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 keen 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