Things to Do
- Form a Cross-Functional Negotiation Team: Assemble procurement, IT, finance, and legal stakeholders 6–12 months before renewal. Brief them on Broadcom’s new VMware pricing model and terms. Assign clear roles (e.g., IT maps usage, finance models cost impacts, procurement handles vendor dialogue). Early alignment prevents last-minute surprises and ensures all departments speak with one voice. For example, a CIO might task IT to identify which VMware features (like NSX or vSAN) are in use. At the same time, finance prepares budget scenarios under both old and new pricing.
- Audit and Document VMware Usage: Conduct a thorough internal review of all VMware deployments, features, and license usage. Document how many cores or hosts run each VMware component, and note any underutilized or redundant licenses. Compile technical dependency maps (which business applications rely on which VMware products). This fact base exposes unnecessary spending (such as unused vSphere Enterprise Plus seats) and arms you with data to challenge broad bundle offers. It also shows vendors exactly what you need – and what you don’t – preventing overbuying.
- Gather Historical Contracts and Entitlements: Pull all past VMware agreements, ELAs, or subscriptions. Summarize favorable terms (discount levels, price protections, included entitlements like growth buffers, global use rights, or disaster recovery allowances). Use these benchmarks in negotiations to demand continuity. For example, if your last ELA had an 18% discount and allowed 10% annual growth at no extra cost, point out that legacy deals prove that you deserve similar treatment. Even if Broadcom resists, this demonstrates you’ve got better terms under VMware and sets an internal baseline for concessions.
- Assess Alternative Solutions (BATNA): Explicitly develop your Best Alternative To a Negotiated Agreement. Evaluate non-Broadcom options’ ical and financial feasibility: for instance, shifting some workloads to Microsoft Azure’s Solution, running critical servers on Hyper‑V or Nutanix AHV, or containerizing applications on open-source stacks. Estimate the cost, time, and risk of such migrations. Even if a full switch isn’t immediate, quantifying a credible fallback gives you leverage. For example, one CIO calculated the multi-year expense of moving 20% of workloads to Azure VMware as a counteroffer during talks. By knowing this BATNA, you can negotiate from strength and, if necessary, credibly walk away.
- Engage Independent Licensing Experts: Consider hiring a third-party advisor (such as Redress Compliance) for an unbiased license and contract review. External experts can uncover hidden risks or savings – for example, identifying unused entitlements or recommending creative contract structures. They also have market data to benchmark your deal. In one case, a CIO brought in specialists who discovered that 25% of licenses weren’t renewed; armed with that insight, the company renegotiated its renewal downwards. Having an external expert on call signals to Broadcom that you’re about due diligence and won’t be a one-sided offer.
- Develop a Clear Negotiation Game Plan: Set your objectives and limits before talks begin. Decide on “must-haves” (e.g, the cap on price increases, elimination of the 20% late-renewal penalty, the right to drop unused products) and “tradeoffs” you’re going to make (such as signing a longer term if costs are controlled). Determine your walk-away threshold (the maximum price or terms beyond which you prefer your BATNA). Draft an agenda and talking points for each negotiation stage. Practice scenarios with your team so everyone responds consistently under pressure. For instance, outline how to answer the vendor if they refuse to uncouple unwanted products: you might say, “Since we only use vSphere, we cannot justify paying for full VCF; please give us a configuration and price for vSphere-only usage.”
- Prepare Escalation Paths and Executive Scripts: Map out escalation channels internally and with Broadcom. Identify who in your organization will step in at an impasse (e.g., the CFO or CEO). Prepare clear messages for high-level engagement. For example, draft an executive escalation email to Broadcom’s sales or country head: it might state that unless terms improve, the renewal will face the Board with options including migration to a competing platform or postponement of projects. Internally, craft talking points for the CIO or CEO on a call: “We value our VMware legacy but cannot absorb a multi-fold price hike; we need executive dialogue to explore a feasible path forward.” Having these templates ready ensures quick, coordinated action if negotiations stall.
- Bundle and Schedule Negotiations for Leverage: If you have multiple Broadcom/VMware products (like Symantec security suites or mainframe software), time those renewals together. Tell Broadcom you are reviewing the entire portfolio holistically. This signals higher stakes: you’re not just ready, you’re one contract away from potentially consolidating elsewhere. Conversely, ensure you’re not negotiatinyou’rere in isolation if timing allows; you might say, “We’re comparing offe “We’re our entire virtual infrastructure, not just vSphere, so we need an overall proposal.” Also, start renewal “talks before deadlines (ideally 4–6 months out) to avoid Broadcom’s common tactic oBroadcom’sute ultimatums. Early engagement removes their time leverage and allows you to consult partners or issue an RFP if needed.
- Train Stakeholders on New Terms: Ensure IT leaders and finance are up to speed on Broadcom’s license changes (e.g., subscript Broadcom’s models, core-based pricing minimums, strict renewal penalties). Adjust internal workflows so approvals can meet Broadcom’s tight timelines. For instance, Broadcom has a 20% penalty for late renewal, plan sign-offs, and budget allocation at least 3–4 months before expiry. Without this preparation, even a technical team unaware of a looming deadline could unknowingly trigger costly penalties.
- Document Technical and Business Dependencies: Outline exactly how VMware fits your IT strategy. Which applications or business processes depend on VMware features (cloud foundations, container support, etc.)? Can parts of the stack run on alternative platforms or in the public cloud? Knowing this helps you argue for maintaining critical rights (like using older perpetual versions indefinitely if needed) and identifies areas to diversify. For example, if a non-critical development environment uses VMware solely for testing, plan to move that to a Kubernetes cluster as a cost-avoidance tactic. At a minimum, mapping dependencies prevents blind spots – so Broadcom can’t slip in clauses that quietly break essential integrations.
What to Think About
- Broadcom’s Profit-First Ethos: Broadcom is reputed to be far more revenue-focused than VMware’s previous customer-friendly culture. Expect “take it or leave it” postures on pricing and bundling. Keep the “s mindset in view: They may deliberately present extreme initial quotes (e.g., 3–5× higher), expecting pushback. Remember, this is partly negotiation theatre; your job is to stay calm and counter with data and alternatives. Don’t assume any quoted price is final—treat it as a starting point. Don’t consider how their profit-driven approach fits with your long-term IT goals. If cutting costs and flexibility are top priorities for your organization, plan accordingly.
- Vendor Lock-In vs. Strategic Flexibility: With Broadcom’s bundling (forcing suites like VMware Cloud Foundry’s perpetual-license eliminations, your environment can become more locked in. Reflect on how that matches your IT roadmap. Are you planning cloud migrations, hybrid expansion, or multi-vendor strategies? If Broadcom ties you into a one-size-fits-all model, will that impede future agility? Conversely, factor in how critical VMware is for your current operations – there may be no perfect substitute. Weigh the pain of potential lock-in (higher costs, less innovation from being tied to one vendor) against the cost and risk of switching parts of your stack. This analysis informs how much you’re willing to push Broadcom versus Adapt.
- Total Cost Impact on IT: Consider short- and long-term financial effects. Broadcom’s shift to subscription and core-count licensing means some capital spending, and your costs scale differently (e.g., paying for “unused” cores due to high minimums). How will this change affect your multi-year “IT budget” and ROI calculations? It might accelerate moving workloads to cloud or container platforms to reduce on-prem cores. Understand that steep upfront renewal costs could crowd out new initiatives or hardware refreshes. Given these economics, does it still make sense to stay on VMware, or should we alter the architecture? This strategic question – cloud-first vs. capex investments – should influence how hard you push for concessions.
- Perception of Negotiation Power: Objectively assess how much power you have in this relationship. Are you a marquee account for Broadcom (large seat count, growth potential) or a smaller customer? Large customers can often get more attention; small-to-medium ones may need to be more creative (e.g., group purchasing with peers, highlighting public sector/commercial alternatives). Your leverage also depends on your willingness to exercise your BATNA: Broadcom respects deals where the customer has a credible alternative or a tight budget they can’t exceed. Use that perception to frame the negotiation. For instance, stating that you have a competitive offer elsewhere (even if preliminary) shows you’re not captive. Conversely, avoid seeming desperate – never communicate that you cannot achieve their terms.
- Audit and Compliance Risks: Broadcom has signaled it will enforce license audits more strictly. Think about how your compliance posture plays into negotiations. If your usage is over-reported (or even just unclear due to poor records), Broadcom could launch an audit mid-renewal to strengthen its hand. Ensure you’re compliant or in a position to correct any over-deployments. Also consider legal tactics: insist that your perpetual licenses remain valid indefinitely if you drop support, which some CIOs have successfully pushed for. If you neglect this, you could pay twice for the same capacity. In short, stay clean on audits now so Broadcom can’t spring surprise costs later.
- Internal and Executive Alignment: Negotiation strategy should align with corporate priorities. Think about how your board or executives care about vendor cost. Some business units might have already prepared to migrate off VMware if prices surged, while others might be highly dependent. Unify these perspectives: prepare executive sponsors (CEO/CFO) so they understand the tradeoffs (e.g., higher license spending vs. moving budgets to alternative projects). This top-down clarity amplifies escalation: the vendor notes whether the CEO is willing to write to Broadcom’s CEO. If your execs assume any Broadcom quote must be paid, Broadcom loses any incentive to negotiate.
- IndusBroadcom’s Market Context: Keep in mind current market moves. Hyperscalers (Microsoft Azure, Google Cloud) are actively courting VMware customers with special offers (like license portability deals). Meanwhile, Broadcom has sometimes restricted those partnerships (e.g., limiting AWS’s VMware resale rights). Knowing these alliances gives you talking points. For example, mention the new Azure VMware offer that lets you AWS-ize flexibly, or mention other vendors willing to discuss migration plans. This signals that even big clouds have taken notice – it subtly warns Broadcom that others are at the table.
- Long-Term IT Roadmap: Reflect on how today’s deal fits next year or the year after. Long multi-year contracts with Broadcom might lock in today’s terms, but if a better technology (e.g., Kubertoday’s adoption, edge computing platforms) emerges, will you be stuck? Consider negotiating today’s terms or include exit clauses tied to new tech availability. If you foresee a shift to containers or SaaS, emphasize that to Broadcom: you plan to reduce on-prem usage as part of the cloud strategy. This could prompt them to be more flexible in pricing or modular packaging, lest they be left with all paid seats and no usage.
Practical Impact
- Cost Savings vs. Overpayment: Following these strategies usually yields significant savings. For instance, companies that audited usage and demanded credits for legacy licenses often secured double-digit percentage discounts or fixed-rate multi-year deals. A healthcare CIO who prepared usage reports and engaged experts capped his renewal to a ~10% increase, whereas Broadcom initially quoted 50%. Conversely, ignoring this advice can be painful: some organizations that signed without pushback saw their VMware bill skyrocket 3–5×. In one example, a university did not renegotiate carefully and faced a jump from ~$40K to ~$500K per year. That kind of overpay can force project cuts or layoffs.
- Budget Predictability and Risk Reduction: You avoid future budget shocks by capping price increases or locking rates. For example, negotiating a clause that annual rises can’t exceed 5% means you’ll know your spending years in advance. This predictability funds other IT initiatives rather than scrambling for the budget. On the other hand, failing to meet your annual caps risks sudden 20–30% leaps each renewal, which could blow a fixed IT budget. Similarly, firms that tightened audit clauses (e.g., requiring 30 days’ notice and reasonable frequency) avoided surprise license-fine expenses. Ignoring that can mean paying breach-of-contract premiums or buying unexpected days’ consent top-ups at full price.
- Avoiding Compliance Traps: Proactively documenting entitlements and pushing back on broad audit clauses often prevents punitive compliance findings. For instance, one procurement lead insisted on redefining “authorized use” to match previous VMware terms so Broadcom couldn’t claim a violation and levy back-dated fees. As a result, the company avoided a potential 6-figure audit bill. If they hadn’t done this, they might have been caught in a “compliance trap” where Broadcom audits suddenly demanded extra seats. The practical impact is the difference between having to swallow a surprise charge and knowing you are” fully compliant.
- Leverage and Negotiation Outcomes: Escalation tactics tend to improve leverage. When CIOs got Broadcom execs on calls or wrote to them, you’re often shifted. In one scenario, a CIO’s involvement removed a harsh no-cancellation clause and included service credits for delayed support. Another example is when a retail CIO engaged the CFO in the CIO’s Broadcom and agreed to a customized payment schedule aligned with the retailer’s fiscal year. These outcomes—better contract flexibility—directly result from applying pressure. In contrast, clients who only dealt with junior reps got boilerplate retail concessions, illustrating the gap that escalation makes.
- Maintaining Strategic Agility: Companies that defined and demonstrated credible BATNAs (e.g., a prepared cloud migration plan) found Broadcom more willing to negotiate. This means they retained the choice to diversify later. For example, a financial services firm emphasized its plan to shift dev/test workloads to an Azure VMware environment if costs were unreasonable; Broadcom offered a lower renewal rate to keep the account. Had the firm not made that fallback plan evident, they would have been more or less “locked in,” unable to pivot. Thus, the practical benefit of a BATNA isn’t only better pricing—it’s the ongoing option to adapt your IT strategy.
- Executive and Organizational Momentum: “Successfully pushing back on terms also sends a message implicitly that IT is in control. Procurement teams involving negotiation executives often gain board-level support for future IT initiatives because they demonstrate fiscal discipline. For instance, after one organization saved $2M via a renegotiated deal, the CIO had more credibility to argue for next year’s cloud migration budget. Conversely, ignoring hardline terms can erode trust: if a VP learns that a renewal unexpectedly doubled, they may veto future projects or force the C’s recut budgets. Therefore, applying these strategies can bolster your position within the company, not just with Broadcom.
- Real-World Example – Escalation Script: Imagine a CIO drafts an email to the Broadcom VMware GM: “Dear [Name], our Board is reviewing this renewal, and the 60% cost increase you’ve proposed is untenable. We are prepared to move some workloads to the Azure VMware Solution if we “can’t agree on a fair price. We propose capping the year-one increase at 10%. Please let us know if Broadcom can accommodate this by [date]; if you can’t, we will be forced to explore alternatives.” Sending a message like this, backed by internal authorization to follow through, often results in a counteroffer much closer to reality. In practice, CIOs who used such direct language (and followed up with executive calls) found that Broadcom’s team returned with better discounts or removed penalties, proving that escalation and a clear walk-away line truly influence outcomes.
- Long-term compliance and Broadcom’s compliance with these strategies can affect your operational resilience. By securing explicit rights to continue using current software versions under existing licenses, you avoid a scenario where support lapses leave you stranded. Companies that skipped this step sometimes faced frozen software when Broadcom discontinued legacy support, forcing emergency upgrades. Conversely, those who negotiated perpetual-use clauses could delay upgrades on their terms. This tangible difference – running unsupported software (a disaster) or having the breathing room to upgrade on schedule – directly results from how you handled the negotiation.
This advisory is based on independent industry research and field experience in enterprise software negotiations. It summarizes collective insights into Broadcom’s post-acquisition VMware strategies and how CIOs can proactively counter them.
