changes.
vSphere 7 reaches end-of-support in October 2025, which is potentially accelerating migrations for organisations on legacy versions.
This isn’t a voluntary technology choice—it’s a forced economic decision driven by pricing shock. Seeing your peers migrate reduces the perceived risk of switching. Understanding the full context of the VMware migration wave helps you position your own strategy correctly.
FAQ
How does the 72-core minimum affect a small organisation with only 20 cores?
You’re licensed for 72 cores minimum, which means you pay for 72 even if you only use 20. This creates a fixed cost floor. For organisations in the 20-50 core range, this often makes alternatives economically superior. Proxmox or KVM licensing – which is zero cost – eliminates this penalty entirely.
Can I negotiate Broadcom down on the 72-core minimum requirement?
Some large enterprise customers have negotiated modifications, but this isn’t guaranteed or widely available. Your negotiating leverage depends on your organisation size, total VMware footprint, and whether you can demonstrate credible alternatives. SMBs typically can’t negotiate minimums. You’re facing the choice of paying or migrating.
What happens to my perpetual VMware licences when they expire?
Perpetual licences never technically expire, but you’ll lose support and security updates. Broadcom pressures perpetual licence holders to convert to subscriptions at renewal. After that, you’re locked into the subscription model with no way back to perpetual licensing.
Is Proxmox or XCP-ng production-ready to replace VMware?
Proxmox has achieved production maturity for virtualisation workloads. Many organisations are running production systems on it right now. XCP-ng is also production-ready. However, neither matches VMware feature-for-feature, particularly around advanced clustering and orchestration. The question is whether your specific workloads actually need those advanced features.
How long does a typical VMware to Proxmox migration take?
Timeline varies. Simple environments – 10-20 VMs, straightforward networking – might take 2-3 months. Complex environments with SDN, storage clustering, and migration dependencies can take 6-12 months. Most organisations underestimate both downtime and the staff learning curve.
What happens to my vSAN storage licensing during a migration?
vSAN is typically either migrated to alternative storage solutions like Proxmox CEPH or traditional SAN, or replaced with standalone storage. This adds complexity and cost to migration planning. You need to budget for storage architecture changes, not just hypervisor swaps.
Can I lock in multi-year VMware pricing to avoid escalation?
Yes. Multi-year deals offer slight discounts – typically 5-10% off annual pricing – and lock in escalation rates. This can be valuable if you’re committed to staying with VMware, but even locked-in pricing is often higher than alternatives for comparable organisations.
What’s my negotiation leverage if I’m a small business?
SMBs have limited leverage individually but strong leverage collectively. Broadcom’s aggressive pricing has created conditions where SMBs are the primary migration target for alternatives. Your leverage is demonstrating you’ve evaluated alternatives and you’re willing to migrate. Broadcom cares more about enterprise accounts than SMBs.
How do I handle existing perpetual VMware licenses during a migration?
You can decommission them – losing their value – or attempt to sell unused licenses on secondary markets, though there’s limited liquidity there. Most organisations accept the sunk cost and focus on the TCO of the new environment rather than trying to recover perpetual licence value.
Are there any exemptions to the 72-core minimum requirement?
Broadcom initially provided exemptions for EU customers due to regulatory considerations. Specific product editions like vSphere Foundation have different minimums than standard editions. Enterprise customers may be able to negotiate modifications. Check your specific products and region for variations.
What’s the total cost of ownership difference between staying with VMware subscription and migrating to alternatives?
This depends entirely on your specific environment, migration complexity, and chosen alternative. A simplified SMB setup – 20 cores, 15 VMs, simple networking – might spend USD 50,000 on migration then save USD 20,000+ annually on licensing. An enterprise with complex orchestration and storage might spend USD 500,000+ on migration and see payback in 3-4 years.
Will the VMware exodus impact my ability to hire skilled staff?
Possibly. Historically VMware was the default, so finding vSphere talent was easy. As migrations accelerate, talent distribution may shift toward alternatives. Timing your migration matters: moving too early means you might face a staff shortage; moving too late means losing a competitive talent advantage.
