Negotiating VMware ELAs & Subscriptions Under Broadcom: Tactics That Work

Negotiating VMware ELAs & Subscriptions Under Broadcom: Tactics That Work

Introduction:

Broadcom’s acquisition of VMware has fundamentally changed how enterprises negotiate VMware contracts.

Legacy VMware Enterprise License Agreements (ELAs) and support renewals that once offered flexibility and discounts have been replaced by stricter, subscription-only deals.

Global IT, procurement, and finance leaders now face an environment of sharply higher prices, new licensing metrics, and less vendor flexibility.

This advisory provides a comprehensive playbook for negotiating VMware subscriptions and ELAs under Broadcom’s regime.

It outlines the new licensing landscape, the risks for customers, and proven tactics to secure better terms, protect budgets, and maintain flexibility.

The tone is direct and vendor-neutral, focusing on practical strategies that have proven effective in real-world negotiations.

Use this guide to approach Broadcom VMware negotiations with a clear understanding and a plan to regain control.

Why Broadcom Killed Perpetual VMware Licenses (and What It Means for You)

Post-Acquisition Changes in VMware’s Licensing, Support, and Sales

Broadcom’s takeover of VMware introduced major changes that every customer must understand before negotiating:

• Subscription-Only Licensing: No new perpetual licenses are sold for VMware products. All new deals are 1–5 year subscription terms. If you let an old perpetual support contract lapse, you must transition to a subscription to get updates or support again. In effect, you now pay continuously or risk running unsupported software. This shift turns VMware spending into an operating expense rather than a one-time purchase.
• Bundled Product Suites: VMware’s many products and editions have been consolidated into a few bundles under Broadcom. For example, core infrastructure software (such as vSphere, vSAN, and NSX) might only be available in a larger bundle (like VMware Cloud Foundation) instead of à la carte. This means customers often pay for components they don’t need, or else risk losing functionality if they opt for a smaller bundle. Key add-ons and advanced features (enterprise management tools, network virtualization, etc.) are frequently only included in the top-tier (and most expensive) bundles.
• Per-Core Licensing with Minimums: Broadcom changed VMware’s licensing metric from per-CPU to per-CPU-core. Every CPU is counted as having a minimum of 16 cores (even if your processors have fewer), and licenses are required for each core. This new metric can dramatically increase costs for environments with smaller servers. For example, a server with 8 cores now effectively requires two VMware licenses due to the minimum requirement of 16 cores. This change, combined with subscription pricing, has led to significantly higher costs for many customers.
• Rigid Pricing and Reduced Discounts: Under VMware’s old model, large ELAs often came with generous discounts (30–50% or more) and renewals had modest increases. Broadcom has adopted a much tougher pricing stance. List prices have increased substantially, and deep discounts are now rare. Even long-time VMware customers have seen their renewal quotes double, triple, or even quadruple. (For instance, one organization’s annual VMware renewal jumped from around $40,000 to $500,000 under Broadcom.) Broadcom is laser-focused on profit, so sales teams have little leeway to offer the kind of flexibility VMware once did.
• Sales Approach Shift – Direct Engagement with Top Customers: Broadcom reorganized VMware’s sales and partner network. Approximately 1,500–2,000 of the largest VMware customers are now managed directly by Broadcom. Smaller value-added resellers have been eliminated, and smaller customers are required to work with Broadcom’s chosen enterprise partners or directly with Broadcom itself. This means many customers have lost their friendly intermediary who could advocate for them or provide competitive quotes. Broadcom’s direct sales approach often feels more aggressive and transactional, leaving customers with less room to shop around or negotiate through third parties.
• Support and Product Changes: Broadcom’s streamlining has affected support and product availability. Standard support contracts must be tied to the active subscription (no more indefinite support on old perpetual licenses). Support responses and flexibility have been noted to decline for non-strategic customers, as Broadcom prioritizes big accounts. Moreover, some VMware products or features have been discontinued or spun off, while others are now sold separately or only as part of premium bundles. Customers must be extremely diligent to ensure that any renewal or ELA includes all the critical components they need – otherwise, they might sign a deal and later find out that a feature (such as advanced security or automation tools) was excluded due to the new packaging.

Bottom line:

VMware licensing under Broadcom is now less customer-friendly. You’ll be dealing with subscription contracts, higher costs tied to core counts, and bundle-based sales that can lead to paying for shelfware.

Discounts are harder to get, and the sales process is more hardline. Understanding these changes is the first step to adjusting your negotiation strategy.

Key Risks for VMware Customers Under Broadcom

For enterprise customers, Broadcom’s changes create several risks and challenges that must be managed proactively:

• Skyrocketing Costs: The most immediate risk is budget shock. Many organizations are reporting 2× to 5× (or higher) increases in their VMware renewal costs under Broadcom. Without intervention, a VMware ELA that previously fit your budget could become financially untenable. CIOs must prepare for significantly higher price quotes and secure larger budget approvals well in advance.
• “Take-it-or-Leave-it” Renewals: Broadcom’s strict policies (like a 20% penalty for late renewals) mean customers are under pressure to accept quotes quickly or face service gaps. If you reach your contract expiration without a new agreement, you may lose support or incur substantial surcharges. This creates a risk of being cornered into an unfavorable deal at the last minute.
• Reduced Flexibility and Lock-In: The shift to multi-year subscriptions and all-in-one bundles can lock customers into specific technologies and associated costs. If you’re forced into a 3- or 5-year commitment on a broad product suite, it’s hard to scale down or remove unused products later. Without negotiated safeguards, you risk paying for unused licenses (“shelfware”) or being unable to adapt the contract if your business needs change. Vendor lock-in is stronger when multiple tools (such as virtualization and security) are tied into a single vendor agreement.
• Compliance and Audit Exposure: Broadcom is expected to be strict about compliance. If you attempt to extend old licenses or use products without a current subscription, you may face an audit or compliance claim. The elimination of perpetual-license support renewals means that when your legacy contract expires, you either stop getting updates or must sign a new subscription. Any period of lapse could leave you running unsupported software, which is risky from both a security and licensing standpoint. Broadcom’s reputation suggests they won’t hesitate to audit customers they suspect are out of compliance, so the stakes for proper licensing are higher.
• Feature and Support Gaps: With products repackaged, there’s a risk that renewing under a new bundle might omit features you previously had. For example, if NSX (network virtualization) or vRealize Automation were included in your environment under an old contract, you must ensure that the new Broadcom deal explicitly includes equivalent functionality. If not, you may lose capabilities or incur additional costs. Similarly, standard support under Broadcom might not meet the service levels you expect, and premium support could cost more – all of which should be part of your negotiation considerations.

In summary, customers face sticker shock, time pressure, inflexible contracts, compliance crackdowns, and the potential loss of functionality.

Knowing these risks helps you plan countermeasures in your negotiation tactics.

Negotiation Strategies for CIOs Navigating VMware Deals

Despite Broadcom’s tougher stance, enterprise IT leaders are not powerless. The following tactics have proven effective in real-world negotiations to control costs and improve terms.

A successful strategy will be proactive, data-driven, and creative about leveraging:

• Start Early and Plan Thoroughly: Begin the renewal or ELA planning 12–18 months before your VMware contract expires. Early preparation is crucial now – you’ll need time to gather data, align internal stakeholders, and weather Broadcom’s slow-moving sales cycles. Launch a cross-functional task force (IT, procurement, finance, and legal) to set goals and timelines. By engaging Broadcom early (at least 6 months before renewal), you avoid last-minute desperation and can push back against any attempt to impose rushed deadlines or penalties.
• Audit Your VMware Usage and Entitlements: Bring Hard Data to the Table. Conduct a detailed internal audit of all your VMware deployments and license entitlements. Identify exactly what you have deployed (count your vSphere hosts, VMs, vSAN clusters, NSX usage, etc.) and compare it to what you’re licensed for. This will uncover any shelfware (unused licenses or features) that can be removed or downsized in the new deal. Also, document any legacy contract benefits you have, such as price caps or grandfathered discounts from VMware – plan to insist that Broadcom honors equivalent terms. Having this factual baseline arms you to challenge inflated quotes and ensures you only pay for what you need.
• Define Your Requirements and Priorities: Based on your audit, determine what an ideal VMware agreement should look like for your business. Determine your “must-haves” versus “nice-to-haves.” For example, you might classify vSphere and vSAN for production as non-negotiable core needs, whereas a secondary product (like a cloud management tool) could be dropped if costs skyrocket. Set a clear budget limit or target price – know your walk-away point. Also, outline any terms you require (e.g., the ability to reduce license counts by 20% if usage drops, or a specific support response time for critical systems). By establishing these objectives internally (and getting management buy-in on them), you enter negotiations with a firm stance and avoid making ad-hoc concessions under pressure.
• Leverage Alternatives and Competition: Perhaps the strongest card you can play is having a credible alternative to staying 100% on VMware. Broadcom assumes many customers won’t go through the pain of switching – prove them wrong (or at least make it appear so). Investigate third-party support providers for VMware and request quotes. These independent firms can support your existing VMware environment at 40–60% lower cost than Broadcom’s official support. Also, evaluate other virtualization platforms or cloud options for some of your workloads (Microsoft Hyper-V, Nutanix AHV, public cloud services, etc.). Even if you don’t plan an immediate migration, obtaining concrete proposals for alternative solutions gives you leverage. When Broadcom knows you have a Plan B – and especially if you can show them a lower TCO from that Plan B – they are far more likely to improve their offer to keep your business.

How Broadcom’s VMware Licensing Changes Impact SMBs and Edge Deployments

For example, consider the potential cost leverage of third-party support: an independent support vendor might charge dramatically less than Broadcom for VMware maintenance, as shown below:

This hypothetical scenario highlights a substantial cost disparity. Broadcom’s support includes entitlement to new versions, while third-party support is basic break-fix and security patches (no upgrades). However, the $240K savings over three years is powerful leverage.

Even if you prefer to stay with Broadcom for strategic reasons, showing their sales team a competing quote that saves you 50%+ puts pressure on them to sharpen their pencil.

Broadcom would rather cut a price than lose a customer to a third-party provider or see them go unsupported.

• Bundle Your Negotiations for Volume Discounts: Broadcom is more willing to negotiate when the deal size is larger. Look for ways to consolidate contracts or co-term renewals so that you’re negotiating one big agreement instead of many small ones. If you have other Broadcom-owned software (Symantec security, CA mainframe tools, etc.), consider aligning those renewals with your VMware deal for a combined ELA. Even within VMware, try to renew all licenses (across all geographies or business units) together. A larger, consolidated renewal not only gets Broadcom’s attention, but it also gives you more purchasing power to demand discounts or extras. For example, combining what would have been two separate $2M deals into a single $4M negotiation could make Broadcom more amenable to a 5–10% price cut or additional concessions, because the stakes of winning (or losing) that business are higher for them.
• Insist on Price Caps and Term Flexibility: Given Broadcom’s tendency to raise prices, it’s critical to negotiate contractual price protections. If you are signing a multi-year subscription or ELA, push for a cap on annual price increases (for instance, no more than a 5% rise per year on renewals or additional licenses). Try to lock pricing for the full term as much as possible. In addition, seek flexibility in the contract term: if you’re uncertain about Broadcom’s direction or your future needs, avoid an overly long lock-in. You might prefer a 3-year term instead of 5, or negotiate an opt-out clause or review at the mid-point of a longer term. Also, ask for the right to adjust usage mid-term – for example, the ability to drop a certain percentage of licenses or swap one product for another if your requirements change. Broadcom may not grant all such requests easily, but even small flexibility clauses can save you money later or prevent being stuck with a bad deal if circumstances change.
• Push Back on Punitive and One-Sided Terms: Do not simply accept onerous boilerplate terms. Common Broadcom clauses to challenge include the 20% late renewal fee, strict termination clauses, and no-refund policies. For instance, if Broadcom insists on a multi-year commitment, negotiate a grace period to renew without penalty or a one-time waiver of the penalty if unforeseen circumstances delay your renewal. If you’re paying for a bundle, ask for the right to exchange or drop unused licenses for other products of equal value. Make it clear that you expect a fair deal – if you’re committing to spend millions over years, Broadcom should be willing to meet reasonable requests like these. Some customers have succeeded (e.g., getting contract language that allows them to swap out unused licenses for different products). Every concession you win will mitigate Broadcom’s power and save costs, so it’s worth challenging the default terms.
• Document Everything and Get Promises in Writing: Broadcom’s sales reps or executives may verbally assure you of certain terms (“We’ll give you a better price next year” or “We’ll be flexible if you need to reduce scope”). Do not rely on verbal promises. Ensure that every negotiated point – pricing, discounts, future credits, flexibility options, support levels, migration incentives – is explicitly documented in the final contract (or at least in a signed written addendum). If an item isn’t in writing, assume it doesn’t exist. Given the high stakes, have your procurement and legal teams do a fine-print review of the final agreement. Cross-check that it includes everything you agreed on. The goal is to leave no room for “we’ll work it out later” – later never comes once Broadcom has your signature and a binding contract.

By employing these strategies, CIOs and negotiation teams can regain some balance in what is otherwise a one-sided negotiation.

The key themes are early preparation, data-backed negotiation, creating credible alternatives, and locking in safeguards.

Broadcom may be a tougher negotiator than VMware was, but with the right tactics, you can still achieve a deal that aligns with your organization’s technical needs and financial constraints.

Recommendations

In summary, enterprise leaders should adopt a strategic and hard-nosed approach in VMware negotiations with Broadcom.

Key recommendations include:

1. Develop a Long-Term Exit or Contingency Plan: Assume VMware is not irreplaceable. Even if you intend to stay on VMware, have a multi-year roadmap for reducing dependence (for example, shifting some workloads to the cloud or another hypervisor). A credible exit strategy strengthens your hand today and provides an alternative if Broadcom’s terms become unacceptable in the future.
2. Engage Broadcom Proactively on Your Terms: Don’t wait for Broadcom’s quote at the last minute. Initiate the conversation early and treat it as a major procurement project. Involving your CFO, CTO, and legal team upfront is essential. By reaching out first with your agenda and timeline, you maintain control. Early engagement also buys time to escalate issues and avoid being caught off guard by a looming deadline.
3. Right-Size and Optimize Before Negotiation: Utilize internal audits to thoroughly understand your VMware footprint. Eliminate or plan to redeploy any unused licenses now. Optimize your usage (for instance, ensure test/dev environments aren’t consuming expensive enterprise licenses needlessly). The leaner and cleaner your environment, the less you have to buy. Go into negotiations able to say, “We only need X because we’ve optimized Y” – this prevents Broadcom from selling you more than necessary.
4. Protect Your Budget with Multi-Year Certainty: Where possible, aim for a multi-year agreement that secures pricing stability. A 2- or 3-year deal at a fixed rate (or with minimal pre-agreed increases) can shield you from Broadcom’s annual price hikes. Yes, a longer deal is a commitment, but it can be worth it if it includes price caps and saves your organization from year-to-year cost spikes. Just be sure the multi-year term includes clauses that protect you (as discussed) and not just revenue assurance for Broadcom.
5. Negotiate for Contractual Flexibility: Push for terms that keep your options open. This includes license portability rights (the ability to use your VMware licenses in cloud environments or across regions), the flexibility to adjust license quantities or mix each year, and clarity on what happens if Broadcom changes a product or bundle. If Broadcom discontinues a product you’re using, you should have the right to an equivalent replacement or a refund/credit. These kinds of clauses will safeguard your investment over the contract term.
6. Leverage External Expertise and Benchmarks: Do not go in blind against Broadcom’s seasoned negotiators. Leverage industry benchmarks (from peers or analysts) on pricing to know what a reasonable deal looks like. Consider hiring an independent licensing advisor who specializes in VMware/Broadcom deals – they can provide valuable insights from other client negotiations, help identify tricky clauses, and even assist with communications with Broadcom. If you are a smaller enterprise, you may also consider partnering with a larger reseller or a purchasing consortium to gain more negotiating power. Use every resource at your disposal to level the playing field.
7. Prepare Your Organization for Tough Outcomes: While you should strive for a win-win deal, be mentally and operationally prepared for Plan B. That might mean obtaining temporary approval to use third-party support or pausing non-critical VMware projects if an agreement isn’t reached by the expiry date. Communicate with application owners and business leaders about the stakes – for example, “If we can’t secure a viable VMware deal, we may freeze new VMware deployments or explore other platforms.” By setting expectations internally, you give yourself the freedom to walk away or delay rather than sign a bad contract under duress.

These recommendations reinforce that negotiating under Broadcom requires diligence and backbone. By planning, insisting on value, and keeping alternatives in play, you can achieve a more balanced outcome.

Checklist: 5 Actions to Take

Immediately consider these five actions as you prepare for your VMware renewal or ELA negotiation:

1. Inventory Your VMware Environment: Compile a detailed list of all VMware software in use (vSphere, vCenter, vSAN, NSX, etc.), how many licenses of each you have, and their current support status. Identify unused or underutilized licenses that can be eliminated or reduced in the new contract.
2. Gather Contracts and Note Key Terms: Locate all current and past VMware agreements and purchase records to ensure accurate documentation. Document important clauses like price locks, renewal caps, or special rights (e.g., upgrade entitlements). These provide a baseline and leverage – for instance, if your last contract capped increases at 5%, you can reference that precedent in negotiations.
3. Align Stakeholders and Budget Early: Brief your executive sponsors (CIO, CFO) on expected changes under Broadcom and get alignment on a negotiation strategy. Secure preliminary budget approval for a higher renewal cost well in advance, so you know your financial limits. Engage legal counsel to review Broadcom’s terms and identify red-flag clauses you’ll need to negotiate.
4. Research Alternatives and Get Quotes: Reach out to at least one third-party support provider for VMware and request a quote for supporting your environment. Also, investigate whether moving some workloads to another platform (or cloud) is feasible and what the associated costs might be. Having these figures will be invaluable as leverage when discussing pricing with Broadcom.
5. Set a Timeline and Kick Off Negotiations: Working backward from your contract end date, establish clear timelines for negotiation milestones. Aim to open formal renewal discussions with Broadcom at least 6 months in advance. Communicate your timeline to Broadcom and stick to it – for example, plan internal review cycles for any Broadcom proposals and don’t allow last-minute pressures to rush you. Starting early is your best defense against the 20% lapse fee and other pressure tactics.

By completing this checklist, you’ll be well-prepared with data, executive support, and alternatives – the essentials for a successful negotiation in the Broadcom era.

FAQ

Q: What happens to our existing VMware perpetual licenses now that Broadcom is in charge?
A: You can continue to use any VMware perpetual licenses you already own, but Broadcom will no longer renew support or provide updates for them once your current support contract expires. To get software updates, patches, or technical support for VMware products in the future, you’ll have to convert to a subscription licensing agreement. Broadcom has essentially ended perpetual licensing for VMware, so at your next renewal, you’ll be offered a term-based subscription (or an Enterprise License Agreement covering a bundle of products) instead. Plan for that transition – if you stay on an unsupported perpetual license, you won’t receive new updates and could be vulnerable to security or compliance issues.

Q: How much of a price increase should we expect on VMware renewals under Broadcom?
A: It varies, but many organizations have seen very large increases – often in the range of 50% to several hundred percent higher than their previous VMware contracts. In extreme cases, costs have jumped by double-digit multiples for similar environments. Broadcom has raised list prices and is less generous with discounts, so your quote could be substantially higher. As a rule of thumb, prepare for the possibility of paying 2–3 times what you used to pay annually, and set your negotiation targets to bring that number down. Your actual increase will depend on your specific product mix and prior discounts; however, you should anticipate a significant uptick and budget accordingly.

Q: Can we still negotiate discounts or better terms with Broadcom, or are their quotes “take it or leave it”?
A: You absolutely can (and should) negotiate, but expect a tougher process than with legacy VMware. Broadcom’s initial quotes are often very high, but they do have room to negotiate, especially for larger deals or strategic customers. Success in getting discounts or improved terms will depend on your leverage. This means coming to them with data (usage figures, alternative options, budget constraints) and being willing to push back. Broadcom may not offer 50% off, as VMware sometimes did, but reductions in the double-digit percentage range are possible if you make a strong business case. Additionally, you can negotiate contract terms – such as price increase caps, flexible cancellation terms, or added services – even if the headline price discount is small. The key is not to accept the first quote and to justify any request with solid reasoning (e.g., “We need a price cap because our budget can’t accommodate more than X% growth year-over-year.”).

Q: Is using a third-party support provider for VMware a viable option?
A: Third-party support for VMware is a viable option that many customers are exploring, especially if Broadcom’s offer is too expensive. Independent support providers can offer technical support and patch advice for VMware products you already have, typically at a much lower cost than Broadcom’s renewal. The trade-off is that you won’t get access to new VMware software versions or official VMware escalation support. Essentially, third-party support can keep your existing environment stable and secure (with workarounds and fixes), buying you time without paying Broadcom’s high fees. It’s an option to save costs in the short term or to extend the life of older VMware versions. Many companies use it as a temporary measure or leverage in negotiations. If you choose this route, ensure you are in full compliance with your license terms (no use beyond what you own, as you won’t have upgrade rights) and weigh the risk of not having access to the latest features. It can be a smart negotiating tactic – even indicating to Broadcom that you might use third-party support could motivate them to offer a better deal to keep you as a direct customer.

Q: Should we consider migrating off VMware to other platforms due to these changes?
A: It’s a big decision, but it’s worth evaluating. Broadcom’s pricing and policies have prompted some enterprises to explore alternatives, such as Microsoft Hyper-V, open-source hypervisors (KVM/Proxmox), Nutanix AHV, or increased use of public cloud services. Migrating off VMware entirely is a complex and potentially costly project, as it involves retooling infrastructure and retraining staff so that most organizations won’t do it overnight. However, you might identify specific segments of your environment that could be moved to alternatives (for example, development or test workloads to a cloud platform, or remote office virtualization to Hyper-V, which is included with Windows Server). Even partial moves can reduce your VMware footprint and give you leverage. At a minimum, doing a feasibility study of moving off VMware strengthens your negotiating position with Broadcom. You can honestly say, “We have looked at other options and won’t hesitate to shift if the VMware deal isn’t reasonable.” Over the long term, having a multi-platform or hybrid strategy (instead of putting all your eggs in the VMware basket) can mitigate the risk of any one vendor (like Broadcom) having too much power over your IT costs.

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