Broadcom bought VMware and cranked prices up anywhere from 200% to over 1,000%. A European financial services provider saw costs jump from 180K EUR to 400K EUR annually for the exact same infrastructure. No changes. Just a bigger bill.
So the obvious move is to migrate, right? Well, here’s the thing. Migration costs can completely negate your licensing savings if you don’t account for the hidden expenses. Training costs. Productivity loss while you’re running dual platforms. Tool replacement. These add up fast.
This analysis is part of our comprehensive guide on the VMware exodus, where we explore why companies are leaving and what comes next. What you need is a complete Total Cost of Ownership (TCO) analysis. We’re going to walk through the methodology using real-world examples so you can make data-driven decisions rather than reactive ones.
What is Total Cost of Ownership (TCO) for Virtualisation Infrastructure?
TCO is comprehensive financial analysis. It covers all your direct and indirect costs over your infrastructure lifecycle—typically 3-5 years for virtualisation platforms.
Those licensing quotes you get? They only show 30-40% of true costs. The rest is made up of support subscriptions, management tools, storage integration, network virtualisation, backup and DR tools, automation platforms.
TCO breaks into four components. Acquisition costs cover licensing and hardware. Implementation costs handle migration and setup. Operational costs are ongoing support, staffing, and tools. And then there are exit costs.
Broadcom’s subscription-only model converts one-time CapEx purchases into perpetual OpEx expenses. This changes your budget planning completely.
You need 3-5 year projections to compare platforms fairly. Shorter than that and you miss operational patterns. Longer introduces too much technology risk.
Without TCO, you’re just comparing licensing sticker prices while ignoring the majority of your actual spend.
How Much Did VMware Costs Increase After the Broadcom Acquisition?
Broadcom acquired VMware for 69 billion dollars in 2023 and immediately restructured licensing. For a detailed breakdown of these Broadcom’s licensing changes, see our comprehensive analysis. Perpetual licences? Gone. VMware Cloud Foundation (VCF) subscriptions became mandatory. vSphere, NSX, vSAN, and Aria Suite all got bundled together whether you use them or not.
The financial impact is brutal. Remember that European case we mentioned? 122% increase for the same infrastructure. AT&T reportedly faced increases reaching 1,050%.
VCF bundling creates what’s called “shelfware”—software you pay for but don’t use. If you only need vSphere for basic virtualisation, you’re now paying for NSX, vSAN, Aria, and Tanzu. That’s 60-70% of your cost going to unused components.
Broadcom also added enforcement mechanisms. There’s a 20% penalty for late renewals. And starting April 10, 2025, a minimum 72-core requirement hits smaller deployments. Some customers saw 4x or 5x cost increases just from this floor.
The market responded predictably. Gartner predicts 35% of VMware workloads will migrate by 2028. 74% of IT leaders are exploring alternatives. 56% plan to decrease VMware usage.
What Alternative Platforms Should I Compare in My TCO Analysis?
You’ve got three categories to consider: open-source alternatives, enterprise alternatives, and cloud-native platforms. For a detailed platform pricing comparison, see our comprehensive alternatives guide.
Open-source alternatives deliver dramatic cost reductions. Proxmox VE offers enterprise support from 110 to 1,495 EUR per year per node. HorizonIQ documented a case where 285K-519K per year VMware costs reduced to 15K per year on Proxmox—a 94% reduction. One enterprise avoided a 2.3 million dollar VMware quote by switching to Proxmox.
XCP-ng is Xen-based and comes with enterprise support from 340 to 1,020 EUR per year per node. Ikoula runs 100+ XCP-ng hosts serving 6,600+ customers.
Enterprise alternatives provide familiar management at moderate cost increases. Nutanix AHV includes the hypervisor at no separate licensing cost. Nutanix claims up to 42% TCO reduction versus VMware.
Microsoft Hyper-V is bundled with Windows Server. If you’re already a Microsoft shop, this eliminates separate hypervisor licensing.
Cloud-native platforms like Red Hat OpenShift with OpenShift Virtualisation Engine let you run VMs alongside containers.
Which makes sense for you depends on your VMware integration depth. Type 1 customers “treat the hypervisor as relatively interchangeable with infrastructure-agnostic automation (Terraform, Ansible) and networking that isn’t built on NSX”. They can evaluate all alternatives.
Type 2 customers “have deeply integrated operations with VMware’s Software Defined Data Centre: NSX for network virtualisation, vSAN for storage, Site Recovery Manager for DR”. They face higher complexity favouring enterprise alternatives.
If you can provision VMs via Terraform or Ansible today, you’re Type 1. If you need vRealize workflows and NSX policies, you’re Type 2.
What Are the Hidden Costs of Migrating from VMware?
The most common mistake companies make is underestimating hidden costs by 30-50%.
Staff retraining includes certification programmes (500-2,000 EUR per person), time investment (40-80 hours per team member), and consultant fees (1,500-3,000 EUR per day). Your team knows VMware inside and out. They don’t know Proxmox or XCP-ng yet.
Productivity loss during dual-platform operations causes a 20-30% efficiency reduction for 6-12 months. You’re running both platforms simultaneously, so when problems pop up they require expertise in two different systems.
Calculate the impact using this formula: team size × average salary × 25% efficiency reduction × 9 months. For a 5-person team at 80K EUR average salary, that’s 75K EUR in reduced productivity.
Tool replacement means backup solutions, monitoring platforms, automation tools. You’re rebuilding operational processes, not just swapping platforms.
Downtime costs follow this formula: (Hourly Revenue ÷ Operating Hours) + (SLA Penalty Rate × Breach Hours) + (Customer Churn Impact). A company generating 10M EUR annually faces 1,142 EUR per hour revenue loss.
Well-planned migrations incur 4-8 hours production downtime, totalling 5K-15K EUR for typical SMBs.
Dual-platform period costs are the largest hidden expense. You’ll run both VMware and alternatives simultaneously for 3-5 years during phased migration, paying for both.
Conservative budgeting requires 20-30% contingency above initial estimates.
How Do I Calculate Migration Costs for My VMware Environment?
Migration costs scale with VM count, storage capacity, network complexity, and integration depth.
Type 1 customers are looking at 80K-120K EUR for 100 VMs. Timeline: 12-18 months (2-3 months planning, 2-3 months pilot, 6-9 months production, 2-3 months optimisation).
Type 2 customers face 200K-350K EUR for 100 VMs. Timeline: 24-36 months (3-6 months assessment, 3-6 months redesign, 12-18 months migration, 6-9 months optimisation).
Migration tools are a choice. Automated tools cost 50K-200K EUR. Manual migration requires 400-800 hours for 100 VMs at 4-8 hours per VM. Tools pay off at 50+ VMs.
Professional services run 1,500-3,000 EUR per day. Your typical SMB needs 20-40 consultant days—that’s 30K-120K EUR.
Parallel infrastructure costs over 3-5 years mean you’re paying both VMware and alternative platforms simultaneously. This dual cost period is your largest ongoing expense.
What Is the Break-Even Point for VMware Migration?
Here’s the formula: (Total Migration Costs) ÷ (Annual VMware Savings – Annual Alternative Costs) = Years to Break-Even.
Real example: European provider with 180K EUR migration investment ÷ 385K EUR annual savings (400K VMware – 15K Proxmox) = 0.47 years. That’s 5.6 months to break-even.
Type 2 customers face 36-48 month break-even periods, which might actually justify staying on VMware despite higher costs. When migration hits 200K-350K EUR and annual savings only reach 100K-150K EUR, you’re looking at 2-3 year payback.
Variables that affect your timeline: migration cost overruns (add 6-12 months), hidden cost underestimation (add 3-6 months), support tier selection.
Run sensitivity analysis. If migration costs increase 30% and alternative platform costs increase 20%, how does that affect your timeline? Build conservative models.
Typical enterprises require 18-24 month break-even for CFO approval. Longer timelines introduce technology risk and opportunity cost concerns.
How Do I Build a Business Case for VMware Migration?
Your business case needs five components. Understanding the broader context of why companies are leaving VMware helps frame your strategic rationale beyond pure cost analysis.
Executive summary covers current state costs, future state options, migration investment, break-even timeline, and 5-year TCO comparison. State expected ROI percentage and payback period.
Financial projections means year-by-year cash flow analysis with actual numbers from your environment. Include cumulative savings over 3-5 years and ROI percentage.
Risk assessment includes technology risks (platform maturity, feature gaps), operational risks (team capability, downtime), financial risks (cost overruns, vendor pricing changes), and strategic risks (vendor lock-in). Acknowledge key risks and mitigation plans.
As one strategist puts it, “Understand which type of customer you are. Define outcomes you actually need. Not ‘escape Broadcom’—what business capabilities matter?”
Strategic alignment shows how migration supports your broader IT strategy—cloud-native transformation, multi-cloud flexibility, cost optimisation.
Alternative scenarios provides detailed comparison of “stay on VMware”, “migrate to open source”, “migrate to enterprise alternative”, and “hybrid approach” with pros, cons, and financial implications. Give your decision-makers options, not binary yes/no.
Vendor negotiation leverage means using competitive alternatives to demonstrate credible exit options. Insist on shorter contracts (1-2 years), staged commitments, à la carte licensing.
Larger customers (500+ VMs) get better negotiation success. Smaller customers (50-200 VMs) get minimal flexibility—prepare for actual migration.
What Should My 5-Year TCO Comparison Include?
Year 1 compares VMware (VCF + support) versus Alternative (licensing + support + migration + training + tools + productivity loss). This is your highest-cost year—you’re paying both platforms plus one-time expenses.
Year 2-3 is the dual-platform period with overlapping VMware (legacy workloads) and alternative (migrated workloads) costs. You’re paying both vendors for 3-5 years.
Year 4-5 is alternative platform steady-state with full VMware decommissioning. This is where you finally realise full annual savings.
Use 5-8% discount rate to calculate NPV. A euro in Year 5 is worth less than a euro in Year 1.
Your checklist includes licensing, support, hardware, migration, training, tools, downtime, productivity, and consultant fees. Account for consolidation savings and automation benefits.
Run three scenarios: best case (on schedule, no blockers), expected case (typical delays, overruns), worst case (technical challenges, scope expansion, extended dual-platform).
Non-financial considerations matter too. Feature parity gaps, vendor stability, community support, future flexibility. As one advisor notes, evaluate whether you’re “gaining strategic capabilities (cloud-native development, AI/ML) where the ‘cost’ includes value of new capabilities”.
Your total cost comparison shows cumulative 5-year costs including migration investment, operational costs, hidden costs, and opportunity costs. This number—not break-even alone—determines if migration makes sense. For a complete overview of the VMware migration landscape and how TCO analysis fits into your broader decision framework, see our comprehensive VMware exodus guide.
FAQ Section
How much does enterprise support actually cost for VMware alternatives?
Proxmox VE: 110 EUR/year (Basic, 8×5 response) to 1,495 EUR/year (Premium, 24/7 response) per node. XCP-ng: 340 EUR/year (Starter) to 1,020 EUR/year (Premium) per node.
Compare this to VMware VCF bundling where support is included but you’re paying for the entire stack. For budgeting, multiply per-node costs by host count and select support tier matching your SLA requirements.
What financial mistakes do companies make when calculating migration costs?
The big one is underestimating hidden costs by 30-50%, particularly productivity loss (20-30% efficiency reduction for 6-12 months), tool replacement, and extended timelines (3-5 years instead of planned 12-18 months).
Companies overlook compliance revalidation, DR re-certification, downtime impact, and consultant dependency. Conservative budgeting requires 20-30% contingency.
Is migrating from VMware worth it financially after considering all costs?
Calculate break-even: (Total Migration Costs) ÷ (Annual VMware Savings – Annual Alternative Costs). That European case we mentioned showed 5.6 month break-even (180K migration versus 385K annual savings)—financially compelling.
However, Type 2 customers face 200K-350K EUR costs and 36-48 month break-even, which might actually justify staying despite higher costs. If break-even exceeds 24 months, you need to factor in technology risk and strategic considerations.
How do I calculate downtime costs during migration?
Formula: (Hourly Revenue ÷ Operating Hours) + (SLA Penalty Rate × Breach Hours) + (Customer Churn Impact). 10M EUR annual revenue = 1,142 EUR/hour loss.
Add in SLA penalties (5-10% monthly credit per breach hour) and customer impact (2-5% churn increase per outage). Well-planned migrations incur 4-8 hours downtime. Include these in your budget and communicate windows to stakeholders.
Can I negotiate better VMware renewal pricing using alternatives as leverage?
Yes, but effectiveness varies by size. Use competitive alternatives (Proxmox quotes, Nutanix proposals, cloud estimates) to demonstrate exit options. Insist on shorter contracts (1-2 years), staged commitments, à la carte licensing (though Broadcom increasingly refuses).
Larger customers (500+ VMs) get better success. Smaller customers (50-200 VMs) get minimal flexibility—prepare for actual migration.
What is the difference between Type 1 and Type 2 customers for migration planning?
Type 1: platform-abstracted automation, minimal VMware integrations. 80K-120K EUR for 100 VMs, 12-18 month break-even. Type 2: deep VMware integration (Site Recovery Manager, NSX), operating model transformation required. 200K-350K EUR, 36-48 month break-even.
Can you provision VMs via Terraform/Ansible? You’re Type 1. Need vRealize workflows and NSX policies? You’re Type 2.
How long does a typical VMware migration take for a mid-sized company?
SMBs (50-500 employees, 100-500 VMs) need 12-36 months.
Type 1: 12-18 months (2-3 months planning, 2-3 pilot, 6-9 production, 2-3 optimisation).
Type 2: 24-36 months (3-6 assessment, 3-6 redesign, 12-18 migration, 6-9 optimisation).
Budget for dual-platform costs throughout—you’re paying both VMware and your alternative simultaneously until final cutover.
Should I use automated migration tools or manual migration?
Automated tools: 50K-200K EUR, reduce timeline, minimise errors, scale for 50+ VMs. Manual: 400-800 hours for 100 VMs at 4-8 hours per VM.
Tools pay off at 50+ VMs. Below that, manual is cost-effective. Consider a hybrid approach: automated for commodity workloads, manual for complex systems requiring validation.
What are the ongoing operational costs after completing VMware migration?
Steady-state costs (Year 4-5) include platform support (Proxmox 110-1,495 EUR/year/node, XCP-ng 340-1,020 EUR/year/node, or Nutanix licensing), management tools (backup, monitoring, automation), continuous training, and hardware refresh (4-5 years).
Open-source trades higher licensing costs for increased staffing (Linux/KVM admins cost 10-20% more). Enterprise alternatives provide familiar models but moderate savings versus open source.
How do cloud migration costs compare to on-premises VMware alternatives?
Cloud (AWS, Azure, Google) eliminates infrastructure costs but introduces variable consumption that often exceeds VMware for stable workloads. IaaS VMs run 2-4× higher over 3-5 years due to compute, storage, and egress fees.
However, cloud provides elasticity, eliminates refresh cycles, and accelerates cloud-native transformation. Hybrid makes sense: predictable workloads to on-premises alternatives (Proxmox, XCP-ng), variable workloads to cloud.
What vendor lock-in risks should I consider when choosing VMware alternatives?
Avoid replacing VMware lock-in with new dependencies. Open-source (Proxmox, XCP-ng) provides maximum flexibility: full functionality, optional support, platform-agnostic automation enables future changes.
Enterprise alternatives (Nutanix, Hyper-V) introduce moderate lock-in: proprietary interfaces, vendor APIs, commercial dependencies. Mitigate by maintaining platform-abstracted automation, avoiding deep vendor integrations, documenting decisions, and reassessing relationships every 3-5 years.
How should I calculate the opportunity cost of migration versus staying?
Formula: (Migration Capital × Expected Return Rate) + (Team Hours × Fully-Loaded Cost × Alternative Value).
Example: 180K EUR migration could fund product development generating 15-20% return (27K-36K EUR/year opportunity cost). Those 2,000 hours could deliver revenue features.
Include in TCO: if break-even shows 12-month payback but opportunity costs add 30K EUR/year, real break-even extends to 16-18 months. Balance cost savings against opportunity costs and capacity constraints.
