Broadcom’s sweeping changes to VMware’s licensing model have alienated a large segment of its user base. Following the $61 billion acquisition completed in November 2023, VMware discontinued perpetual licenses, consolidated thousands of SKUs into just four bundles, and introduced a new subscription-only model that many small and midsize organizations find unworkable.
The changes have not only sparked industry-wide backlash, but also prompted legal action from major customers like AT&T.
Backlash from SMBs: Core minimums and price hikes
At the center of the frustration is a 72-core licensing minimum now required for VMware vSphere, the company’s flagship virtualization platform. vSphere allows administrators to run multiple virtual machines on a single physical server, often in configurations far smaller than 72 cores—particularly in nonprofit, academic, or SMB environments.
The new floor leaves these smaller users with dramatically higher costs for infrastructure they don’t need.
As reported by System Administration, these changes have effectively cut off small-scale organizations from VMware’s server virtualization products. Many sysadmins are now considering alternatives such as Proxmox or KVM, while open forums like Hacker News have become gathering places for frustrated users voicing concerns.
One user noted, “Broadcom has been so abrasively hostile to the idea of the VMware business it acquired that its intentional rejection of profitable markets should be enough to start purging members of the board of directors.”
Some users also pointed to accessible alternatives such as Cockpit and libvirt-based KVM stacks, with one noting, “Even the humble Cockpit project supports VMs using libvirtd and KVM, and provides a workable interface for virtualization that supports migration and snapshots.”
AT&T lawsuit exposes broader tensions
The licensing shift hasn’t only upset small users. In September 2024, telecom giant AT&T filed a lawsuit against Broadcom, alleging that it failed to honor a contract tied to its VMware perpetual licenses. AT&T claims its agreement, which was due to expire on September 8, included an option for two more years of extended support.
Broadcom allegedly refused to honor the extension unless AT&T agreed to purchase expensive additional subscriptions.
The complaint warns of national-scale consequences as some of the 8,600 servers running AT&T’s 75,000 virtual machines serve national security and public safety entities, including the Office of the President. AT&T attorneys described Broadcom’s demands as “an attempt to bully AT&T into paying a king’s ransom for subscriptions AT&T does not want or need.”
Broadcom “strongly disagrees with the allegations” and “believes it will prevail in court.” The company maintains that the subscription transition began before its acquisition of VMware and is designed to give customers more consistent pricing and flexibility.
Broadcom’s April adjustments offer limited relief
Facing pressure from customers and regulators, Broadcom made minor concessions in April 2024. The company acknowledged that the transition had been difficult and promised to extend support and security patches for customers with perpetual licenses. Broadcom also committed to gradually expanding these patching programs to more VMware products beyond vSphere. However, many users view these measures as temporary fixes rather than substantive course corrections.
Adding to the confusion, Broadcom restructured VMware’s desktop hypervisor lineup in May 2024. It eliminated Workstation Player and Fusion Player, instead offering the Pro editions—Workstation Pro for Windows/Linux and Fusion Pro for macOS—for free under a “personal use only” license.
The commercial subscription was reduced to $120 per year, down from the previous $194.99 perpetual license cost. While individual developers and home users may benefit, the change offers no relief to organizations seeking affordable enterprise-grade tools.
Strategic shift sidelines small and midsize users
VMware’s transformation under Broadcom’s stewardship has prioritized consolidation and simplification. The previous portfolio of over 8,000 SKUs has been trimmed to just four core bundles. While this reduces procurement complexity for large enterprises, it simultaneously strips out the flexibility that smaller organizations once depended on.
Tools like vSAN, for storage virtualization, and NSX, for network virtualization, are now bundled in ways that no longer align with the modular needs of smaller IT environments.
This pivot has left many long-time users feeling discarded. VMware’s early success stemmed from empowering labs, startups, nonprofits, and sysadmins with scalable virtual infrastructure.
The new licensing structure represents a fundamental departure from that legacy. The message from Broadcom is clear: customers who don’t scale to enterprise-level deployments may no longer be worth supporting.
Competitive landscape shifts as users explore alternatives
The backlash is already benefiting VMware’s competitors. Open-source virtualization platforms like Proxmox VE and KVM, as well as Microsoft’s Hyper-V, are gaining momentum among those leaving the VMware ecosystem.
While these alternatives may lack some of the polish or integrations of VMware’s commercial stack, they offer lower barriers to entry, transparent licensing, and active community support—values increasingly prized by disillusioned VMware customers.
Gartner’s Market Guide for Full-Stack HCI Software predicts a decline in VMware’s market share amid these changes. Notably, the guide now includes three Chinese HCI vendors as representative alternatives—an indication that global competition in the virtualization space is accelerating as Broadcom reshapes VMware’s market positioning.
What comes next?
Whether Broadcom adjusts its course again remains to be seen. Regulatory pressure from European watchdogs and public outcry from major clients like AT&T suggest that more concessions could follow. But for now, VMware’s strategic direction appears firmly focused on high-margin, large-scale enterprise clients.
For small and midsize organizations that once formed the backbone of VMware’s success, the message is increasingly unambiguous. It’s time to evaluate alternatives—or prepare to pay a premium for staying in the fold.
