VMware Costs To Soar 1050%: AT&T Details Broadcom's Extreme Price Hike

Elias Adebayo

4 min read

Post on Apr 27, 2025

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The Anatomy of the 1050% VMware Price Increase

Broadcom's acquisition of VMware in 2022 fundamentally shifted the landscape of enterprise virtualization. This acquisition, while initially viewed with some apprehension, has resulted in a far more drastic consequence than many anticipated: a massive increase in VMware licensing costs. This isn't simply a minor adjustment; the reported 1050% price hike experienced by AT&T represents a significant blow to IT budgets across numerous organizations.

Several factors contribute to this substantial price increase:

• Increased licensing fees per core/socket: The cost per core or socket has dramatically increased, leading to exponentially higher expenses for organizations with large VMware deployments.
• New mandatory support contracts: Previously optional support contracts are now mandatory, adding a significant recurring cost to the overall licensing expense.
• Elimination of previously available discounts or bundled offerings: Discounts and bundled offerings that previously helped to lower the total cost of ownership have been removed, further increasing the overall price.
• Changes to the Software Assurance program: Modifications to the Software Assurance program, which often includes maintenance and updates, have likely increased the overall cost of the VMware licensing package.

This complex interplay of factors explains how a seemingly straightforward acquisition could lead to such an astronomical jump in virtualization costs. The implications are far-reaching and affect businesses of all sizes.

Impact on AT&T and Other Enterprise Businesses

The 1050% price hike affects AT&T significantly, potentially straining its operational budget and forcing strategic reassessments. The scale of this increase necessitates a re-evaluation of their virtualization strategy and a likely search for cost-effective alternatives. However, AT&T's experience is not isolated. The ripple effect extends across numerous enterprises relying on VMware virtualization.

The ramifications for other businesses include:

• Increased operational expenses: A substantial increase in VMware licensing fees directly impacts operational budgets, potentially squeezing resources allocated to other critical IT initiatives.
• Potential budget reallocations: Companies may need to reallocate funds, potentially delaying or canceling other projects to accommodate the increased VMware costs.
• Strategic reassessment of virtualization strategies: Organizations are forced to reconsider their reliance on VMware and explore alternative solutions to reduce costs.
• Exploration of alternative virtualization solutions: The price hike encourages businesses to actively seek more cost-effective alternatives, both open-source and commercial.

Alternatives and Mitigation Strategies for VMware Licensing Costs

Faced with drastically increased VMware costs, many organizations are exploring various mitigation strategies and alternatives. The good news is that several viable options exist to reduce dependence on VMware or to better manage its escalating costs.

• Open-source virtualization (e.g., Proxmox, oVirt): Open-source solutions provide a cost-effective alternative, although they may require greater technical expertise to manage.
• Alternative commercial solutions (e.g., Microsoft Hyper-V, Citrix XenServer): Commercial alternatives offer a comparable level of functionality to VMware, often at a lower cost.
• Cloud migration (AWS, Azure, GCP): Migrating workloads to cloud platforms can offer greater flexibility and potentially reduce upfront licensing costs, though ongoing cloud expenses must be carefully considered.
• License optimization and consolidation: Careful review and optimization of existing VMware licenses, consolidating workloads where possible, can help reduce unnecessary spending.
• Negotiating better terms with Broadcom: Direct negotiation with Broadcom may yield some cost savings, although this may require significant leverage.

The Future of VMware Licensing and Virtualization

The 1050% price hike signals a significant shift in the virtualization market. The long-term effects are likely to include:

• Increased competition in the virtualization market: The price increase will likely fuel innovation and competition from alternative virtualization providers, offering organizations more choices.
• Shift towards cloud-based virtualization: The rising cost of on-premise VMware licensing might accelerate the migration towards cloud-based virtualization solutions.
• Potential regulatory scrutiny of Broadcom's pricing practices: The dramatic price increase may attract regulatory attention, potentially leading to investigations into Broadcom's pricing strategies.

Conclusion: Navigating the Rising Tide of VMware Costs

The dramatic price increase imposed by Broadcom on VMware licensing, exemplified by AT&T's 1050% hike, presents a significant challenge to businesses worldwide. This increase underscores the need for proactive planning and exploration of alternative virtualization solutions. By carefully considering open-source options, alternative commercial platforms, cloud migration, license optimization, and negotiation strategies, businesses can effectively manage their VMware costs and avoid being overwhelmed by this rising tide. Don't let soaring VMware costs cripple your IT budget. Explore alternative virtualization solutions and cost-optimization strategies today. Learn more about managing your VMware costs effectively.