VMware will lose a significant chunk of business over the next three years, according to Gartner research VP Julia Palmer.
Of course, some organizations have already abandoned VMware or are plotting partial or total migrations. Broadcom acquired the virtualization business in November 2023 and made sweeping changes that alienated many customers. The biggest concerns have been higher costs driven by a shift from perpetual licenses to subscriptions and the bundling of products into fewer, more expensive SKUs and a reduction in the number of channel partners that are allowed to resell VMware technologies. The new VMware business model favors large organizations, forcing many small- to medium-sized businesses to explore alternatives.
However, the wave of departures that Palmer spoke of today at Gartner’s IT Symposium in Gold Coast, Australia, comes from customers who use VMware technology through hyperscalers, like Amazon Web Services (AWS), as reported by The Register. Soon after its acquisition, Broadcom made it so that hyperscalers are unable to resell VMware subscriptions to customers using hyperscaler cloud services that rely on VMware. Because of this change, 35 percent of VMware workloads will migrate elsewhere by 2028, Palmer predicted, noting that hyperscalers will push their customers to the public cloud.
In a June 2024 blog post, VMware said the changes around selling VMware licenses for hyperscaler cloud environments are about ensuring consistency and driving customer “flexibility and choice.” The move also pushed more customers to buy VMware from Broadcom directly, giving Broadcom a bigger piece of the deal.
During Gartner's event, Palmer posited that Broadcom’s VMware doesn’t view hyperscalers as strategic partners and vice versa. AWS took issue with Broadcom disallowing AWS and its channel partners to resell VMware Cloud on AWS, telling CRN in May 2024 that it was “disappointed” by the news. Still, hyperscalers, including AWS, have remained interested in doing business with VMware end users "because they know over time they will convert you to 'proper cloud,'" Palmer said.
Palmer also offered opinions on VMware migrations, which companies have described to Ars as being costly and time-consuming, especially for organizations that have limited manpower or are managing other big IT projects. Considering the lack of true VMware competitors, Palmer recommended partial migrations, which she said should take less time (up to a year) than total migrations, (which she pegged as taking at least three years).
“We are all addicted to hypervisors, and that needs to change,” Palmer said.
Despite losing customers, VMware is driving revenue for Broadcom, thanks to the company’s new focus on subscriptions, bundles, and higher prices. In its most recent earnings report, Broadcom reported that infrastructure software revenue, which is mostly driven by VMware, grew 25 percent year over year to $6.6 billion.
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