Broadcom Hybrid Cloud Licensing Tips
Introduction – Hybrid Reality for VMware Customers
Most VMware customers now run in a hybrid model, with some workloads in their own data centers and others in VMware Cloud services (AWS, Azure, GCP).
Broadcom’s acquisition of VMware means Broadcom’s hybrid cloud licensing must account for this mix, but customers cannot assume the old flexibility will remain. Without careful planning, you risk significantly overpaying for your VMware estate.
Under VMware’s previous ownership, programs like VMware Cloud Universal enabled some license portability between on-premises and cloud environments. It’s unclear if Broadcom will maintain anything similar.
Without explicit contract provisions, you may not be able to transfer licenses from on-premises to cloud at all – leading to double payment, stranding existing licenses, or facing compliance headaches.
Below are strategic tips to help CIOs, procurement teams, and IT architects structure hybrid VMware agreements without overpaying or losing flexibility.
For a comprehensive overview, read our ultimate guide, ‘VMware Cloud & Advanced Platforms Licensing Under Broadcom: Aria, Cloud Foundation, Tanzu.’
Challenge 1 – License Portability
License portability is a major concern. VMware historically offered programs (like Cloud Universal) to convert on-premises licenses into cloud credits.
Broadcom’s plans for such flexibility are unclear. Without portability, you’ll pay for new cloud subscriptions while your paid-for on-prem licenses sit idle – a duplicate expense to avoid.
To prevent that, negotiate a contract clause that lets you convert or transfer on-prem VMware licenses to VMware Cloud usage during the term.
With a portability clause in place, you can shift workloads to the cloud without wasting your existing investment in on-prem licenses.
Challenge 2 – Avoiding Double Payment
A hybrid setup risks double-paying for the same workload – for example, paying support for an on-prem license while also paying for that VM’s cloud instance.
Without safeguards, this scenario is common when workloads move.
Negotiate a “no double payment” clause so that if a workload moves to the cloud, its on-prem license fees stop.
Ensure you have the right to suspend or reassign that on-premises license during cloud usage. This ensures you won’t pay twice for a single deployment.
Challenge 3 – Different License Models
On-prem and cloud use very different licensing models, which can complicate management.
On-premises VMware is often perpetual (a one-time license plus ongoing support), whereas VMware Cloud services are subscription-based (recurring usage fees). Managing both can lead to cost surprises if not aligned.
Try to unify your licensing model through negotiation and collaboration. Ideally, include both on-prem and cloud entitlements under one master agreement or ELA. This way, a single committed spend can flex between the environments.
At a minimum, secure consistent discounts and cap price increases for both.
For example, negotiate limits on support fee hikes and cloud rate increases. These steps keep costs predictable and prevent either side from unexpectedly inflating your budget.
Insights on how to negotiate VMware services with Broadcom, Negotiating VMware Cloud Services with Broadcom – How to Secure Better Terms.
Challenge 4 – Data Residency & Compliance
Using VMware Cloud across regions raises data residency and compliance issues. Regulated industries require assurance that moving a workload to a cloud data center in another country will not violate any rules or license terms.
Broadcom’s standard terms may not cover cross-border usage by default. Include global usage clauses in your contract.
Ensure it explicitly allows your licensed workloads to run in any region where VMware Cloud operates, with no additional fees or approvals needed.
That way, you can deploy or migrate workloads globally (for disaster recovery, backup, etc.) without licensing headaches or penalties.
Negotiation Strategies
To manage a hybrid VMware environment under Broadcom, be proactive and specific in negotiations. Broadcom’s default contract won’t necessarily accommodate hybrid needs, so you have to secure the terms you require.
Key strategies include:
- Unify agreements: Consolidate on-prem and cloud licensing under one Enterprise License Agreement. A unified contract ensures consistent terms, making portability and conversions easier to manage.
- Include transfer & conversion rights: Insert a license portability clause so you can transfer licenses between on-premises and cloud environments. Define a conversion formula (e.g., one on-premises license equals a set amount of VMware Cloud capacity) so that both parties understand how conversions work.
- No double billing: Insist on a “no double payment” provision. It should be stated that when a workload is moved to the cloud, the corresponding on-premises license fee is not charged.
- Lock in pricing: Negotiate price protections for both models to ensure stability. Cap annual support fee increases and lock in cloud subscription rates or discounts for your contract term to avoid surprise cost hikes.
- Address compliance: Ensure the contract allows global license use and includes fair audit terms. You don’t want to be penalized for shifting workloads across borders or caught off-guard by an aggressive compliance audit.
By entering talks with a clear list of hybrid requirements, you set the expectation that flexibility is a must-have. It’s far easier to get these concessions before signing than to add them mid-term.
Remember, Broadcom’s priority is maximizing its revenue – only you can ensure your hybrid cloud needs are contractually protected.
Checklist – Must-Have Hybrid Licensing Terms
When finalizing your VMware contract, make sure these critical clauses are included:
- License Portability: “Customer may convert on-prem VMware licenses into equivalent VMware Cloud credits during the contract term.” This ensures you can repurpose on-prem investments for cloud use instead of paying anew.
- No Double Payment: “Customer shall not be invoiced for both on-prem and cloud licenses for the same workload.” Guarantees you won’t be charged twice if a VM migrates to the cloud.
- Conversion Ratio: Define how on-prem entitlements translate to cloud usage (for example, one on-prem CPU license grants X amount of VMware Cloud capacity). A written formula prevents ambiguity when you switch environments.
- Global Usage Rights: “Licensed workloads are valid across all geographies where VMware Cloud is offered, without additional fees or approval.” Protects you when deploying in multiple regions and ensures location-specific rules don’t hinder your license rights.
- Support Price Cap: Limit support and subscription price increases (e.g., “Support fees and cloud subscription rates shall not increase by more than 5% annually during the term.”). This keeps cost growth predictable across hybrid deployments.
FAQs
Q: Can Broadcom VMware licenses be moved from on-prem to VMware Cloud?
A: Not by default. You must negotiate that ability upfront. In practice, secure a portability clause that allows you to apply the on-premises license value to VMware Cloud usage. Broadcom hasn’t guaranteed license mobility in standard terms (even if some new offerings hint at it), so ensure it is explicitly stated in writing.
Q: How do we avoid paying twice for hybrid workloads?
A: Use a “no double payment” clause to ensure you’re not charged an on-prem license fee while the same workload runs in the cloud. Set clear terms that let you pause or reassign licenses when migrating a system. In short, if a VM is moved to the cloud, its original on-premises license billing should cease.
Q: What happens to our perpetual licenses if we migrate those VMs to the cloud?
A: If you do nothing, those licenses become shelfware (you might even keep paying support for them without using them). Protect that investment by negotiating conversion credits or similar – get value back when you move a workload off an on-prem license. Otherwise, migrating to the cloud could leave your purchased licenses collecting dust.
Q: Does Broadcom support VMware Cloud Universal or similar programs?
A: No, not in the same form. Broadcom has not continued VMware’s Cloud Universal credit program. Instead, they push their own subscription bundles (like VMware Cloud Foundation subscriptions). You shouldn’t assume any universal credit flexibility now. To achieve hybrid flexibility, incorporate it into your contract through the clauses outlined above.
5 Actionable Hybrid Licensing Tips
Finally, here are five actionable tips for negotiating a hybrid-friendly VMware deal under Broadcom:
- Push for portability: Make on-prem-to-cloud license portability a non-negotiable contract element.
- Ban double-billing: Get explicit “no double payment” commitments so you never pay twice for the same workload.
- Align support costs: Negotiate unified support and subscription pricing caps to prevent surprise rate hikes.
- Include conversion rights: Build in the ability to convert on-premises licenses into cloud usage credits as needed.
- Address compliance early: Include data residency and global usage in the contract to ensure licensing doesn’t limit where you deploy workloads.
By following these tips, enterprises can enjoy the benefits of both on-premises and cloud VMware environments without overspending or sacrificing flexibility.
With the right clauses in place, you’ll leverage hybrid cloud on your terms – not Broadcom’s.
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