CIO Playbook: Negotiating VMware ELA Contracts in the Broadcom Era

The New VMware Licensing Landscape After Broadcom’s Acquisition

Broadcom’s acquisition of VMware has significantly altered its licensing model and pricing strategy.

VMware was once known for its relatively customer-friendly terms, including flexible license options, perpetual licensing with annual support, and a broad product catalog.

Read more about Broadcom Negotiations.

Under Broadcom, global licensing policies have shifted to a more rigid, high-cost model.

Key changes include:

• Subscription-Only Licensing: Broadcom has eliminated new perpetual licenses and support renewals, moving all VMware software to subscription-based licensing. Customers can continue running their existing perpetual VMware products, but to receive updates or support, they must transition to subscription agreements when their current contracts expire. In effect, VMware licensing now resembles a cloud or subscription service – you pay continuously or risk running software that is no longer supported.
• Simplified (and Bundled) Product Portfolio: VMware’s numerous SKUs (around 160 products and editions) have been consolidated into a few bundles. VMware, now owned by Broadcom, focuses on four main offerings rather than numerous standalone products. For example, rather than licensing vSphere, vSAN, NSX, and other components separately, Broadcom offers bundled suites that include multiple components (often more than an organization uses). The primary bundles introduced are VMware Cloud Foundation (VCF), VMware vSphere Foundation (VVF), vSphere Standard (VVS), and vSphere Essentials Plus. Advanced capabilities, such as extra storage, networking, or cloud management tools, are available only as add-ons or in the highest bundles. This means customers often pay for features they don’t need or risk losing functionality if they choose a lighter bundle.
• New Licensing Metrics and Requirements: Licenses are now metered by CPU core (with a minimum of 16 cores per CPU), replacing the previous per-CPU model. This change can increase costs for smaller servers since even a 4-core processor is counted as 16 cores for licensing purposes. The mandatory 16-core floor results in a higher baseline cost and additional cores scale the price linearly. Combined with subscription pricing, this per-core model has led to significant cost increases for many. (For example, some organizations have reported 5× to 12× increases in annual VMware costs when moving from their old contracts to Broadcom’s subscription bundles.) Broadcom also enforces policies, such as 20% penalties for late renewals, pressuring customers to sign on time or face additional surcharges.
• Rigid Pricing and Reduced Discounts: Under VMware’s previous regime, enterprise license agreements (ELAs) often came with steep discounts, flexible terms, and renewal price protection – especially for loyal customers or those who consolidated their spending. Broadcom has taken a much tougher line on pricing. List prices have risen significantly, and discounts are more limited. Deals that might have previously received 50% off may now see much smaller discounts or none at all for smaller deals. Broadcom’s sales teams have been mandated to maximize revenue, even if it means pushing customers to the brink. In one case, a university’s VMware renewal quote increased from around £40,000 to £500,000 annually due to the new pricing structure – a 1,250% increase that strained its budget. Such hikes force CIOs to secure much larger funds or consider scaling back VMware usage.
• Focus on Large Accounts & Direct Sales: Broadcom has reorganized VMware’s sales and partner strategy. Approximately 1,500–2,000 of VMware’s largest “strategic” customers are now managed directly by Broadcom, removing the third-party reseller from the equation. These large clients must negotiate directly with Broadcom, which often means a tougher stance and fewer intermediaries advocating for the customer. Smaller customers can still buy via partners, but Broadcom has pruned the reseller network, cutting many smaller VARs and requiring customers to work with Broadcom’s chosen top-tier partners. This shift reduces the personalized support and advocacy many VMware customers were used to. It also means fewer channels to shop around for a better quote – Broadcom largely dictates pricing. Additionally, without a friendly reseller to buffer relations, customers fear a greater risk of strict compliance enforcement, including audits, if they don’t adhere to the license terms.
• Support and Product Changes: Broadcom’s cost-cutting and portfolio simplification have also impacted support and product availability. Standard support offerings have been slimmed down for some, and certain VMware products have been discontinued or sold off (for example, some desktop and cloud management tools were spun off or planned for end-of-life). Many features that were once part of base VMware editions are now only available in the higher bundles or require separate subscription add-ons. For instance, vRealize Suite (now VMware Aria) components and NSX network virtualization – often critical to enterprise private clouds – may not be included unless you opt for the most comprehensive (and expensive) bundle, such as VCF. If customers aren’t careful, they could sign a new ELA and later discover that a key component (e.g., NSX or advanced automation tools) was not included due to the new bundling structure. Such “surprise unbundling” is a real risk if contracts are not crystal clear on what’s included.

VMware Licensing: Before vs. After Broadcom Acquisition

What CIOs Should Do Next: In light of this new reality, CIOs must immediately educate their teams and recalibrate their VMware strategy.

Key initial steps include:

• Analyze the Impact on Current Licensing: Conduct an internal review of your existing VMware licenses, support contracts, and Enterprise Licenses Agreements (ELAs). Identify which ones will be affected by Broadcom’s changes (e.g., which perpetual licenses will lose support at expiration, which products you use are being bundled or discontinued). This “licensing impact assessment” will reveal potential compliance gaps or cost increases you must address.
• Update Budget Projections: If you haven’t already, forecast the financial impact of Broadcom’s pricing model on your IT budget. Assume higher annual costs – potentially significantly higher. Engage your finance team early to explain that maintaining the same VMware footprint may require materially more budget going forward. Setting expectations now is better than facing sticker shock at renewal time.
• Communicate with Stakeholders: Brief your IT leadership and relevant business stakeholders on these industry changes. Application owners, infrastructure managers, and procurement officers should all understand that VMware licensing is becoming more stringent. This context will prepare them for upcoming discussions around possibly adjusting project plans, re-architecting solutions, or approving large license expenses.
• Reach Out for Guidance: Start gathering external intelligence. Connect with independent licensing advisors or user community groups to learn how others cope. For example, public-sector CIO forums or research from firms like Gartner and specialized licensing consultancies can provide benchmarks and negotiation tips. Knowing how peer organizations respond (some may be considering alternative platforms or negotiating creative deals) can inform your strategy.

Scenario 1: Renewing an Existing VMware ELA Under Broadcom’s Terms

Many enterprises have legacy VMware Enterprise Licenses (ELAs) that were signed prior to the Broadcom acquisition.

These multi-year agreements often granted broad rights (sometimes unlimited deployments of certain products or large bundles with attractive discounts) and might have been structured around VMware’s old licensing model.

If you are currently under a VMware ELA that is due for renewal, expect a significantly different experience this time around.

Renewal under Broadcom effectively means negotiating a new deal from scratch that is aligned with Broadcom’s subscription model and pricing.

Key considerations for ELA renewals:

• No “Status Quo’ Renewal: Under VMware’s previous ownership, renewing an ELA might have been as simple as extending the term with the same terms and pricing. Now, Broadcom is not simply extending old ELAs on the same terms. In most cases, they will present a new contract aligned with the new bundles and pricing. CIOs should be prepared for significant changes in contract structure and costs. For example, suppose your original ELA granted you perpetual licenses for vSphere, NSX, and vRealize Suite with a 20% discount and fixed support rates. In that case, the renewal offer may convert all those licenses into a 3-year subscription to “VCF” (which includes those components) at the current list price minus a much smaller discount. Even if you had a steep discount before, Broadcom might view that as a one-time concession and attempt to reset pricing to its new standard.
• Transitioning Perpetual Entitlements: Determine what happens to any perpetual licenses you obtained under the expiring ELA. Many VMware ELAs allowed customers to true-up or receive license grants that became perpetual at the end of the term. If you have such entitlements, you technically retain the right to use that software perpetually. However, Broadcom has clarified that support and upgrades for those perpetual licenses will end. In practice, if you want the latest version or any patches after your ELA expires, you must include those environments in the new subscription. One strategy is to utilize existing perpetual licenses in less critical environments without support (to reduce costs) while migrating mission-critical systems to subscriptions. But this carries a risk – unsupported software can be a security and operational liability. Most organizations will fold all important VMware deployments into the new ELA and treat any leftover perpetual assets as contingency or for lab use only.
• Higher Renewal Costs (Budget Early!): Plan for a budget increase at renewal – possibly a very large one. As noted, many customers have seen proposals that are multiple times their previous spending. Before the ELA end date, engage your finance leadership to explain why “keeping VMware” may require a significant one-time increase or a longer-term commitment. Running scenarios is useful: e.g., “If we renew for three years under Broadcom’s model, it will cost $X (a Y% increase over the last term). If we choose not to renew, we will lose support on these systems, which has its costs/risks.” By quantifying this, you can justify your budget request or explore trade-offs (such as dropping certain non-critical components to save money). Do not wait until the last minute to secure funding approval – Broadcom is known to impose tight deadlines, and you don’t want internal budget bureaucracy to force you into an unfavorable lapse or emergency deal.
• Map Your Current Usage to New Bundles: A renewal negotiation should begin with a comprehensive inventory of what your organization currently uses under the existing ELA. Catalog the VMware products, editions, and quantities in use. Then, map each to Broadcom’s new portfolio. For instance, if under your current ELA, you have 100 CPUs of vSphere Enterprise Plus, 50 CPUs of vSAN, and 20 of NSX Data Center, the analogous Broadcom offering might be a certain number of core licenses of VMware Cloud Foundation (which bundles all three). Or perhaps you only heavily use vSphere and vSAN, but not NSX – in that case, the vSphere Foundation bundle (which includes vSAN but not NSX) might be sufficient for some parts. This mapping exercise is crucial, as it allows you to identify whether any capability will be lost or unbudgeted. It also positions you to resist buying things you don’t need. For example, if you never deployed NSX under your last ELA, you could argue for a renewal that excludes NSX (perhaps using a vSphere + vSAN bundle), so you’re not paying for unused software.
• Identify and Preserve Special Terms: Review your expiring contract for any custom clauses or special pricing that you previously negotiated. Common examples include a capped annual increase in support, the right to carry over unused licenses or transfer them to the next term, or special deployment rights across subsidiaries. Assume that Broadcom’s standard renewal proposal will not include these favorable terms. It’s up to you to bring them up and insist on their inclusion. If, for instance, your previous ELA allowed a 10% growth in license count at no additional cost (a not-uncommon benefit in ELAs), you should attempt to negotiate a similar cushion or at least ensure that any additional licenses you might need mid-term come at the same discounted rate. Be explicit about carrying forward any volume discount you had – if you got 45% off last time due to volume, argue that your environment hasn’t shrunk (it may have grown), so that discount level is still justified. Document these must-have legacy terms and include them in your negotiation checklist.
• Expect a Push Toward Multi-Year Subscription Deals: Broadcom is likely to encourage multi-year ELAs (three years or more) rather than short renewals. This is to lock in your commitment, but it can also benefit you by providing price stability. If your organization can commit for a longer term, you might be able to leverage that for better terms: “We’re willing to sign a 3-year agreement now, but in return, we need a guarantee of no price increases and an X% discount locked in.” Many CIOs renewing now opt for a longer term, specifically to avoid even higher prices in years 2 and 3. Broadcom’s price trajectory is upward, so locking today’s three-year terms can hedge against further hikes. Just be cautious not to overcommit – if you suspect your VMware usage might drastically drop in a couple of years (due to cloud migration, for example), a shorter-term contract or an escape clause for reduced usage would be a wiser choice.
• Renewal Timing and Penalties: Broadcom has implemented strict policies, including a 20% surcharge for renewing lapsed support. Ensure you initiate the renewal process well in advance to avoid your ELA from lapsing. Ideally, begin discussions at least 6–12 months before expiration (12+ months ahead for large environments). This lead time gives you room to negotiate without a service interruption deadline. If Broadcom knows your back is against the wall (time-wise), you’ll have little leverage. Starting early also allows time to evaluate alternatives (should you decide to take a different path) and to coordinate co-terming if you have multiple contracts. Consolidating them all to renew at once can increase your bargaining power.
• Plan for Possible Service Gaps: Negotiations can drag on despite best efforts. If your ELA expiration date is approaching and you haven’t reached an agreement, consider interim measures. Broadcom is not known for easily granting short-term extensions. Still, it’s worth asking for a 3-6 month support extension (perhaps at a prorated cost) to complete negotiations, especially if you demonstrate that you are evaluating the complex new terms. If Broadcom refuses, one fallback some organizations use is to temporarily engage a third-party support provider for VMware. Firms like Rimini Street and Park Place offer support for VMware products. While this third-party support cannot provide new software versions, it can help keep you covered in the short term with troubleshooting and critical patches. This is not ideal for more than a year, but as a stopgap, it prevents your infrastructure from being unsupported while you sort out a deal or migrate. Knowing you have this safety net can also reduce pressure to accept a bad deal under a deadline.

What CIOs Should Do Next (ELA Renewal):

• Form a Renewal Task Force: Assemble a cross-functional team (IT, procurement, finance, legal) dedicated to the VMware ELA renewal. Assign roles – e.g., the IT team gathers usage data and defines requirements, procurement and contract specialists handle term negotiations, finance models the costs, and legal reviews the contract language. Start regular meetings before the expiration to track progress and address any issues.
• Engage Broadcom Early: Reach out to your VMware/Broadcom account manager at least a year in advance (for large enterprises) or six months or more (for mid-size organizations) to signal your intention to discuss renewal. Request their timeline and process. Early engagement puts you on Broadcom’s radar as a proactive customer and gives you insight into their stance. It also prevents the scenario of Broadcom sending a quote with a 30-day acceptance window at the last minute.
• Audit Your VMware Deployment: Before receiving Broadcom’s offer, conduct thorough research on your usage. Use VMware’s tools or third-party license management tools to inventory all deployed VMware software and the features being used. Reconcile that with what you’re entitled to under the current ELA. This data is your leverage to avoid overbuying. For example, if you find 500 vSphere licenses deployed but only 300 are actively used, you might negotiate for 300 in the new contract (or at least avoid paying for the extra 200). Document any unused products to credibly remove them from the renewal quote.
• Define Your “Negotiation Red Lines”: Clearly articulate what outcomes you need from the renewal. For instance: Must include support for X critical products; must not exceed Y% budget increase; must preserve right to use perpetual licenses A, B in dev/test; need the ability to add Z more hosts at a locked price if needed. These become your non-negotiables when talking to Broadcom. Having this clarity internally ensures you don’t concede something vital under pressure. Communicate these priorities to your executive sponsors (CIO and CFO), so they support you if tough decisions arise.
• Coordinate Co-Termination of Contracts: If you have multiple VMware contracts (perhaps past acquisitions left you with separate ELAs or regional agreements), plan to align them to co-terminate with this renewal. Broadcom is more likely to give concessions for a larger, consolidated deal. It also simplifies administration on your end. This might involve a short extension of one contract or early renewal of another, so they all align. The goal is one single ELA renewal negotiation that covers your whole enterprise, maximizing your volume leverage.

Scenario 2: Considering a New VMware ELA Post-Acquisition

Some organizations that never had a VMware enterprise agreement (or perhaps had one in the past) are now considering entering an Enterprise License Agreement (ELA) to simplify licensing management and lock in prices amid Broadcom’s rapid changes.

This scenario might apply if you buy VMware licenses à la carte (or through smaller deals) and find the new subscription model cumbersome to manage individually.

A consolidated ELA could bring predictability, but it also means committing significant spend under Broadcom’s terms. CIOs must evaluate this path carefully.

Key considerations for new ELAs:

• Weighing ELA vs. Ad Hoc Purchases: Under VMware’s legacy regime, some medium-sized customers avoided ELAs because standard pricing with perpetual licenses was manageable, and they valued the flexibility of buying only what they needed when needed. Now, with subscription-only and likely annual price increases, not having an ELA could expose you to continuously rising costs on each purchase and the administrative headache of multiple short-term subscriptions. An ELA (Enterprise License Agreement) typically involves a large upfront or committed spend covering a bundle of licenses over a period (e.g., 3 years), often at a discounted rate. Broadcom’s sales pitch for an ELA will be straightforward (“one contract for all VMware needs”) and may include a discount or incentive. You should compare the total 3-5-year cost of an ELA vs. a pay-as-you-go approach. If your environment is stable or growing, an ELA can yield savings and reduce procurement effort by avoiding the need to repeatedly buy incrementally, each with its negotiation. However, if you anticipate reducing VMware usage (due to cloud migrations or other platform changes), committing to a large Enterprise License Agreement (ELA) might lock you into paying for capacity you won’t use. Perform a cost-benefit analysis: forecast your VMware license needs for the next few years under both scenarios.
• Inclusion of All Needed Products: When structuring a new ELA, ensure it encompasses the full scope of VMware products your organization uses (or plans to use). Broadcom’s default bundles might not automatically include everything. For example, you may heavily use vSphere, vSAN, and NSX for software-defined networking in parts of your data center. In Broadcom’s lineup, full NSX capabilities are only in the top-tier bundle (VCF) or as an add-on. If you only sign up for, say, vSphere Foundation, you may later find that NSX is missing and requires an unexpected separate purchase. Likewise, consider management and cloud tools: do you use vRealize, Aria Operations, Automation, Log Insight, etc.? Those were historically separate licenses or part of management suites. Under Broadcom, some are integrated into bundles, while others may require an “Advanced Add-on Pack.” Review each major VMware component (compute, storage, network, management, EUC, etc.) and verify how it will be licensed in the new ELA. Specify in the contract which product components are included. Do not rely on assumptions or generic bundle names; list them explicitly. This prevents “surprise unbundling,” where you think you have a certain feature, but it isn’t explicitly stated in writing.
• Leveraging Trade-In Credits and Promotions: If you currently own a lot of VMware perpetual licenses with active support, use that as a bargaining chip for your new ELA. Broadcom has occasionally offered “license conversion” incentives to encourage customers to switch to subscription-based models. For instance, during the early transition, some customers were offered a discount of over 50% on the subscription price if they surrendered their perpetual licenses. In a new ELA negotiation, explicitly ask: “What credit or discount can you provide for our existing licenses of products X, Y, Z that we’ve already invested in?” While Broadcom may not volunteer it, they have reason to offer at least a one-time discount so that customers feel their past investment isn’t being completely discarded. Structure your ELA deal to include an up-front discount or service credit in recognition of the support value remaining on those perpetual licenses you will be dropping. Ensure any such incentive is documented (e.g., a reduced rate for the first term or a lump-sum credit). Act quickly if such promotions are available – Broadcom will likely phase out generous trade-in deals over time as more customers capitulate to the new model.
• Plan for Growth (but Don’t Overbuy): One advantage of an ELA is the ability to accommodate growth without constant re-negotiation. However, avoid the trap of grossly over-provisioning “just in case,” as that leads to shelfware. Analyze your growth projections: Are you opening new data centers, expanding into new cloud environments with VMware on Cloud, or rolling out more VDI (Horizon) that will require vSphere hosts? If so, quantify that (e.g., “We might need 20% more cores licensed over 3 years”). Negotiate flexibility for that growth. One tactic is to include a pre-agreed unit price for additional licenses added during the term. For example, your ELA could stipulate that any additional vSphere core subscriptions added within the next three years will be at the same per-core price (or discount percentage) as the initial allotment. This effectively serves as a price lock on expansion. It prevents Broadcom from gouging you on future needs once you’re tied into the ELA. Another approach: include true-down rights at renewal – perhaps you commit to a certain level now, but if, after a year, you see you overestimated, you can reduce the count for the subsequent years (this is rare, but some large customers negotiate a degree of elasticity, especially if they agree to a minimum spend floor).
• Evaluate Term Length and Renewal Protections: Determine the optimal term for the new ELA. Broadcom will push for multi-year (3 or 5 years). Three years is a common sweet spot – it provides medium-term stability without locking you too far into the uncertain future. Five years could yield a slightly better discount, but consider how unpredictable the tech landscape and Broadcom’s policies might be in five years. If you opt for a longer term, insist on renewal price caps or options. For example, negotiate an option to renew for an additional two years at a price increase of no more than X% or, if possible, a fixed price. Also, clarify what happens at the end of the term: do you have any carryover rights or a grace period? (Often, if an ELA ends and is not renewed, you might lose rights to continue using the software unless explicitly granted as perpetual, which Broadcom is unlikely to grant now. So you will be renewing or replacing it with something else.) Knowing the endgame can influence how you negotiate the start.
• Incorporate Key Contract Safeguards: Just as with renewing an existing ELA, a new ELA’s contract language should be scrutinized for flexibility and risk mitigation. Since you’re starting fresh, this is your chance to bake in protective terms from the outset. Some clauses to consider for your new agreement:
  • Deployment Flexibility: The right to interchangeably deploy your licensed software in any environment (on-premises or cloud). Broadcom has begun offering some portability, allowing licenses to be used on VMware Cloud on AWS or Google Cloud without requiring a double payment. Ensure your ELA explicitly allows you to move workloads to supported cloud platforms using your licenses and reassign licenses across your entire enterprise (without region or affiliate restrictions).
  • Product Changes Protection: A clause that states that if Broadcom discontinues or significantly modifies a product included in your ELA, you have the right to an equivalent product or credits. This is important given the ongoing portfolio shake-up. For example, suppose they later split a product out of the bundle and charge for it separately. Your contract should entitle you to continue using it without an extra fee, since it was part of your original agreement.
  • Price Hold on Renewals: As noted, seek a contractual cap on price increases if you renew or extend the ELA. Even something like “any renewal will not exceed a 5% price increase year over year” provides some predictability beyond the initial term.
  • Audit and Compliance Terms: Given Broadcom’s aggressive posture, negotiate the audit clause. Aim for reasonable notice (e.g., 30 days), no more than one audit every X years, and the right to remedy any shortfalls by purchasing needed licenses at discounted rates (instead of punitive back-charges). If you can’t get all that, at least be aware of the compliance terms so you can internally prepare strict license tracking.
  • Termination/Exit Clauses: A vendor rarely allows mid-term termination for convenience, but you might negotiate specific exit rights if Broadcom fails to meet certain obligations. For instance, if support quality drops below an agreed-upon SLA or a critical security issue isn’t patched according to the terms, you may have grounds to terminate or seek compensation. This may be tough to get, but even a performance credit system is something.
  • Preservation of Custom Terms: If during negotiation, Broadcom’s team agrees verbally to any special accommodations (e.g. “We will allow you 6 months of dual use of old and new versions during migration” or “We’ll grandfather your existing 50 NSX licenses outside the ELA for lab use”), get it in writing in the contract. Leave no room for ambiguity later. Broadcom will strictly adhere to the contract text, ensuring that all promises are clearly outlined and codified.
• Consider Phased Adoption: A new ELA doesn’t mean you have to deploy everything on day one. You might, for example, continue to run some environments on existing licenses for a while and migrate them into the ELA scope over the first year. Check if Broadcom can structure the ELA with a phased ramp-up, ramp credits, or deferred start for certain components. This way, you’re not paying full freight for NSX on day one if you don’t plan to implement it until month 12. They might bill it as part of the 3-year term, but only activate support when you’re ready. Be creative in asking for such flexibility.

What CIOs Should Do Next (New ELA Consideration):

• Inventory and Forecast Needs: Compile a comprehensive list of all VMware products across your organization, including their quantities, versions, and planned deployments over the next few years. Use this to define the scope of an ELA. Categorize items into “Must include in ELA,” vs. “Nice to have,” vs. “Not needed.” This will guide what you negotiate into the bundle and what can be left out to save cost.
• Engage Independent Experts: If you’re new to VMware ELAs, consider consulting independent licensing advisors not tied to VMware or Broadcom to help structure the deal. Firms experienced in VMware contracts can highlight common pitfalls, appropriate pricing benchmarks, and negotiation tactics specific to Broadcom. Their input can be invaluable in crafting an ELA with the right size and protective language. They can also validate if the discount being offered is truly competitive.
• Consult Peer Experiences: Reach out to other CIOs or IT procurement heads who recently entered VMware agreements under Broadcom through professional networks. Ask about their experiences: What worked? What do they wish they had done differently? Peer insight might reveal, for example, that Broadcom was willing to budge on one component but not another or that including a particular product early saved them a huge hassle later. Use these anecdotes to refine your negotiation plan.
• Scenario Plan Alternatives: Even if you are inclined to go with a VMware ELA, scenario-plan one or two alternative paths (for due diligence and leverage). For instance, what if we do nothing (just renew minimal needed subscriptions annually)? What if we partially shift some workloads to the cloud or another hypervisor instead of signing a large Enterprise License Agreement (ELA)? Evaluate the costs/benefits of these options. This exercise equips you with useful comparison points in negotiations to demonstrate to Broadcom that you have explored alternative routes. It also prevents tunnel vision; an ELA is a big commitment, and you want to be sure it’s the best strategy, not just the path of least resistance.

Key Negotiation Strategies for VMware ELAs in the Broadcom Era

Whether you’re renewing an ELA or signing a new one, the negotiation dynamics with Broadcom will likely be challenging.

Broadcom has a reputation similar to Oracle’s in the software industry—it employs hard-nosed sales tactics, is willing to leverage compliance risks, and is confident that customers have limited alternatives due to high switching costs.

As a CIO entering these negotiations, you must be extremely well-prepared, data-driven, and assertive. Below are essential strategies and best practices to employ:

Prepare Like You’re Negotiating with Oracle (Tough Vendor Mindset)

Approach Broadcom negotiations with the mindset that nothing will be given easily. Just as Oracle is known to maximize its advantage, assume Broadcom will exploit any lack of preparation on your side.

This means:

• Thoroughly understand your contractual obligations and their policies. Read the fine print of any proposal. Broadcom’s quotes might include onerous terms by default (e.g., strict payment timelines, auto-renewal clauses, audit rights). Be ready to challenge or amend these.
• Anticipate the “limited flexibility” stance. Broadcom representatives may say, “This is our standard, we can’t change it” – a tactic to get you to concede. Be aware that almost everything is negotiable if the deal size is substantial enough. Don’t accept boilerplate terms without pushing back, especially if they don’t meet your needs.
• Document everything. Like Oracle, Broadcom will hold you to the letter of the contract. Therefore, ensure that any negotiated exceptions or promises are documented in the paperwork. If a concession isn’t in writing, it effectively doesn’t exist.
• Be mindful of audit risks. Oracle is infamous for using license audits as a revenue tool; Broadcom could adopt similar practices for VMware. Enter negotiations from a compliance position: reconcile your deployments with your entitlements (proactively fix any under-licensing issues if found). This deprives them of an easy pressure point. If an auditor finds something, it’s better to know it first and address it during the deal (perhaps by including those licenses).

Scope and Right-Size Your VMware Estate Before Negotiating

As highlighted earlier, one of your strongest tools is a detailed knowledge of your VMware environment:

• Conduct a self-audit of VMware usage. Identify exactly which products and features you use and at what scale (e.g., how many hosts, cores, VMs, etc.). Determine if there are unused licenses or under-utilized deployments. For example, perhaps you have NSX deployed in only 2 out of 10 clusters, or you have 100 vRealize Operations licenses, but only 50 are being actively used. This information can inform a discussion about scaling back or choosing a smaller bundle for certain portions.
• Right-size your requirements. If your audit reveals inefficiencies (idle resources that still consume licenses), consider optimizing your VMware footprint before or during the renewal. Can some workloads be consolidated to require fewer hosts? Can test/dev environments be downsized or turned off when not in use (to reduce needed licenses under a subscription model)? Every core you can eliminate is a cost saved. Present Broadcom with a clear picture: “We need licenses for X cores of production and Y cores of dev, nothing more.” This prevents them from quoting based on your previous, possibly overestimated counts. It also signals that you won’t be paying for shelfware.
• Segment your environment for cost efficiency. You might not need the highest-end VMware features for all parts of your estate. Consider a tiered approach: critical workloads that require the full software-defined data center (SDDC) stack (vSphere, vSAN, NSX, advanced management) can be licensed with the top-tier bundle, whereas lighter workloads (such as a DMZ or branch office with basic VMs) may only require vSphere Standard. Broadcom’s sales might initially offer an “all or nothing” bundle for everything, but you can negotiate a mixed approach. For instance, agree to license 60 hosts with Cloud Foundation but only 40 hosts with vSphere Standard – to avoid paying for NSX/vSAN on those 40 hosts if not needed. Your usage data must drive this scoping and could dramatically save costs.
• Use data to counter upselling. Broadcom will naturally try to sell you on the value of having everything; their bundles assume you want the whole ecosystem. With usage data, you can firmly say, “We have not deployed Product X in three years, so we see no value in paying for it. Remove it or significantly reduce the price.” Data beats speculation in these talks.

Leverage Alternatives as Bargaining Chips

One of the few pressures you can exert on Broadcom is the explicit or implicit threat of moving away from VMware. While a complete switch is hard, demonstrating a serious evaluation of alternatives can soften their stance:

• Investigate competitor offers. Other infrastructure vendors and cloud providers are aware of Broadcom’s actions and are eager to poach disaffected VMware customers. Microsoft, for example, can position Hyper-V (or Azure Stack HCI) as an alternative. Red Hat promotes its KVM-based virtualization, which includes Red Hat Virtualization and OpenShift virtualization. Even Oracle has a KVM variant and would love to steal workloads from VMware. Public cloud services (AWS, Azure, GCP) offer native virtualization or VMware-as-a-service options. As CIO, ensure your team obtains quotes or estimates for what a migration to some of these would entail. It’s not that you will necessarily switch, but having a document that says, “Option B would cost us $X over 3 years,” provides a reality check in negotiations.
• Run pilot projects or proof-of-concepts on alternative platforms. If feasible, set up a small environment on an alternative platform (such as migrating a sample of VMs to Hyper-V or AWS). Not only do you learn the effort involved, but you can credibly tell Broadcom, “We have a test migration underway to the X platform for part of our workload.” That ups the ante – they know you’re willing to invest time and money to explore leaving, which means you are serious about requiring a fair deal.
• Use cloud migration as leverage. Many organizations are already moving some workloads to public cloud or container platforms. Highlight this in discussions: e.g., “Our strategy is to reduce on-prem VMware footprint by 30% over the next 2 years via cloud migration. So we are only interested in a deal for the capacity we will retain. Otherwise, we will accelerate the migrations.” This signals they stand to lose even more business if they don’t cooperate. Not wanting to lose the remaining 70%, Broadcom may offer concessions (such as shorter terms or better rates) to keep you on VMware for those workloads.
• Be ready to show your Plan B. In negotiations, you might explicitly present a scenario: “If we cannot reach an acceptable renewal, our plan B is to maintain our older VMware version for a year (with third-party support) while we migrate XYZ applications to an alternative platform. We have costed this; while not trivial, it is doable.” This isn’t posturing if you have indeed done the analysis. It tells Broadcom you won’t simply capitulate to any terms – you have an escape route, however painful. Even a partial plan can be effective, such as migrating a specific application to AWS or adopting a different virtualization for development and test labs. Often, Broadcom will calculate that giving a discount is preferable to motivating you to execute that exit plan in full.

Push for Multi-Year Commitments with Price Locks

Shield your organization from future price escalations by locking in terms now:

• Negotiate a multi-year deal instead of a one-year renewal. Broadcom is inclined to multi-year contracts anyway, and you can use that to your advantage. In exchange for a longer commitment and earlier revenue recognition, insist on fixed pricing throughout the term. For example, a 3-year ELA with an annual subscription cost of $X, fixed for years 1, 2, and 3. Broadcom has been offering small discounts for longer terms – secure that, but the bigger win is insulating your budget from the notorious Broadcom yearly price hikes.
• Include price caps for any extensions or renewal options. If you agree to a 3-year term, consider negotiating an option to extend by 1-2 years at a predefined price (or, at worst, a cap such as “no more than a 5% increase” at extension). This provides some predictability if you aren’t ready to fully exit VMware after three years and need a bridge.
• Lock pricing for anticipated growth. As mentioned earlier, if you foresee adding additional capacity (cores or hosts) during the term, include those unit prices in the contract. For instance: “Customer may purchase additional licenses coterminous with the ELA at a rate of $Y per core” (perhaps tied to the same discount level as the initial purchase). This way, expanding your environment won’t blow the budget unexpectedly. Broadcom might counter with limits (e.g., up to 20% growth at a locked price), which is still better than nothing.
• Avoid mid-term repricing triggers. Ensure the contract contains no clauses that allow Broadcom to reprice your deal if you modify it. Sometimes, vendors include language stating that discounts may be retroactively adjusted if you reduce quantities or change the product mix. Strive to remove or neutralize that. You want the freedom to optimize usage (scale down one product, increase another) without being financially penalized. The contract should let you make minor adjustments or swaps (with equivalent value) without reopening pricing.

Ensure Key Product Suites Are Included (Avoid Unbundling Surprises)

Given the bundle-centric approach, it’s critical to explicitly secure the products you need:

• List out each component you expect to receive. If your deal is for “VMware Cloud Foundation”, append an exhibit that spells out that VCF includes (for your contract’s purposes) vSphere Enterprise Plus, vSAN Enterprise, NSX Enterprise Plus, Tanzu Kubernetes, Aria Operations Suite, etc., and whatever else was promised. If VMware/Broadcom changes a bundle name or content, this avoids any later ambiguity – you have locked in what you’re entitled to.
• Verify support for adjunct products. Do you use VMware Horizon (VDI) or other VMware products that are not part of the core bundles? Horizon, for instance, might not be covered by a data center ELA (it has its own licensing). Include it if it’s in scope; if not, ensure you have a plan (and pricing) in place. The same goes for emerging products like VMware Cloud on AWS or other services – are they covered or discounted under your agreement? Ask and get answers in writing.
• Watch out for bundle tier changes. Broadcom may introduce new “editions” or alter bundles mid-term. For example, if they decide to unbundle NSX from VCF next year and sell it separately, your contract should guarantee that you continue to have NSX, as it was part of your original deal. The protection clause discussed earlier comes into play here. Fix your entitlements at contract signing so they can’t retract something later.
• Account for Aria (vRealize) Suite if needed. Many VMware customers relied on vRealize Operations, Automation, and Log Insight, among others, now under the “Aria” brand. Broadcom’s bundling of these tools has been inconsistent – some bundles include Aria Operations (monitoring) but not Aria Automation, and vice versa. If cloud management and automation tools are important to you, explicitly negotiate their inclusion. It might be more cost-effective to bundle them now than to find out later that you need to buy an “Aria Suite subscription” outside the ELA.
• Insist on no removal of features during the term. State that the features/capabilities present in the software as of the start of the contract will remain available to you for that version. This is a softer point aimed at preventing Broadcom from disabling or paywalling something previously free. (For example, if they decided to start charging separately for a security feature in a patch release.)

Preserve Valuable Legacy Terms and Discounts

If you had any prior relationship with VMware that afforded you special terms, fight to retain them:

• Carryover discount levels. As noted, if you enjoyed a high discount previously due to volume, use that as a benchmark. Broadcom might argue that its cost structure is different, but it’s reasonable to expect a similar % off if your usage scale hasn’t changed. Bring data: “We spent $XYZ with VMware last cycle, which was given a 40% discount. Our planned spend now is similar/higher, so we expect at least 40% off the list to continue.” Even if list prices increase, maintaining the same discount percentage is a win.
• Protect renewal terms. If your previous contract included a clause that limited support fee increases (many VMware contracts capped support fee increases at 5-7% annually), reference that clause and attempt to incorporate a similar provision for subscription renewal. Broadcom may push back, but it signals that you are accustomed to price protections.
• Custom use rights. Perhaps you had negotiated unlimited virtualization rights on a smaller product or special licensing for DR sites (e.g., cold standby hosts not counted towards licensing). Try to port these over. For instance, if your old deal allowed a passive disaster recovery site to run VMware for failover without requiring separate licenses (a common concession), request the same in the new context – perhaps as long as VMs are powered off except during a DR event, they don’t count against subscription counts. Even if Broadcom’s standard policy doesn’t allow it, they might agree to a large customer to grandfather such a term.
• Enterprise License Pools. If you have an enterprise license pool concept (where licenses can be allocated flexibly among subsidiaries or locations), ensure the new deal continues to permit this. Broadcom might want to charge separately per region or restrict use by affiliates – push back to keep it enterprise-wide. Multinational companies should specifically negotiate global use rights so that licenses can be transferred or used in any country where they operate, without requiring separate regional licenses.
• Migration and Upgrade rights. Historically, VMware allowed ELA customers to upgrade to new versions or even crossgrade to equivalent editions at no additional cost. Confirm that in the subscription world, you will always have access to the latest version (as long as the subscription is active) – that’s usually inherent to subscriptions, but clarify that you can upgrade on your schedule. If you still have some older version in production you need to keep for a while, maybe negotiate an allowance to stay on it with support for a bit (for example, if you need to run vSphere 6.7 for a legacy app, will Broadcom support that under your subscription? They might require you to upgrade to 8.0 – so check support policy on older versions).

Be Firm on Contractual and Financial Safeguards

Beyond product and pricing specifics, ensure the contract as a whole has safeguards:

• Payment terms and currency: If you operate in multiple regions, determine whether you pay in USD or local currency and how exchange rate fluctuations are handled. Broadcom may require an upfront payment for multi-year deals. Consider whether an annual payment is possible without a surcharge, as they have allowed this in many cases. Manage these financial details to avoid surprises.
• Support SLAs: Given concerns that Broadcom may cut costs on support, consider including specific service-level commitments. For example, response time for critical tickets or named support account managers for large accounts. If you’re a government or regulated entity, you may even include penalty clauses if the support SLA is not met (perhaps service credits). Broadcom may not readily agree to penalties, but it’s worth pushing for stronger support terms if standard support has degraded.
• Explicitly address late renewal grace periods: Consider including a grace period for renewals. For instance, a clause that says if you are in good faith negotiations past the term, Broadcom will not apply penalties or suspend support for a certain buffer period. This is tough to get, but some customers negotiate a 30-60 day buffer so they aren’t threatened with an immediate cutoff at midnight if the paperwork is finalized.
• Liability and indemnity clauses: As with any large software contract, ensure legally reviewed liability caps, data protection, etc., but in the context of VMware ELA, one specific angle: if Broadcom’s software changes cause you compliance issues (like licensing compliance), you want the ability to cure without heavy penalties. Aim for a clause that if an audit finds you out of compliance, you can purchase the needed licenses at standard rates to become compliant (rather than some punitive fee). In other words, your “indemnity” for unintentional under-licensing is that you’ll pay what you should have – no more. Broadcom may not explicitly agree, but setting an expectation in writing that you can true-up at normal rates is useful.

Engage High-Level Executives and Build Vendor Relationships

Don’t treat this as a routine IT procurement. It’s strategic and may require executive muscle:

• CIO/CFO involvement: As the CIO, ensure you are personally involved in key negotiation meetings. Have your CFO or IT finance director join discussions about financial terms. This signals Broadcom that your company takes this seriously and has top-level oversight. Vendors often shift away from rigid positions when they see a CXO-level commitment on the customer side, which indicates that the deal’s outcome could impact broader vendor relationships or future spending.
• Escalate within Broadcom if needed: If your account team is inflexible or lacks the necessary authority to make concessions, request to speak with a VMware or Broadcom executive or a pricing approval authority. Broadcom’s upper management is undoubtedly tracking major renewals. A polite but clear message up the chain (e.g., a letter from your CIO to Broadcom’s VP of Customer Success outlining your concerns about the current offer) can sometimes lead to a special pricing review or an exception being granted. Use this sparingly – it’s a negotiation “escalation” lever when normal channels stall.
• Use Customer Advocacy and Public Forums: Broadcom is aware of these changes’ negative publicity. Customers, especially in Europe and the public sector, have lodged complaints with regulators and in the media. While you should remain professional, you can reference these broader concerns in negotiation: “We’ve seen many peers express that the new terms are unsustainable – we need to report to our Board how Broadcom is addressing customer concerns before we can sign.” This reminds them that you, too, have stakeholders watching. In extreme cases, if you are a public entity, leveraging collective pressure (through government IT coalitions or industry groups) can push Broadcom to introduce more accommodating programs.
• Keep Communication Lines Open: Maintain a firm but respectful tone throughout the negotiation. Don’t burn bridges with the account team – you’ll likely be working with them for years. Make it clear you seek a win-win outcome: your company gets a workable contract and Broadcom retains a committed customer (and revenue). If they offer creative solutions, be receptive (as long as your core needs are met). Sometimes, non-monetary sweeteners can come into play – for example, additional training credits or free migration services, which provide value while not reducing the subscription fee. These can be easier to offer than an extra discount, so consider them part of the package.

What CIOs Should Do Next (Negotiation Strategy):

• Develop a Detailed Negotiation Plan: Write your negotiation strategy before meeting with Broadcom. This should include your ideal outcome, acceptable fallback positions, and deal-breakers. First, determine what you will ask for, what counterarguments you will likely face, and how to address these issues (e.g., secure agreement on bundle contents, then proceed to pricing, and finally to the Terms and Conditions). Having this script (even if it’s just internal) keeps the process structured and ensures you don’t forget to address any critical points.
• Use a Unified Front: Ensure everyone on your negotiation team is aligned on messaging. Broadcom should hear a consistent stance, whether they’re talking to your procurement lead or your technical architect. Inconsistency can be exploited (e.g., the sales rep asking an engineer, “Do you need that feature?” and getting a wavering answer can weaken your position). Do internal prep meetings so each team member knows when to speak up and defer to the lead negotiator.
• Benchmark and Validate Proposals: As you receive offers from Broadcom, benchmark the terms. Compare them with any data you gathered (from peers or advisors) about what other organizations are getting. If you have Gartner or similar research on enterprise software negotiations, use it. For instance, if you know that another company of your size got a 30% discount, and you’re being offered 15%, that’s ammo to ask for better. Validate pricing against your own alternatives analysis as well – is the proposal financially better than going to an alternative platform when all costs are considered? If not, you have a strong case to negotiate for a lower price or consider walking away.
• Maintain Leverage Until Closing: It’s tempting to relax once you have most of what you want in writing. But continue to be vigilant until the contract is actually signed (and even then, ensure that purchase orders and other documents reflect the deal). Broadcom might put expiration dates on offers to pressure you – manage those by not leaving decisions to the very last minute. However, don’t commit too early either; use the time to ensure all conditions are vetted by legal, etc. Leverage is highest before you sign – afterward, you’ll have to live with what was agreed upon. So double-check that every promise and expectation is captured. If there is an open item (e.g., “we’ll figure out the support detail later”), try to resolve it in the contract now or, at the very least, get a written side letter.
• Prepare Implementation of the Deal: As the negotiation concludes, plan for a smooth transition to the new contract’s entitlements. Line up resources to deploy new license keys and upgrade software, if necessary, to versions compatible with the new subscriptions. Inform your operations teams of any changes, such as new support contact procedures or updated license tracking requirements. This internal readiness will ensure that you realize the value of any concessions you win – it’s no use negotiating portability rights or cloud credits if your team doesn’t utilize them. So, while finalizing the deal, brief the relevant IT groups on what’s coming. This also positions you to hit the ground running and comply with any new compliance rules from day one, thereby avoiding inadvertent violations.

Following this playbook, CIOs can approach VMware ELA negotiations with a structured, proactive strategy.

The Broadcom acquisition has undoubtedly tilted the field in the vendor’s favor. However, with careful preparation, creative tactics, and assertive advocacy, you can still secure an agreement that meets your organization’s needs.

The key is to start early, know your facts, and not shy away from hard conversations – very much the approach one would take with an Oracle or other tough vendor.

Protecting your enterprise’s IT interests is the ultimate goal, even if it means pushing back firmly or considering bold alternatives.

Remember that the VMware landscape will continue evolving under Broadcom’s influence. Build flexibility into your plans, stay informed on policy changes, and watch the market for new options.

With a solid negotiated foundation and contingency plans, CIOs will be equipped to lead their organizations through this licensing transition while maintaining control over risk and cost.

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