Criticism of new licensing model – lessons companies can learn from VMware’s software strategy

Since VMware was taken over by Broadcom, its new licensing model has been causing confusion among VMware users and partners alike. The takeover has brought about some changes that raise many pressing questions. For instance, only the applications VCF (VMware Cloud Foundation) and VVF (VMware vSphere Foundation) are set to be available in future – and only on subscription. Aria as SaaS will officially be discontinued.

This signals the end of permanent licences for VMware, as it appears that all other products and their associated features are set to become subscription-only services. Users with ‘a very small number’ of servers will continue to be able to use vSphere Standard and the vSphere Essentials Plus Kit on a subscription basis. However, the announcement that the company would be moving to a subscription-only software model has sown further uncertainty among customers. The fact that VMware intends to replace its existing partner programme with a ‘selected partner’ system and has done away with the VMware Cloud Service Providers only adds to the uneasiness.

All in all, the new licensing model raises more questions than it answers. Users and partners should take a very close look at the impact the new usage conditions will have on them. For smaller software partners in particular, the changes mean that they will lose a portion of their business and will suddenly find themselves unable to meet contractual obligations they have towards their customers. Even if VMware does offer support to its customers during the transition, the future remains uncertain.

A licensing strategy with far-reaching consequences
VMware’s new licensing strategy is a vivid example of the consequences faced by IT customers and the market when these kinds of changes are introduced. It is becoming evident that a change in shareholders or investors at a software company can have devastating ramifications for customers, partners and the ecosystem as a whole. What it is also clear is that cloud and subscription-based services have major flaws, like the fact that providers are free to change their licensing models as and when they like – and will be resolute in their decision to do so. However, customers also need to remain resolute and refrain from blindly trusting in software subscriptions.

They should under no circumstances base their IT strategy on this business model, as they may face incalculable risks as a result. The fact alone that all the renowned cloud providers have massively increased their prices in recent times should be a red flag for software users. Instead of opting more and more for software subscriptions for their companies or public bodies, users should develop a well-thought-out and strategic licensing strategy.

A tenfold increase in costs a possibility
Yet this is not the only example of the new approach to selling software solutions: take the example of Citrix, another leading software provider that is planning to copy VMware’s strategy and set up its own new licensing model. In this case, too, the company has recently undergone changes to its shareholder structure: the company was bought for USD 16.5 billion in 2022 by subsidiaries of the global investment companies Vista Equity Partners and Elliott Investment Management, who are now looking for a return on their investment. Whereas in the past, Citrix offered virtualisation software products similar to those of VMware, they have now also opted to switch to a new licensing model. This will result in a tenfold increase in the costs of using the application, open-source platform Golem reports. According to the site, the monthly fee for pay-as-you-go licences is set to double as of 1 September 2024.

The benefits of perpetual licences
This is yet another example of a trend that has already begun emerging among many other software providers. These changes, which are becoming suddenly and palpably apparent, have sparked outrage in the IT community. However, European customers in particular do not have to stand by and watch as their established rights are stripped away. They can still rely on open-ended or ‘perpetual’ licences which are considered as property and therefore cannot be taken away from them – and that is where the strength of these licences lies.

When buying a software solution, it is important to always opt for purchased or perpetual licences over subscriptions where possible. Another benefit of this is that it bolsters the European second-hand software market, which the European Court of Justice decisively declared permissible in 2012. The fact that providers like VMware are trying to circumvent this legal possibility by switching to subscription licences should only serve to encourage customers to move to other providers. In the case of Microsoft in particular, it is still possible to obtain both on-premise and perpetual licences for up-to-date versions of various products thanks to high customer demand. This demand is only likely to increase in future.

At LizenzDirekt, we have made it our mission to advise companies and public bodies on all things pertaining to software licences. Our consultancy services and publications have been successful in convincing users of the benefits of second-hand software for many years. However, there is still a great deal of work to do in order to ensure everyone is fully aware of the various risks they face when using subscription-based services. One thing is sure: cases like those of VMware and Citrix serve as an example to IT decision-makers of the impact that a careless decision to use subscription and cloud services can have.