Negotiating VMware Cloud Services with Broadcom
Introduction – VMware Cloud Under Broadcom
VMware’s cloud services (such as VMware Cloud on AWS) are now sold under Broadcom’s umbrella. This shift means enterprise buyers must navigate a tougher, more rigid approach to contracts and pricing.
Broadcom is profit-driven and less flexible than VMware was historically, so negotiating favorable terms is more critical than ever.
In this guide, we’ll cover how to handle VMware Cloud pricing, credits, and hybrid licensing under Broadcom, as well as strategies to secure better terms.
For a comprehensive overview, read our ultimate guide, ‘VMware Cloud & Advanced Platforms Licensing Under Broadcom: Aria, Cloud Foundation, Tanzu.’
VMware Cloud Sales Paths
There have been two ways to purchase VMware Cloud on AWS:
- Direct from AWS: Previously, customers could buy VMware Cloud on AWS through AWS and pay as part of their AWS bill. This path offered transparent usage billing and potential AWS enterprise discounts. (Note: Broadcom ended AWS’s reselling rights in 2024, so new purchases must go through Broadcom.)
- Through Broadcom (VMware): Customers now purchase VMware Cloud services via Broadcom or authorized partners. Broadcom often integrates these services into a VMware Enterprise License Agreement (ELA) or sells them as subscriptions/credits. You may receive a bundled discount with your on-premises VMware products, but you’ll likely need to commit to a specific spend or capacity.
Tip: Always compare the economics. Even if you must buy through Broadcom, calculate what the service might cost via AWS’s native pricing or other alternatives. Use that as leverage to ensure Broadcom’s offer is competitive.
Broadcom’s Approach to Cloud Credits
Broadcom typically sells VMware Cloud on AWS via prepaid credits tied to multi-year commitments. These Broadcom VMware Cloud credits are often integrated into enterprise deals to lock in your spend.
Key points to consider:
- Bundled Commitments: Broadcom may push you to purchase a block of cloud credits as part of a larger deal.
- Shelfware Risk: If you overcommit, unused credits expire and become wasted spend. Be realistic with workload forecasts.
- Clarify Billing: Ensure you understand how credits are applied to actual usage. Ask Broadcom to document how consumption is measured against credits and what happens if you exceed them or have leftovers.
- Negotiable Flexibility: Try to negotiate portability of credits. For example, unused VMware Cloud on AWS credits can be applied to other VMware Cloud services or carried over into the next term.
Broadcom’s credit approach can secure better rates, but it requires careful negotiation. Make sure everything is in writing, including any promises of how credits can be used or adjusted.
Read about Tanzu licensing, VMware Tanzu Licensing Under Broadcom – What Buyers Should Know.
Commit vs On-Demand Pricing
Like any cloud service, VMware Cloud on AWS offers two pricing modes: reserved (committed) and on-demand.
- Reserved Commitments: You commit to a certain capacity (e.g., number of hosts for 1 or 3 years) and pay a lower rate. This is cost-effective if your usage is steady. Broadcom will encourage commitment – in fact, new deployments might require at least a 1-year term.
- On-Demand: You pay as you go, with no long-term commitment, but at a higher rate for greater flexibility. This is ideal for short-term or unpredictable needs. However, Broadcom’s sales model makes pure on-demand less prominent.
Advice: Commit to a baseline that you know you’ll use (to get discounted rates), but avoid overcommitting. Keep some capacity on demand if you anticipate variable needs. If possible, get quotes for both options so you understand the trade-offs.
Read our licensing tips, Broadcom Hybrid Cloud Licensing Tips – Managing On-Prem and VMware Cloud Together.
Negotiation Strategies
Approach Broadcom cloud negotiations with a plan. Here are key strategies to secure better terms:
- Bundle with Your ELA: Include VMware Cloud usage in your broader VMware enterprise agreement. Bundling can earn you bigger discounts across all VMware spend.
- Tiered Discounts: Negotiate volume discounts based on spend levels. For example, if you spend more than $X on VMware Cloud, you get a higher discount.
- Portability of Spend: Insist on the right to reallocate or transfer unused cloud credits. If you don’t use all your VMware Cloud on AWS credits, you should be able to apply them to other VMware services or future periods.
- Use AWS Cost Benchmarks: Come armed with pricing comparisons. Know what an equivalent setup on AWS would cost and use that to challenge Broadcom’s price.
- Cap Renewal Increases: Negotiate a renewal price cap (e.g., a maximum of 5% per year) to prevent unexpected hikes later.
Sample Clauses: Consider using plain-language clauses to solidify these terms. For example:
- “VMware Cloud usage above $X/year will be billed at Y% off the standard rate.” (Volume discount)
- “Unused VMware Cloud credits may be applied to any VMware Cloud service or rolled into the next year at equal value.” (Portability)
- “Support for VMware Cloud services is included in the subscription at no additional cost.” (Support included)
Hybrid Licensing Considerations
If you run a hybrid environment (on-prem VMware plus VMware Cloud services), address these points in your negotiation:
- Integrated Deals: Seek a combined deal for on-premises and cloud solutions. Broadcom should provide incentives if you commit to both, such as offering better overall discounts or simplified terms under a single contract.
- License Portability: Request flexibility to convert or utilize on-premises licenses in the cloud. For example, if you have unused vSphere/vCloud licenses, can they be credited toward VMware Cloud usage? Ensure your agreement allows you to move workloads to the cloud without incurring additional costs.
- Avoid Double Charges: Make sure you’re not paying for the same capability twice. If VMware Cloud includes certain software (e.g., vSphere and NSX as part of the service), you shouldn’t also be charged full on-prem license fees for those workloads when they move to the cloud. Clarify how on-prem licensing audits will treat VMs migrated to VMware Cloud.
Support & SLA Issues
When buying VMware Cloud services, nail down support and service level details:
- Support Inclusion: Verify that standard support is included in the VMware Cloud subscription price. Broadcom shouldn’t charge extra for basic cloud support. If they offer premium support tiers, decide if you need them, but baseline help should come with what you already pay.
- Service SLAs: Review the uptime guarantee and SLA credits. VMware Cloud on AWS should have an availability SLA (e.g., 99.9%). Ensure you are aware of the remedies if the service falls short (typically service credits). While you may not be able to easily change the SLA, it helps you hold Broadcom accountable.
- Escalation Path: Get contacts for support escalation. Under Broadcom, support processes may have changed – be aware of how to quickly escalate critical issues. Having this documented in the contract or support plan ensures you won’t scramble to find the right help during an outage.
Checklist – VMware Cloud Negotiation Must-Haves
Before finalizing your VMware Cloud deal with Broadcom, ensure these crucial points are addressed:
- ✅ Commitment Discounts: Volume or term discounts on cloud usage (the more you commit, the lower the unit price).
- ✅ Credit Flexibility: Ability to use or roll over unused cloud credits (avoid “use it or lose it” scenarios).
- ✅ Included Support: Written confirmation that support is included in the subscription cost (no separate support fees).
- ✅ Renewal Cap: A limit on price increases at renewal time (e.g., cap at 5% annually) to protect your budget.
- ✅ Hybrid Rights: Clauses allowing on-prem license portability to cloud and no double billing for hybrid use.
FAQs
Q: Is it better to buy VMware Cloud on AWS from AWS or from Broadcom?
A: Historically, AWS’s direct purchase offered more flexibility, while Broadcom’s route allowed bundling with VMware deals. Today, Broadcom is essentially the only seller (AWS no longer resells it), so compare Broadcom’s price to the equivalent cost on AWS. Use that knowledge to negotiate a fair deal with Broadcom.
Q: Do VMware Cloud subscriptions include support?
A: Yes – standard 24/7 support is typically included in VMware Cloud subscriptions. Confirm this in your contract so Broadcom doesn’t add any extra support fees.
Q: How do reserved and on-demand prices differ for VMware Cloud?
A: Reserved pricing means committing to a term (e.g., 1 or 3 years) for lower rates, while on-demand is pay-as-you-go at higher rates. Broadcom heavily favors reserved plans – use reserved for steady workloads and on-demand only for short-term or unpredictable needs.
Q: Can VMware Cloud credits be part of an Enterprise License Agreement (ELA)?
A: Yes – Broadcom can bundle VMware Cloud credits into an ELA. This often yields bigger discounts by increasing your committed spend. Just ensure the contract clearly defines the credits’ value, expiration, and flexibility so you don’t end up with unusable credits.
5 Actionable VMware Cloud Negotiation Tips
- Benchmark against AWS: Know the cost of running VMware workloads on AWS (or equivalent) to use as leverage in negotiations.
- Bundle for leverage: Combine VMware Cloud with on-prem licenses in one deal to unlock better discounts from Broadcom.
- Get volume discounts in writing: Ensure your contract includes tiered pricing that rewards higher VMware Cloud usage with bigger discounts.
- Protect unused spend: Negotiate the ability to repurpose or carry over unused cloud credits so your budget isn’t wasted.
- Demand support transparency: Confirm that support and SLAs are included and clearly documented to avoid surprises later.
By following these strategies and tips, you can approach VMware Cloud on AWS negotiations under Broadcom with confidence.
The key is to be proactive and detail-oriented. Don’t accept boilerplate terms – push for clarity, flexibility, and protections.
Broadcom’s default contracts favor the vendor, but with a solid negotiation approach, you can secure a cloud agreement that meets your technical needs and financial goals.
Read about our Broadcom Licensing Advisory Services
