Licensing VMware Cloud Foundation Under Broadcom
Introduction – VCF as Broadcom’s Flagship Bundle
VMware Cloud Foundation (VCF) is VMware’s all-in-one private cloud suite, bundling vSphere (compute virtualization), vSAN (software-defined storage), NSX (network virtualization), and management tools into a single offering.
Under Broadcom’s ownership of VMware, VCF is being positioned as the flagship licensing bundle for enterprise customers.
Broadcom is streamlining VMware’s portfolio to focus on a few core bundles, with VCF at the top. It is pushing customers to adopt this full-stack solution as the default option for on-premises cloud infrastructure.
This aggressive push means that buyers need to carefully understand VCF’s licensing and costs before committing. For a comprehensive overview, read our ultimate guide, ‘VMware Cloud & Advanced Platforms Licensing Under Broadcom: Aria, Cloud Foundation, Tanzu.’
VCF promises a simplified one-stop solution, but it also comes with a higher price tag and potential loss of flexibility compared to purchasing vSphere, vSAN, and NSX separately.
This article explores how VCF is licensed under Broadcom, what drives its costs, and how to negotiate effectively to avoid overpaying or being locked into unwanted components.
(Note: VMware Cloud Foundation overlaps with many core products. Negotiating a VCF deal inherently involves considerations of vSphere/vSAN licensing, NSX licensing, and bundling strategies. A cohesive approach is needed, as covered in related sections of this buyer’s playbook.)
How VCF Licensing Works under Broadcom
Licensing Model:
VMware Cloud Foundation has historically been licensed on a per-CPU basis, meaning each physical server CPU requires a VCF license (often with all features included). With Broadcom’s changes, the licensing is being standardized to a per-core model. Each CPU is counted by its number of cores (with a minimum core count per CPU applied). In practice, Broadcom now typically requires at least 16 cores per CPU to be licensed, regardless of whether a processor actually has fewer cores. This effectively retains a per-CPU structure but charges for a baseline of 16 cores (and if a CPU has more cores, those all count toward licensing).
Management vs. Workload Domains:
In VMware Cloud Foundation deployments, you set up a Management Domain (running the management stack) and one or more Workload Domains (running your actual business VMs). Historically, some VCF licensing was tied to these domains – for example, you needed to license the management cluster plus each workload cluster. Under Broadcom’s simplified scheme, such distinctions are less visible to the buyer; you generally license all physical cores in the environment, and the bundle covers both management and workload components. This means less flexibility in licensing just part of the stack: if you run VCF, you are licensing the full environment for all included products.
Reduced Flexibility:
Compared to standalone product licensing (where you can buy just vSphere, just vSAN, etc.), the VCF bundle is an all-or-nothing approach. Under Broadcom, the menu of VMware licensing options has been significantly reduced. Enterprise customers, especially, may find that the only quotes they get are for VCF (the full suite) or perhaps a smaller bundle like “vSphere Foundation”, rather than individual products. This lack of choice means you must pay for the entire stack’s licensing even if you intended to use only a subset of the components.
Key point: Broadcom’s licensing strategy for VCF focuses on standardization and maximizing revenue per customer.
By licensing per core and bundling everything together, Broadcom ensures that if you choose VCF, you’re investing in the whole VMware ecosystem on a per-processor basis. Understanding this is critical for negotiations – it sets the stage for the cost implications described next.
Cost Considerations of VCF
Adopting VMware Cloud Foundation can significantly increase costs for customers who were previously using only some VMware products.
By design, VCF is a high-cost bundle because it includes virtually VMware’s entire infrastructure stack.
Here are the main cost drivers and considerations:
- All-in-One Pricing: VCF’s price accounts for vSphere, vSAN, NSX, and various management tools together. Even if your organization doesn’t currently use (or plan to use) one of these components (for example, NSX for software-defined networking), you still pay for it. The bundle pricing is hefty to reflect the full feature set.
- NSX and Unused Components: For many vSphere and vSAN customers, NSX was not part of their environment. VCF introduces NSX licensing by default. NSX licensing can be a substantial cost increase – often comparable to vSphere itself. This means that moving to VCF can double the cost per CPU/core if NSX wasn’t previously licensed, potentially turning it into shelfware if it’s not utilized.
- Per-Core with Minimums: The shift to per-core licensing (with a 16-core per CPU minimum) can inflate costs in two ways: (1) Small processors penalty – if your CPUs have, say, 8 or 12 cores, you still pay as if each had 16. (2) High core count penalty – if you run servers with 24, 32, or more cores, Broadcom’s per-core charges accumulate quickly (and in some cases, VMware has even signaled larger minimum order quantities, making small deployments financially unviable). The net effect is a higher baseline spend for the same hardware footprint compared to previous per-socket licensing.
- Limited Discounts vs. À la Carte: In the past, buying à la carte (only vSphere/vSAN) allowed for optimized costs by omitting what was not needed. With VCF, you’re paying for everything up front. Broadcom may offer some bundle discount to make the pill easier to swallow, but the base list price is steep. Even after discounts, the all-in cost of VCF often exceeds what an equivalent vSphere-only solution would cost, because you’re now funding the entire software-defined data center.
- Support and Renewal Costs: VCF, being a subscription-based service, means you’ll pay annually (or in multi-year increments) for continued rights and support. Broadcom’s track record is to impose price increases at renewals. Without protective terms, you might face steep uplift costs in year 2 or 3. The comprehensive nature of VCF means any uplift is applied to a big bundle price, making the dollar impact even larger.
In summary, VMware Cloud Foundation can deliver technical value by integrating the full VMware stack; however, it is a significant financial investment.
Buyers must go in with eyes open that they’re signing up to pay for a Cadillac, and budget accordingly (or negotiate fiercely) if they only need a sedan.
Read about VCF licensing, Licensing VMware Cloud Foundation Under Broadcom – What Buyers Should Know.
Negotiation Challenges with Broadcom’s VCF Approach
When negotiating VCF licensing with Broadcom, customers encounter several challenges and pitfalls.
Broadcom’s default approach is geared toward maximizing its revenue and pushing the full bundle, which can put unwary buyers at a disadvantage.
Key challenges include:
- Paying for Unwanted Components: The biggest concern is shelfware – paying for parts of VCF you won’t use. If your team isn’t ready to deploy NSX or certain management tools, Broadcom’s default VCF offer doesn’t care – you’re paying for them regardless. This can lead to significant waste in your IT budget if not addressed.
- Forced Full-Stack Adoption: Broadcom may implicitly (or even explicitly) make VCF the only viable option for enterprise agreements. You could lose the ability to purchase vSphere and vSAN separately on favorable terms. In some negotiations, customers find that if they request standalone vSphere licenses, Broadcom responds with quotes for VCF bundles. This lack of choice can be frustrating – it’s essentially “take the bundle or walk away,” limiting your flexibility.
- Complex Transitions for Existing Deployments: If you’re currently licensing vSphere and vSAN standalone, moving to VCF means converting licenses and possibly rearranging your environment architecture to align with VCF’s terms (for example, ensuring all hosts are under the VCF subscription). There’s a risk of disruption or inefficiency during this transition, and Broadcom’s contracts might not accommodate a phased adoption easily.
- Renewal and Cost Escalation Risk: Without negotiated protections, the cost of VCF can skyrocket at renewal. Broadcom is known for aggressive renewal tactics – if you simply accept their standard terms, you might face high annual price escalations or the inability to drop unused components later. This challenge means you could be locked into an ever-growing expense with no escape hatch if your needs change.
- Inflexible Bundle Terms: The integrated nature of VCF can make negotiations tricky. For example, removing one component (such as excluding NSX licensing) isn’t something Broadcom sales representatives may readily agree to, since their product catalog is simplified into set bundles. Buyers often have to push hard for any deviations from the standard bundle. It can feel like negotiating with all-or-nothing stakes, which is a tough position if you have specific requirements.
Buyer risk without negotiation: If a customer simply accepts Broadcom’s VCF proposal without pushing back, they risk:
- Overpaying for a full bundle regardless of actual need.
- Being forced into NSX adoption (and other tools) even if they had no intention of using them.
- No control over future costs, as prices can increase unchecked at each renewal.
Understanding these challenges is the first step. The next step is formulating strategies to counter them and secure a fair deal.
Negotiation Strategies for VCF Licensing Deals
To mitigate the challenges above, buyers should approach a VMware Cloud Foundation deal with a clear strategy.
Here are key negotiation strategies to consider when dealing with Broadcom on VCF:
- Bundle-Level Discount: If you decide to go with VCF, negotiate aggressively on the overall price. Broadcom wants to land big VCF commitments, so use that to your advantage. Push for a substantial package discount off the list price for VCF. Treat it like buying in bulk – you’re committing to the whole VMware suite, so you deserve better-than-standard pricing. Make Broadcom justify the cost, and counter with pricing you’ve seen for individual components in the past to anchor a lower rate for the bundle.
- Custom SKU or Component Opt-Out: Don’t assume you must accept the bundle exactly as offered. If there are components you truly don’t need (for example, if you have no plan to use NSX in the next year or two), push for a custom SKU or removal of that component. This could involve requesting a “VCF without NSX” package or a pricing carve-out for the unused components. They may resist, claiming the bundle is indivisible. Still, strong negotiation can sometimes yield exceptions or creative solutions (like providing a separate credit or discount equivalent to the cost of the unwanted component).
- Maintain Standalone Purchase Rights: Insist on the ability to purchase core components separately if needed. Your contract or agreement should not require 100% of your virtualization spend to be allocated to VCF if it doesn’t make sense for certain parts of your estate. For example, you might want to continue purchasing some vSphere and vSAN for a small remote site that doesn’t require the full VCF stack. Make sure Broadcom’s deal does not eliminate your option to procure and renew non-VCF licenses (at least for a defined period or specific use-cases). This requires clear communication in negotiations: let them know you value VCF for certain environments, but not universally.
- Lock Expansion Pricing: A critical strategy is to lock in the pricing for future expansions. Get a clause that any additional VCF licenses (additional cores or CPUs) you purchase during the term of your agreement will be at the same unit price or discount level as the initial purchase. This prevents Broadcom from quoting much higher prices when you grow. Without this, they could entice you with a decent initial price, then gouge you for more licenses later when you’re already committed to the VCF path.
- Cap Renewal Uplifts: Given Broadcom’s tendency to raise prices, negotiate a cap on annual price increases for your VCF subscription. For instance, agree that upon renewal (or in any annual price adjustments), the fee cannot increase more than, say, 3–5% per year. Lock this into the contract. This cap protects you from unexpected cost increases after the first term. If Broadcom insists their policy is to increase by X% or tied to some index, negotiate the lowest possible cap or a flat renewal rate in advance.
- Multi-Year Commitments and Terms: Broadcom often pushes multi-year subscriptions (like 3-year deals). Leverage this in negotiations: if you’re committing to a longer term, you should receive benefits in return. This could be a larger upfront discount or the caps above and price locks spanning the term. Ensure that any multi-year deal includes provisions for the price to remain steady or for controlled increases throughout the period. Additionally, clarify the terms for adding more licenses mid-term in a multi-year deal (to avoid co-terming issues that reset your rates).
- Benchmark and Alternative Leverage: Quietly gather pricing benchmarks from peers or third parties for comparable solutions. For example, determine the cost of a competing hypervisor or cloud solution for your workload. While switching may or may not be realistic, having those figures gives you leverage. You can tell Broadcom, “If the VCF bundle is too expensive, we are evaluating other options (open-source virtualization, alternative HCI platforms like Nutanix, or even public cloud) for part of our workloads.” This signals that you won’t hesitate to diversify away from VMware if they don’t negotiate fairly. Broadcom desires to keep you all-in on VMware, so do not use any credible alternative as a bargaining chip.
- Total Cost of Ownership Transparency: Request that Broadcom break out the components in pricing (even if they claim it’s a single bundle). Sometimes seeing the cost of NSX, vSAN, etc., inside their quote can lead to negotiation points (“We can’t justify paying $$ for NSX, we won’t use this year – how can we reduce that?”). Even if they don’t fully break it out, asking these questions puts them on notice that you are scrutinizing the value of each part of VCF. It can lead to creative discounting (“Okay, we’ll throw in a 100 TB vSAN capacity add-on for free” or “we’ll discount NSX by 50% for the first year”) to close the deal. Get all such promises in writing.
Each of these strategies is designed to avoid the one-sided default deal. The goal is to tailor the VCF licensing agreement to meet your organization’s actual needs and provide safeguards against future cost increases.
Read about VMware Aria licensing, VMware Aria (vRealize) Licensing Under Broadcom – What Changed and What to Negotiate.
Buyer Leverage Points with Broadcom
Buyers have more leverage than they might think when negotiating with Broadcom on VMware Cloud Foundation.
Broadcom is highly motivated to get customers onto VCF, and that motivation can be exploited in negotiations.
Here are some leverage points and how to use them:
- Broadcom’s Push for Adoption: Broadcom’s sales teams have quotas and strategic goals around VCF adoption. If you’re a sizable customer, they want your VCF business badly. Use this to extract concessions. For example, let them know that VCF is one of several options you’re considering – if they want you to standardize on VMware’s full stack, they need to make it worth your while financially.
- Reference and Case Study Dangling: This is a bit of gamesmanship, but consider leveraging their marketing appetite. Indicate that if you adopt VCF with Broadcom on good terms, you may be willing to serve as a reference account or share your success story. Vendors often trade better pricing for customer references. Whether or not you actually do marketing with them, planting this seed can encourage Broadcom to give a more generous deal in hopes of a public win.
- Alternative Solutions: Even if you have no immediate plan to switch, do your homework on alternatives like other hypervisors (Hyper-V, KVM), other HCI solutions, or public cloud migrations. Bring up the fact that you have these alternatives scoped out. For instance: “Our CFO is asking why we don’t consider moving some workloads to an open-source virtualization stack or XYZ cloud – I need a strong financial case to stick with VMware.” This puts pressure on Broadcom to sharpen its pricing or risk losing some market share. It reminds them that their competition is a viable threat if they overreach.
- Holistic Spend Leverage: If you’re negotiating VMware licensing as part of a broader procurement (perhaps your company also buys Broadcom’s other software, or hardware, or has a significant overall spend), use that holistic view. Broadcom now owns multiple product lines – you can try to bundle commitments across portfolios for a better deal. Alternatively, simply make it clear that your total spend with Broadcom-VMware will depend on the reasonableness of the VCF deal. The more they think long-term revenue is at stake, the more flexibility you may gain.
- Timing and Quarter-End Pressure: Broadcom, like other large vendors, faces quarterly targets. Your leverage can increase as quarter-end or fiscal year-end approaches. If you have the luxury of timing, negotiate late in Broadcom’s quarter – sales teams may offer extra discounts or concessions to book the deal in the current quarter. Use that timing to push for the terms you want when they’re most eager to close.
- Internal Alignment and Walkaway: Finally, one of your strongest levers is the willingness to say “no”. Ensure your internal stakeholders (IT, procurement, finance, and even executives) are aligned on what you need from the deal and at what point you will walk away or explore alternatives. Communicate (politely) this walkaway stance to Broadcom: “We have a hard budget/policy, and if we can’t make VCF work within that, we will stick with our current setup or look elsewhere.” This credible resolve often forces the vendor to re-evaluate their stance. Broadcom knows that losing a customer to alternatives or leaving them on older licensing is a loss for their strategy so that a firm stance can yield last-minute improvements.
In summary, remember that Broadcom’s desire to sell you the whole cake (VCF) can be turned to your benefit. So long as you’re genuinely willing to consider other paths, you can negotiate from a position of strength rather than weakness.
Checklist – Must-Have VCF Contract Terms
When finalizing a VMware Cloud Foundation licensing agreement, ensure that your contract includes provisions that protect your interests and align with your specific needs.
Here’s a checklist of must-have terms and clauses to negotiate into the contract (in plain language where possible):
- Selective Components Clause: Ensure you have the right to exclude unused components or receive equivalent cost relief. For example: “Customer may license VMware Cloud Foundation excluding NSX (or other undesired component) at a commensurately reduced rate.” This clause explicitly allows you to carve out something like NSX if it’s not part of your plans, so you’re not paying for shelfware.
- Expansion Pricing Lock: Include a clause to lock future expansion costs at the same rate. For example: “Any additional VCF licenses purchased during the term will be at the same per-core (or per-CPU) price as the initial purchase.” This prevents price gouging when you grow. If you start with 100 cores and later need 20 more, you pay the same unit price, not a new, higher price.
- Discount Rate Assurance: If you’ve negotiated a discount off the list price, make sure it carries forward. For instance: “The negotiated discount percentage for VCF shall apply equally to any renewals and additional licenses during the term.” This way, even if VMware’s list prices change, you retain the same discount level and don’t lose the benefit when renewing or expanding.
- Renewal Cap / Price Protection: Negotiate a cap on the maximum increase in subscription price at renewal. Example clause: “Upon renewal, the annual VCF subscription fee shall not increase by more than X% per year.” If possible, lock a specific renewal price or a very low cap (e.g., 3% annually). This guards against nasty surprises in year 4 when your initial term expires.
- Flexibility for Standalone Products: Include an option to switch or purchase standalone VMware products as needed. “Customer retains the option to license vSphere and other components separately outside of VCF for specific use cases, without penalty.” This ensures that if VCF doesn’t work out for a part of your environment, you’re not completely locked in. It also gives leverage in case you need to partially unwind the bundle.
- Subscription Term and Exit Terms: Clarify what happens at the end of the term. For example, avoid auto-renewals at list price. Ensure there’s a clear exit or renewal negotiation window. Also, if Broadcom’s policies change (say they alter the licensing metrics or bundle contents in the future), include a clause that you won’t be forced into a materially worse position mid-term.
Review this checklist with your legal and procurement team. These clauses help transform a potentially one-sided vendor contract into a more balanced agreement that safeguards your interests.
Broadcom may not volunteer these terms – you must request them.
But getting even a few of them can save hundreds of thousands of dollars and a lot of headaches later on.
FAQs: Common Questions on VCF Licensing under Broadcom
Q: Is VMware Cloud Foundation mandatory now that Broadcom is in charge?
A: Not officially mandatory, but it can feel that way. Broadcom has greatly simplified VMware’s product lineup and is heavily promoting VCF as the go-to solution for private cloud. In practice, many large customers are finding that the most viable or best-value offers are VCF bundles rather than picking and choosing components. However, you can still insist on other options. Smaller customers and specific cases can still purchase individual VMware products (like vSphere-only or vSphere+vSAN) – just be prepared that Broadcom’s sales motion will try to funnel you into VCF. It’s a strong push, not a literal requirement.
Q: How is VCF licensed – per CPU or per core, and what about core counts?
A: Under Broadcom’s licensing model, VMware Cloud Foundation is licensed per physical core on your processors. There is a minimum of 16 cores counted per CPU. In simpler terms: if you have a server CPU with eight cores, you still need to buy 16 cores’ worth of licensing (a minimum “floor”), and if you have a CPU with, say, 20 cores, you pay for all 20. This represents a shift from the old model, which was based on a per-CPU socket (up to 32 cores in VMware’s previous rules). Broadcom’s approach ensures that it captures value from high-core-count chips and avoids undercharging for lower core counts. Always verify the number of cores they are counting for your hardware and ensure it matches your expectations before signing.
Q: Can I still buy vSphere and vSAN without buying the full VCF bundle?
A: Yes, technically you can. VMware’s core products like vSphere (compute) and vSAN (storage) are still available as separate subscriptions (and there are smaller bundles like “vSphere Foundation” that include vSphere + vSAN without NSX). However, Broadcom’s sales strategy for larger accounts is to encourage the full VCF. If you are a large enterprise customer, you may find that standalone purchases are less discounted or even discouraged. During negotiations, you can absolutely push to obtain quotes for only what you need – for example, if you have no intention of deploying NSX, you can request a vSphere + vSAN package instead of VCF. The key is not to assume VCF is your only choice. It may be necessary to escalate within Broadcom’s organization or involve a reseller who can advocate on your behalf. However, standalone licensing is still possible and sometimes makes sense if VCF doesn’t fit your requirements or budget.
Q: Is NSX definitely included (and charged) by default in VCF pricing?
A: Yes. NSX is a core component of VMware Cloud Foundation. The VCF bundle price includes licensing for NSX (specifically NSX for vSphere/VCF), as well as vSphere, vSAN, and other components, such as the Aria management suite. Whether or not you actually use NSX networking in your environment, the cost is baked into VCF. This is exactly why many organizations see a cost jump – NSX can be as expensive as the compute layer in some cases. If you aren’t ready to utilize NSX, this portion of VCF becomes effectively an added tax. In negotiations, this is a point to raise. If NSX (or any included product) is not in your deployment plan, ask Broadcom what value you’re getting for that cost, and seek a way to mitigate it (through discounts or removing it as discussed above). But out of the box, NSX comes with VCF, and you pay for it.
5 Actionable VCF Licensing Tips for Buyers
To wrap up, here are five quick, actionable tips when approaching VMware Cloud Foundation licensing under Broadcom:
- Confirm the Licensing Metric Upfront: Nail down exactly how you’ll be charged – per core, per CPU, any minimums – before negotiating price. Ensure there are no surprises about core counts or required quantities in the quote.
- Only Pay for What You Will Use: Don’t accept a bundle that includes software you have zero intention of using. Push for a tailored SKU or a discount to offset unused components. It’s better to start with what you need and add components later than overpay for shelfware from day one.
- Lock and Cap Your Costs in Writing: Obtain contractual assurances on pricing – secure your per-unit price for future expansions and limit renewal increases. If it’s not in writing, assume it’s not promised. Verbal assurances won’t help you when a renewal comes back 20% higher.
- Keep Your Options Open: Maintain the ability to fall back to standalone vSphere/vSAN or other solutions as needed. Even if you plan to go full VCF, negotiating the right (or at least not waiving the right) to choose alternatives gives you leverage and flexibility. Never let a vendor contract corner you into a single path with no escape.
- Leverage Broadcom’s Desire to Sell VCF: Remember, Broadcom wants you on VCF. Use that as your bargaining chip. Make them earn your business with better pricing and terms. If they sense you’re considering other options or a piecemeal approach, they’ll be more inclined to bend. Don’t be afraid to walk away from a bad deal – that’s when you often get the best offers.
By following these tips and the strategies outlined above, buyers can approach VMware Cloud Foundation licensing with a clear game plan.
The key is to remain strategic and skeptical of the default offer. With careful negotiation, you can harness the benefits of VCF’s full stack without falling prey to unnecessary costs or risk.
Broadcom may set the rules of the game, but informed customers can still negotiate wins on the field.
Read about our Broadcom Licensing Advisory Services
