Licence costs hit a record high as Microsoft and SAP weigh on the public purse in Germany

Since its acquisition by Broadcom, many VMware customers have seen their licence fees skyrocket. However, there are alternatives, as demonstrated by the case of cloud provider Anexia. By migrating over 12,000 virtual machines from VMware to open-source solution KVM (Kernel-based Virtual Machine), the Austrian company has deliberately taken back the reins of its infrastructure and licensing.

‘The new licence terms would have threatened our very existence,’ as Anexia CEO Alexander Windbichler explained to The Register. The company has over 100 offices across the world and serves high-profile customers such as Lufthansa and TeamViewer. As passing on the additional costs simply wasn’t an option, Anexia decided it was best to make a clear break, garnering much support from customers.

What has changed at VMware?
Anexia is not alone: a survey by cloud provider Civo has shown that over half of all VMware customers are considering a change and nearly half are already on the lookout for an alternative. British provider Beeks has already taken concrete steps: it now operates over 20,000 virtual machines using open-source virtualisation technology in its 30 data centres.

But what is the rationale behind this decision? Following the acquisition, Broadcom cancelled many of its ongoing licenses. Since spring 2025, customers wishing to continue using VMware products have had to take out a subscription. For many businesses, what was supposed to bring ‘simplification’ has turned into a considerable fee hike, with a two- to tenfold increase for some licenses. Another issue is the fact that contract terms have been extended and customers are expected to pay upfront for several years at a time. Broadcom’s model seems to be a profitable one: during the first half of 2025, the company made 6.6 billion US dollars in sales from its infrastructure software business unit, with a highly lucrative operating margin of up to 70%.

Much is in motion following Anexia’s decision
Anexia isn’t the only business to have taken this path. The first half of 2025 has seen many companies rethinking their VMware strategy, sometimes with wide-ranging consequences. More and more cloud providers have been considering possible alternatives after Broadcom moved to a subscription model only. Perpetual licenses are now a thing of the past, and changes in pricing and minimum order quantities (e.g. minimum of 72 CPU cores) are leaving SMEs in particular rather disgruntled. Broadcom is also forcing its customers to commit for several years and to pay upfront, sanctioning even minor failures to renew licenses on time.

Meanwhile, distribution partners are also feeling the knock-on effects. Some major distributors such as Ingram Micro decided to sever their relationship with VMware completely or partially in spring 2025. While Broadcom is unwaveringly staying its course, the political and regulatory pressure is mounting across Europe. More and more customers are migrating to open-source platforms. Digital autonomy is therefore gaining traction, not only for financial reasons, but also as a means to strategically break free from such virtualisation and license shackles.

Subscriptions: a convenient but risky option
The case of VMware goes to show how dangerous one-sided relationships of dependence can be. Even long-standing partners are not immune to such strategic shifts. For providers, subscriptions are an attractive model, as they offer a steady revenue stream and an opportunity to maintain control over pricing and contract terms. By essentially ‘renting’ software instead of owning it, users often lose any ability to react to detrimental changes. Microsoft too is following a similar approach: after increasing its cloud service fees by 11% in 2023, it announced a monthly payment structure for M365 associated with additional costs in November 2024.
The need to be vigilant and react smartly
IT decision makers are advised to monitor developments closely and to adjust their strategy accordingly. Blindly moving to the cloud without weighing up possible consequences is very risky. The German government, for example, spent a record 1.3 billion euros on software licences in 2024, up from 1.2 billion the previous year. The main culprit: Microsoft products such as M365, with licence fees soaring from 197.7 million (2023) to 204.5 million euros (2024), an increase of approximately 3.4%. In light of this, some digital strategies seem rather questionable, even more so as Microsoft is regularly criticised for its data protection and security failings.

Strategies for greater digital autonomy
Gaining greater autonomy requires courage and considerable staying power. For Anexia, moving from VMware to KVM wasn’t easy, but it was well worth it. The business is now using the cash freed up by this project to develop its own open-source solution and reclaim its digital freedom. And by doing so, Anexia is paving the way for other businesses, some of which have already followed suit.

Open technology is one key option, but on-premise solutions also offer interesting opportunities. Despite its focus on the cloud, Microsoft is still selling perpetual licenses, e.g. Office LTSC 2024, an up-to-date option that is not connected to the cloud. Most companies don’t actually need all the new features for their everyday work – older versions are often perfectly satisfactory and cheaper if bought in the form of used software. Another great way to save precious money.

Finding the right mix for more stability
Businesses don’t have to choose between one or the other – as always, it’s about finding the right balance, i.e. using local software where appropriate and cloud services where they provide demonstrable added value. Combining several providers is also a good way to derisk and to remain flexible. Used together, on-premise products, open-source solutions and targeted cloud services offer a solid foundation. The pressure VMware customers are currently facing is a stark reminder to all to rethink their IT strategy on a regular basis and to break free from any relationships of digital dependence.