Audit Risks Under Broadcom’s VMware Licensing: How to Stay Compliant

Audit Risks Under Broadcom’s VMware Licensing: How to Stay Compliant

Broadcom’s acquisition of VMware has radically changed VMware’s licensing and compliance landscape.

Audit risks are increasing under Broadcom’s VMware licensing model, as the company encourages customers to adopt new subscription terms and strictly enforces compliance with these terms.

Global IT, procurement, and finance teams must adapt quickly to avoid costly audit surprises from Broadcom.

This executive brief highlights why VMware license audit exposure is increasing and how enterprises can maintain VMware compliance through proactive management.

Broadcom’s VMware Licensing Shake-Up Raises Compliance Stakes

Broadcom’s takeover of VMware brought an overhaul of licensing rules almost overnight.

Insight: VMware’s traditional perpetual licenses were discontinued in favor of subscription-only deals, often tied to CPU core counts and multi-year commitments. Prices jumped significantly – for example, some enterprises saw support renewals triple when forced into new bundles.

Scenario: A multinational bank planning its IT budget expected a routine VMware renewal. Instead, after the acquisition, they faced a new subscription quote 30% higher with stricter terms.

Caught off guard, they considered pausing support on non-critical systems to cut costs. Within weeks, they received a stern notice warning that letting VMware support lapse could violate licensing agreements.

Takeaway: Understand the new rules of the game. Broadcom’s VMware licensing changes mean higher costs and zero tolerance for flexibility.

Enterprises should anticipate these shifts in advance and budget for increased subscription fees, and avoid “going dark” on support.

Any attempt to use VMware licenses outside Broadcom’s prescribed terms (like running old licenses without support) now carries real compliance risk.

Aggressive Audits: The New Normal Under Broadcom

Insight: Broadcom has a reputation for strict license enforcement, and VMware is now no exception.

Under VMware’s previous management, audits were relatively infrequent and customer-friendly.

Broadcom, however, treats VMware like a high-value asset to be tightly controlled – similar to how Oracle or IBM audits their biggest clients.

Scenario: An international manufacturing firm learned this the hard way. Soon after Broadcom took over, it received an unexpected request for a VMware license audit.

The audit uncovered that their virtualization team had activated vSphere on a dozen more CPU sockets than they had purchased licenses fo,r a gap that had gone unnoticed internally.

Broadcom’s auditors pressed for an immediate true-up purchase, resulting in millions of dollars in unplanned spending.

In another case, a tech company that let its VMware support expire received a cease-and-desist letter within days, threatening legal action if it applied any product updates or patches without a new subscription.

Takeaway: Assume a Broadcom audit is coming sooner rather than later. This is the new normal. Enterprises must prepare by thoroughly reviewing their deployments and entitlements now.

Every VM cluster, host, and license key should be accounted for. If you find you’re using more than you bought or using software in ways not covered by your contract, fix it before Broadcom knocks.

Being proactive can turn a potential seven-figure compliance crisis into a manageable true-up on your terms.

Common VMware Compliance Pitfalls and Audit Triggers

Even well-intentioned IT teams can slip into non-compliance under Broadcom’s tighter regime. Insight:

The most common audit triggers include untracked growth, misunderstood license metrics, and contract lapses.

Scenario:

A retail conglomerate expanded its VMware environment over a busy year – adding new hosts and enabling advanced features like vSAN and NSX. But procurement was unaware that the added CPU cores and features weren’t covered by their original licenses.

When Broadcom’s audit arrived, it quickly flagged “unauthorized” use of these components.

Similarly, a healthcare organization discovered that using VMware’s free ESXi hypervisor in a test lab alongside a licensed vCenter rendered their setup unlicensed in Broadcom’s eyes – a nuance they hadn’t caught until an audit was looming.

Takeaway: Be aware of the potential landmines.

Key pitfalls to avoid include:

• Unlicensed capacity creep: Adding hardware (CPUs, cores, clusters) without buying matching licenses.
• Feature drift: Using features or products (like vSAN, NSX, or Tanzu) not included in your purchased edition.
• Support lapse: Allowing support or subscriptions to expire but continuing to use the software (especially applying updates or patches) – a guaranteed audit trigger under Broadcom.
• Mergers & acquisitions: Inheriting VMware environments via M&A without aligning licenses can expose you to immediate non-compliance.

Third-Party Support VMware When Cost Increases

Audit Triggers vs. Mitigation Strategies

Each trigger above is a red flag that could invite a VMware license audit.

Mitigate them by implementing strict change management for licenses: whenever IT adds capacity or introduces new VMware features, loop in asset management and procurement to assess the compliance impact.

Keep proofs of entitlement (contracts, license keys, support renewals) well-documented so you can quickly demonstrate your rights.

Navigating Contract Pitfalls Under Broadcom

Insight: Broadcom’s VMware contracts come with tighter terms that can unknowingly increase audit risk if not managed. Key pitfalls include mandatory multi-year agreements, auto-renew clauses, and broad audit rights in the fine print.

Scenario:

A global manufacturer entering a new Enterprise License Agreement (ELA) with Broadcom discovered the contract disallowed any reduction in licenses during the term – even if they downsized their data center.

If they virtualized fewer servers, they’d still have to pay for the original core count, or risk non-compliance. In another case, an energy company failed to meet the notice period to cancel an auto-renewing support contract.

They were locked into another year of payments, and any attempt to quietly drop usage would have breached terms, potentially sparking an audit.

Takeaway:

Scrutinize every clause when negotiating VMware deals with Broadcom. To stay compliant and agile:

• Negotiate audit terms: Seek reasonable audit frequency and notice provisions to ensure a mutually beneficial agreement. While Broadcom likely won’t remove audit rights, you can at least define a process (e.g., 30-day notice, audits not to disrupt operations).
• Watch multi-year commitments: Understand that a 3- or 5-year term means you’re committing to maintain certain usage levels (and costs). If flexibility is important, consider negotiating the ability to adjust downwards or include a mid-term checkpoint.
• Manage auto-renewals and deadlines: Track all renewal dates to ensure timely payments. If you plan to change your licensing approach or consider alternatives, please provide Broadcom with the required notice well in advance to avoid any unwanted extensions.
• Preserve special entitlements: If you had prior VMware contract benefits (such as unlimited deployment rights or special bundles), ensure that Broadcom acknowledges them in writing. For example, if you previously had a vCloud Suite bundle, clarify how those components are licensed now to avoid “double-paying” for something you already own rights to.

By handling these contract elements proactively with your legal and sourcing teams, you prevent many compliance issues before they start.

A well-negotiated contract can limit surprise price hikes and provide clarity on what is permitted – so you’re less likely to get caught out in an audit.

Proactive License Management: Your Best Defense

Insight: The most powerful tool against audit risk is a strong internal Software Asset Management practice.

Treat VMware under Broadcom as you would any Tier-1 software vendor: continuous monitoring, governance, and executive attention are required.

Scenario:

A global pharmaceutical company avoided a potentially unfavorable audit outcome by instituting quarterly internal compliance reviews for all VMware deployments.

Their IT asset team tracked every license key, matched it to active hosts, and even conducted “mock audits” to ensure records accurately reflected reality.

When Broadcom eventually initiated a review, the company confidently provided a complete license inventory and deployment evidence, satisfying the auditors with no findings.

In contrast, a financial services firm that neglected license management scrambled when an audit hit they, spending weeks pulling logs and purchase records, during which Broadcom’s patience wore thin and penalties loomed.

Takeaway: Make VMware compliance a habit, not a fire drill. Concretely:

• Regular internal audits: Schedule routine self-audits (e.g., twice a year). Verify that the number of active VMware hosts and cores in use matches what you’re entitled to. Check that only licensed features are enabled.
• Use SAM tools: Leverage software asset management tools or VMware’s reporting features to get accurate usage data. Tools can alert you if, say, you spin up a new ESXi host without a license or exceed your purchased core counts.
• Cross-functional oversight: Involve IT operations, procurement, and finance in a governance committee for VMware licensing. This ensures any infrastructure change that could affect licensing is evaluated for compliance and budget impact beforehand.
• Train and communicate: Educate your virtualization admins on the importance of staying compliant. Simple steps, such as not deploying an extra host without approval, can save huge headaches. Equally, procurement should be aware of including license checks in any hardware purchase or project plan.

A proactive stance turns compliance into a strength. You’ll catch issues early, optimize license usage (often saving money), and negotiate with Broadcom from a position of data and confidence.

The goal is to never be surprised by your environment – when you know exactly where you stand, even if an audit comes, you’re ready.

Recommendations

• Form a VMware Licensing Task Force: Establish a team responsible for VMware license governance. Include IT asset managers, procurement, and technical leads to monitor usage and plan for renewals.
• Keep Support Active (If Possible): Avoid letting VMware support contracts lapse. If budget pressures arise, consider scaling down usage or exploring third-party support rather than running software in an unsupported state that risks legal notices.
• Baseline and True-Up Proactively: Regularly reconcile your VMware deployments against entitlements. If you find you’re over-using (or under-using) licenses, address it proactively – buy additional licenses or re-harvest unused ones – before Broadcom’s audit team does it for you.
• Negotiate Audit and Compliance Protections: When entering into a new contract or renewing an existing one, negotiate provisions such as the audit notice period, cure period for any compliance issues, and caps on backdated fees. Having these in writing can soften the impact of any future audit findings.
• Document Everything: Maintain a centralized repository of VMware license proof-of-purchase, contracts, and deployment records. In a compliance review, quick access to documentation can resolve questions before they escalate.
• Leverage Broadcom Account Management: Proactively engage with your Broadcom/VMware account manager. Request clarification on any license changes or new regulations. Sometimes, they can provide tools or scripts to help monitor compliance – take advantage of those resources.
• Consider Alternative Strategies Cautiously: If VMware costs become unsustainable, you might evaluate alternatives (cloud services, other hypervisors). Use this as leverage in negotiations, but ensure that any migration plan is fully developed; an incomplete switch could leave you paying both Broadcom and the alternative vendor, as well as potentially exposing compliance gaps.

Checklist: 5 Actions to Take

1. Inventory Your VMware Environment: Immediately create a detailed inventory of all VMware products in use (e.g., vSphere, vCenter, vSAN), including version, edition, and the hardware (e.g., CPU cores) on which they run. Identify the licenses you currently hold and any gaps.
2. Review Contracts and Policies: Pull out your VMware license agreements and support contracts. Note key terms, such as audit clauses, support end dates, and any special conditions. Make sure you understand Broadcom’s updated licensing policies (e.g., core-based counts, required minimums).
3. Address Quick Wins: Resolve any obvious compliance issues immediately. This could mean purchasing a few extra licenses for the new host cluster, turning off a feature that you accidentally enabled without a license, or consolidating workloads to stay within the licensed capacity.
4. Engage Stakeholders: Brief your CIO, CFO, and relevant department heads on the new VMware licensing reality. Secure their support for necessary actions – whether it’s budget for true-ups or approval to explore alternative solutions. Align everyone on the importance of staying compliant to avoid audit surprises.
5. Plan Your Long-Term Strategy: Develop a roadmap for the next 12–24 months of VMware usage. Include expected growth (and required licenses), upcoming contract renewals, and possible transitions (like cloud migration or different vendors if needed). Having a strategic plan ensures you won’t be cornered into last-minute, high-cost decisions by Broadcom’s timeline.

FAQ

Q: How has VMware licensing changed under Broadcom?
A: Broadcom moved VMware to subscription-only licensing and counts usage by CPU cores (with high minimums per CPU). Perpetual licenses can no longer be purchased, and support renewals are more stringent. The result is higher ongoing costs and reduced flexibility compared to before.

Q: Are we likely to face a VMware license audit now?
A: Broadcom has signaled a much tougher stance on compliance. If you’re a VMware customer, you should expect an audit or license review in the next year or two. Assume it will happen and prepare accordingly, rather than hoping to avoid it.

Q: What can we do to avoid penalties in a VMware audit?
A: The best approach is to prevent issues before an audit. Keep your deployment strictly within the scope of what you’ve licensed. Conduct regular self-audits and address any shortfalls by purchasing additional licenses or adjusting usage as needed. If audited, be transparent and promptly provide the records to show compliance or outline a remediation plan.

Q: Can we still use our old VMware licenses without paying for support?
A: You can use software versions you’ve already bought perpetually, but if your support has expired, you’re not entitled to upgrades or patches. Broadcom is actively enforcing the removal of any updates installed after support ended. Running without support also means no help if issues arise – and it puts you on Broadcom’s radar. It’s safer to either renew support, transition to a subscription, or have a clear plan to phase out that software.

Q: How should we handle VMware contract negotiations with Broadcom now?
A: Go in well-prepared. Know your current usage and what you need. Start early – ideally, many months before the renewal date. Focus on negotiating terms that give you some flexibility (like price protections, the ability to adjust volumes, and reasonable audit provisions). Benchmark the pricing to ensure the quote is fair, and don’t be afraid to ask for concessions, especially if you’re committing to a multi-year deal. If you have alternative platforms or a plan B, politely make it known – it can improve your bargaining position without overtly threatening to leave.

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