Is Your ServiceNow SAM Pro Investment Falling Short?

Table of Content

Introduction

Table of Contents

1. Introduction
2. Unpacking VMware’s New Licensing Model
   1. What is a Core?
   2. How Does VMware Define Core?
   3. Core-Based Licensing vs. Processor-Based Licensing
   4. Subscription-Based Model
   5. Minimum License Capacity (16 Cores per CPU)
   6. Calculation of Capacity Required
3. Analysis of VCF Pricing (1-5 Years)
4. Analysis of VVF Pricing (1-5 Years)
5. vSAN Included With VCF and VVF Bundles
   1. What is a Tebibyte (TiB)?
   2. Difference Between TiB, GiB, TB, GB
6. VVF and VCF With vSAN Capacity Table
7. LDS Recommendations
8. Conclusion

Introduction

Following Broadcom's acquisition, significant changes have been introduced. These include discontinuing the sale of all perpetual licenses in favor of a subscription-based model, modifications to packaging and bundling of vSphere, vSAM to VCF and VVF, and a transition from processor to core-based licensing. Collectively, these changes are forming a substantial challenge, leading to customers experiencing shocking increases in costs ranging from 5-40X their current spending. This blog will specifically concentrate on the shift from processor to core licensing and provide essential information to help you understand and mitigate the impact of this change.

Unpacking VMware’s New Licensing Model

What is Core?

A core is an individual processing unit within a Central Processing Unit (CPU). It functions as the "brain" of the CPU, receiving instructions and executing calculations or operations to fulfill those instructions. A CPU may contain multiple cores, each capable of operating independently from the others.

Physical server showing physical processors, physical cores, and hardware threads

How Does VMware Define Core?

“Core” means a unit of measurement that is defined based on the environment in which the Software operates:

1. in a physical computing environment, a Core is a Physical Core;
2. in a virtualized or hypervisor (VM) computing environment, a Core is a single physical computational unit of the Processor which may be presented as one or more vCPUs and/or
3. in a public cloud computing environment, a Core is defined as a single physical computational unit of the Processor, which may be presented as one or more vCPUs, but may be named differently by the public cloud vendors (e.g., Amazon Web Services uses the term “vCPU”, Microsoft Azure uses the term “Core” or “vCPU”, Google Cloud Platform uses the term “Virtual CPU”, and Heroku uses the term “Compute”).
4. In cases where Hyperthreading is not enabled, one (1) vCPU is recognized as one Core. In cases where Hyperthreading is enabled, two (2) vCPUs are recognized as one Core.

VMware, After Getting Acquired by Broadcom, Changed Its Licensing Model From Processor to Core.

Adding to the complexity, VMware has transitioned to a new licensing model based on the number of cores in a Processor rather than the previous model, which was based on the number of processors.

Let’s break down how it works:

Subscription-Based: The core-based licensing model is subscription-based “Only.” This means you pay a recurring fee to use the software, for example, on a rental basis.

Minimum License Capacity: For VVF and VCF, customers must purchase a minimum license capacity of 16 cores per CPU. This means that even if your processors each have fewer than 16 cores, you’ll pay for 16 cores anyway.

Calculation of Capacity: To calculate the capacity needed for your environment, you need the total number of physical cores for each CPU on all ESXi hosts individually in your environment and then sum it up.

Example: To illustrate, suppose you have a single ESXi host in your inventory with a single CPU that has 8 cores. In this case, you are required to buy a subscription capacity for 16 cores per CPU, as this is the least license capacity available. If you have two ESXi hosts, each with two CPUs and each CPU having 8 cores, you would require a total of 64 core licenses.

VSAN Capacity Now Comes Bundled With VMware Cloud Foundation (VCF) and VMware vSphere Foundation (VVF)

vSAN capacity is now included in the VMware Cloud Foundation (VCF) and VMware vSphere Foundation (VVF) bundles. vSAN, which is a storage solution, is integrated with vSphere and managed through a single platform.

For VMware Cloud Foundation (VCF), the licensing model stipulates that each core license bought provides 1 Tebibyte (TiB) of vSAN capacity.

In the VMware vSphere Foundation (VVF) case, the licensing model grants 100 Gibibytes (GiB) of vSAN capacity for each core license purchased.

Additional capacity used must be purchased using the Add-on SKU.

vSAN TiB Licensing Metric

VMware’s vSAN, a software-defined storage solution, employs a distinctive licensing metric based on tebibytes (TiB). This metric considers the total usable capacity of your vSAN datastore, quantified in TiBs.

What is a TiB?

A tebibyte (TiB) is a unit of digital storage equal to 2^40 bytes, which is roughly 1.1 times the size of a traditional terabyte (TB) based on a power of 10. TiB (Tebibyte) is a different unit to a TB (Terabyte) commonly used for storage. While they sound similar, a TiB is actually about 10% larger than a TB. This seemingly small difference translates to a significant distinction in licensing costs.

 Difference between Tib, GiB and TB, GB:

Table showing number of TiB licenses required for vSAN under VMware new licensing model.

Overall, VCF is advantageous if you are utilizing VSAN or considering its use in the future.

Broadcom is offering VSAN at no cost as part of a bundle to encourage customer adoption/addiction to VSAN and other included products.

LDS Recommendations:

Assess the New Consumption Metrics by Conducting an Effective License Positioning (ELP)

VMware Enterprise License Position will clearly illustrate the consumption levels under both the old and new models and demonstrate the cost implications of each.

Optimize and Right Size Deployments Before Renewal to Reduce Renewal Cost

The era of deploying vSphere without careful planning has passed. Developing a proactive approach to managing your resources efficiently by creating an Enterprise License Position is essential. This strategy ensures that you only invest in what is necessary, reducing future renewal expenses.

Do Not Run Any Scripts or Provide Outputs to VMware/Broadcom Sales Reps 

Do not run any scripts or provide data as requested by Broadcom sales representatives. Specially Counting Cores for VMware Cloud Foundation and vSphere Foundation and TiBs for vSAN (95927). Be aware that this could be a stealth backdoor attempt to audit your VMware deployments. Executing these scripts and sharing the outputs with Broadcom has led to some customers facing unexpectedly high charges, often 10 to 40 times their usual costs. To safeguard your interests, it is critical to have any script outputs independently analyzed by a third party, then prioritize cleaning up and optimizing your environments and only share the most essential, high-level data with Broadcom for renewal purposes.

This cautious approach will help protect your business from potential financial pitfalls and any internal embarrassment after VMware sends an inflated bill to your senior management.

Negotiate with VMware, recognizing that you are dealing with an entirely new vendor:

a. Begin preparation and negotiations at least 6-8 months in advance.

b. Analyze current demand, consumption, and project future costs.

c. Benchmark your pricing; previous VMware pricing and discounts may no longer be applicable.

d. Be prepared for rigorous negotiations to maintain the terms of existing contracts, as Broadcom has shown reluctance to honor them.

e. Expect extensive negotiations if you intend to obtain credits for old perpetual licenses.

f. Involve C-level executives or senior management in discussions with VMware, as renewals are no longer straightforward processes that can be handled solely by the Infrastructure team. Broadcom is likely to rapidly escalate issues to your top executives.

Conclusion

Given the complex nature of these issues, if you lack the necessary in-house expertise or need assistance explaining these changes to your management, don't hesitate to contact Licensing Data Solutions. A thorough grasp of VMware's products and their uses can be obtained through an Effective License Position (ELP) analysis. It's important to understand the possible outcomes, including higher costs, more complicated management, and less flexibility and control. For the best and most effective ELP analysis, consider working with Licensing Data Solutions (LDS). Feel free to reach out for advice at This email address is being protected from spambots. You need JavaScript enabled to view it..

Licensing Data Solutions(LDS) is a leading provider of Audit Defense, Software Asset Managed Services , SaaS and Cloud FinOps Cost Saving Analysis,  for major software vendors such as IBM, SAP, Microsoft, Oracle, Quest, Autodesk, VMware, Salesforce, and ServiceNow. Our team of 35 analysts comprises former software compliance auditors with expertise in delivering exceptional services. At LDS, our clients benefit from cost savings of up to 30 percent on their software spend and up to 85 percent on their audit findings.

Also read more on this:

Broadcom Shakes the Ground Under VMware Customers: Comprehensive Guide to New VMware Licensing, Packaging, Reseller Changes in 2024

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VMware Licensing Review

Introduction

On November 22, 2023, Broadcom made a significant impact on the IT industry by acquiring VMware for $69 billion, one of the most substantial technology transactions to date. Immediately after the acquisition was finalized, Broadcom quickly introduced significant alterations to the licensing model by ending perpetual licensing and major changes to the partner network, including how customers interact with resellers and Broadcom, as well as changes to the product packaging and bundling. This blog will cover these changes in detail, examining their effects on you as a customer. We will also provide advice on steps you can take to safeguard yourself and minimize the impact on your budgeting and licensing strategies.

Change 1 - VMware Ends Perpetual Licenses and Introduces Subscription Licensing

On December 11, 2023, VMware, now a subsidiary of Broadcom, announced a pivotal alteration in is licensing strategy, ceasing the sale of new perpetual licenses. Henceforth, VMware software will be exclusively accessible via subscription models. To clarify this change, the subscription tmodel may be compared to renting a residence or leasing a car; the license is not owned, yet it remains usable as long as the subscription fees are continually paid. Conversely, a perpetual license resembles the outright purchase of a residence or automobile; the license is owned indefinitely, with typically only nominal maintenance fees required in subsequent years. This shift towards subscription models is a trend increasingly adopted by software companies in recent years. However, Broadcom's decision to suddenly entirely eliminate perpetual licenses and forbid any new perpetual acquisitions has been met with disappointment and dismay among customers.

Please see the link to the official announcement below:

https://news.vmware.com/company/vmware-by-broadcom-business-transformation

VMware Perpetual License Phase-Out: Implications for Existing Customers

Shock at Contract Expiration and Forced Migration:

Clients currently engaged in an Enterprise License Agreement (ELA) or possessing active maintenance agreements will not experience immediate impacts from this change. They are permitted to utilize their perpetual licenses until the conclusion of their agreement or the expiration of their maintenance period.

Upon the termination of an ELA or active maintenance agreement, clients will be ineligible to receive future maintenance for their existing licenses under the old model, necessitating a forced transition to VMware’s subscription-based offerings.

Furthermore, should there be a requirement to procure any new products not encompassed within the ELA or existing agreements during the term of an ELA, such acquisitions must be made under the newly established subscription model.

Escalating Cost at Renewal

This evolution is advantageous for customers who favor operational expenditure (Opex) for their purchases. However, it poses challenges for those who prefer capital expenditure (Capex) strategies, aiming for significant upfront investment followed by reduced operational costs, and for customers who are using VMware software without active maintenance.

Customers of VMware are likely to experience an increase in costs upon renewal. This escalation can be attributed to the potential forfeiture of their existing investment in perpetual licenses. Despite assurances from Broadcom regarding the availability of a trade-up path, it has not demonstrated cost neutrality. Additionally, customers may encounter a progressive increase in expenses over time, as the subscription model tends to be more costly in the long term.

Strategic Recommendations to Customers

Understand That the Landscape Has Changed for Good

It is imperative for customers to recognize that the acquisition of VMware by Broadcom has fundamentally altered the operational landscape. The prevailing paradigms have undergone a significant shift, rendering the former status quo with VMware untenable. Clients must initiate their preparatory measures promptly, adopting a strategic approach akin to that utilized in negotiations with Microsoft or Oracle.

Understand Usage and Simulate Cost and Quantity Under the New Subscription Model

Carry out a detailed review of your current usage against what you have purchased. This evaluation, called the Enterprise License Position, gives a clear picture of how you are using VMware resources compared to what you have bought. It helps in understanding your current usage, as well as estimating future usage, if you switch to a subscription model. Based on this assessment, it is advisable for customers to adjust their deployments to prevent an unexpected rise in costs.

Change 2 - Broadcom Major Changes to the Reseller/Partner Network

Furthermore, alongside the transition from perpetual licensing to subscription-based models, Broadcom has implemented substantial modifications to its partner/reseller network. These changes could significantly alter your interactions with VMware.

https://news.vmware.com/partners/building-a-simplified-stronger-advantage-program-for-vmware-by-broadcom

Broadcom's Strategic Shift in Eliminating Resellers for Strategic Accounts: Broadcom has initiated a notable strategic shift by opting to directly oversee its major VMware accounts (2000 as per unofficial estimates), diverging from its prior approach. This repositions partners, who played a crucial role in the management of these accounts, to a sidelined status. Broadcom is now designating substantial accounts as Strategic Accounts, and will engage with them directly. Consequently, entities recognized as Strategic Accounts will no longer have the liberty to procure through their resellers, but will instead be obligated to conduct transactions directly with Broadcom.

Narrowing of Reseller Network: Broadcom has decided to reduce the number of its resellers, especially eliminating small ones. This change will greatly affect smaller businesses because they will no longer be able to sell Broadcom products through their current reseller. They will need to find and work with a larger reseller instead.

Consequences of Partner Alterations for Customers:

Direct Interaction With Broadcom and Increase in Cost: Broadcom is making changes that will reduce the support and incentives previously provided by resellers, especially for large or strategic accounts. This means that instead of receiving personalized support from resellers, these accounts will have to deal directly with Broadcom. This shift could result in the loss of discounts due to Broadcom's tough negotiating stance. Moreover, without a reseller acting as an intermediary, there's a higher chance of audits. If Broadcom's sales staff finds the terms of a deal unsatisfactory or decides to examine an account closely, they may be more likely to nominate the customer for a software licensing audit.

For smaller customers, this adjustment will likely lead to increased costs, as they will now need to engage with larger resellers. These bigger entities may not place as much emphasis on their relationship or exert the same effort to secure discounts that smaller resellers previously managed to obtain.

Guidance for Customers on How to Navigate This Reseller Change:

For small customers, verify whether your current reseller remains within the Broadcom network. If not, initiate efforts to build connections with a reputable reseller.

For large customers, prepare for direct negotiations with Broadcom. Begin preparations for VMware/Broadcom discussions several months prior to your contract's expiration. Consider enlisting third-party assistance, such as LDS, which can aid in comprehending the alterations, educating your internal management, analyzing your current and future consumption and costs, benchmarking these costs, and facilitating negotiation and adaptation to this new standard.

Change 3 - VMware Draconian Product Packaging/Bundling Changes!

In conjunction with the transition from perpetual licensing to subscription models and the consolidation of resellers and partners, a significant simplification and consolidation in product packaging was also unveiled. The array of stock-keeping units (SKUs) has been streamlined, resulting in the reduction to four primary SKUs: 1) VMware Cloud Foundation, 2) VMware vSphere Foundation, 3) VMware Standard, and 4) VMware Essentials. 

Let’s delve into the landscape of VMware’s product offerings:

1.  VMware Cloud Foundation (VCF): 

• vSphere Enterprise Plus
• vSAN Enterprise (1TiB per core) Not to be confused with TB (TeraByte) which is a different metric
• Tanzu Kubernetes Grid
• SDDC Manager
• HCX Enterprise
• NSX Enterprise Plus
• Aria Operations
• Aria Automation
• Aria Operations Enterprise
• Select Support
• Site Reliability Engineering

1.  VMware vSphere Foundation (VVF): 

• vSphere Enterprise Plus
• vSAN Enterprise (100 GiB per core) Not to be confused with GegaByte GB
• Tanzu Kubernetes Grid
• Aria Operations

Feature difference between VCF and VVF

3. vSphere Standard

• vSphere Standard
• vCenter Standard

4. vSphere Essential Plus Kit

• vSphere Essentials
• vCenter Essentials Plus
• Limitations
• Maximum of 3 hosts w/up to 96 Cores

Perspectives on the Recent Packaging Changes:

• This transformation is favorable for individuals fully committed to utilizing VMware; however, it poses disadvantages for customers who do not employ the complete suite of products, such as Aria/NSX.
• The implementation of product bundling is anticipated to lead to a price augmentation ranging from two to five times for all customers, attributable to the financial implications of acquiring these bundles.
• The bundling strategy is likely to culminate in the underutilization of software, resulting in resources being expended on unused software.
• VMware aims to incentivize customers to adopt more products from its suite, potentially altering bundle offerings or introducing premium versions of these products in the future to extract additional revenue from clients.
  

LDS Recommendations in Handling This Product Bundling

Comprehend Actual Utilization and Project Future Consumption: Clients are encouraged to ascertain both their present and anticipated future utilization at the SKU level, and to conduct a comparative analysis of current versus future costs. Leveraging this analysis, customers should negotiate discounts with VMware/Broadcom.

Elevate This Matter to the Level of Executive Management: VMware renewal is no longer a task the infrastructure team can manage on its own. Comprehending the alterations and devising either a temporary or prolonged strategy now requires the attention and decision-making of either the Chief Information Officer (CIO) or another high-ranking executive.

Investigate Substitute Strategies: It is advisable to examine other virtualization solutions that may present a more economical option, especially those characterized by stable pricing structures and negligible concealed expenses. Furthermore, it is anticipated that the future will be marked by escalating prices, a decline in development and customer support, intensified sales representative tactics, and rigorous software compliance audits. 

In discussions with our clientele, the following alternatives have been mentioned:

• Transitioning to cloud services such as Azure, AWS, or GCP
• Exploring Microsoft Hyper-V
• Evaluating Nautanix
• Exploring Verge.io
• Investigating Proxmox
• Transitioning to Physical Servers

Engage in Strategic Negotiations: Upon subscription renewal, it is advisable to enter into assertive negotiations with VMware to uncover possible concessions. Benchmark your agreement to ascertain the standard discounts currently provided by Broadcom and recognize the shift in dynamics as you are now interacting with a representative from Broadcom, rather than the familiar VMware representative.

Conclusion

In summary, Broadcom has implemented significant alterations to VMware's packaging, licensing model, and reseller network. These changes are poised to deeply affect your association with VMware. It is advisable for clients to recognize that the operating framework has fundamentally transformed and to take the necessary measures to comprehend their usage, and to prepare for extensive and forceful negotiations with VMware. Additionally, it is imperative for this matter to be escalated to the level of Chief Information Officer (CIO) and to devise a strategy for assessing alternative Hypervisor Technologies. Should there be a lack of expertise internally, or a requirement for an external consultant to provide enlightenment on these modifications, assess your actual usage, project your future VMware cost, and explore alternative options, then please do not hesitate to contact Mark Thaver at This email address is being protected from spambots. You need JavaScript enabled to view it..

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VMware Licensing Review