VMware Contract Changes Under Broadcom – What’s Different and How to Negotiate

VMware Contract Changes Under Broadcom

Intro – Why This Matters Now

Broadcom’s takeover of VMware is reshaping VMware’s contract terms in ways that buyers must heed now. Expect tighter terms, fewer flexible programs, and higher baseline costs at renewal.

Broadcom is applying its hard-nosed playbook from past acquisitions (like CA and Symantec) to VMware customers. Read our comprehensive guide to Broadcom Enterprise License Agreements (ELA/PLA) and Framework Contracts.

What used to be a straightforward VMware ELA renewal now comes with surprise clauses and stricter policies. You need a clause-by-clause game plan before your next negotiation to protect your organization and budget.

Section 1 – Renewal Mechanics

Change: Shorter renewal notice windows (often 30–60 days) and auto-renewal by default.
Impact: Less time to negotiate or seek alternatives; higher risk of being locked into an unwanted renewal or sudden price hike.
Negotiate: Insist on 90–120 day notice and opt-in renewals (no automatic extensions). Carry forward your existing discount percentage, and cap any annual price increase (e.g. ≤5% per year).

Section 2 – Flexibility (True-Ups/Downs & Swaps)

Change: True-down rights (reducing license counts) have been removed or heavily restricted. Broadcom contracts lock in quantities for the full term, and product swap options are no longer available.
Impact: Risk of paying for shelfware – if usage drops or a product isn’t needed, you still pay for it. The inability to swap out unused licenses means less flexibility with multi-year deals.
Negotiate: Add an annual true-down allowance (e.g., you can reduce licenses by 10–15% at renewal without penalty). Negotiate swap rights to exchange unused licenses for other equivalent products if needs change.

Section 3 – Transfer & Assignment (M&A Terms)

Change: Tighter rules on transferring licenses during mergers or reorganizations. Broadcom often requires explicit consent for any assignment and removed “consent not unreasonably withheld” language. Affiliate usage rights are narrowed (only specified or wholly-owned affiliates can use licenses).
Impact: Mergers or spin-offs become licensing landmines. You may need to repurchase licenses for a divested entity or renegotiate if your company’s structure changes. Licenses are effectively locked to the original entity, limiting flexibility across an enterprise.
Negotiate: Restore assignment flexibility. Insert “not unreasonably withheld” for consent on assignments due to M&A. Ensure any majority-owned affiliate can use the licenses under your agreement. If you divest part of the business, allow the transfer of its licenses to the new owner, so you’re not forced to repurchase them.

Section 4 – Licensing Metrics & Programs

Change: Broadcom is transitioning VMware to new models – notably, per-core licensing with high minimums (e.g., you must license 72 cores, even if fewer are in use). Many standalone VMware products are now only sold as part of larger bundles (like VMware Cloud Foundation), and legacy VMware purchasing programs (like the VPP volume discount program) have been retired.
Impact: You may be forced to buy more than you actually need. Small deployments face a much higher entry cost due to core minimums. Bundle-only sales mean paying for components you might not use, leading to shelfware. And losing VMware’s old programs can mean losing predictable discounts you counted on.
Negotiate: Freeze metrics for your term – if you were licensed per-CPU, stick to that, or if moving to per-core, ensure the cost impact is neutral for you. Demand transparency in bundle pricing: get a cost breakdown for each component. If you don’t need a part of a bundle, request the option to remove it or receive a price credit for it.

Read more Broadcom ELA vs Separate Contracts – Which Model Fits Your Enterprise?.

Section 5 – Support & Audit Terms

Change: Support is standardized (harder to get custom SLAs), and audit rights are stronger. VMware’s flexible support tiers and occasional custom SLAs for large customers are largely gone – Broadcom offers a one-size-fits-all support model. Meanwhile, audit clauses now allow more frequent checks with shorter notice, and Broadcom is quicker to enforce penalties for non-compliance (e.g., back-charging 20% “late” fees or requiring immediate true-ups).
Impact: It’s harder to hold Broadcom accountable for support quality (limited remedies if they miss response targets). At the same time, customers face a higher compliance burden – they need to be continuously audit-ready, as Broadcom can initiate audits aggressively. A minor license mistake could result in a surprise bill or even suspension of support.
Negotiate: Push for at least some SLAs in the contract (e.g, defined response times for critical issues, with possible service credits if missed). Also, tame the audit clause: limit audits to, e.g., once every 24 months with 30–45 days’ notice. Require that any license shortfall be remedied by purchasing at your contract discount rates (no list-price penalties) and give you a window to cure issues before any drastic action.

Read about the support terms, Broadcom Subscription and Support Terms in Enterprise Agreements – What to Watch For.

Section 6 – Financial Terms (Uplifts & Payment)

Change: Broadcom’s default terms favor them with built-in price uplifts and stricter payment rules. Contracts often include automatic annual fee increases (e.g., ~5% per year or tied to CPI with a floor). Payment terms are tight (Net 30), and Broadcom often pushes for multi-year upfront payment (sometimes offering a small discount for prepay). If you lapse on support, they impose reinstatement fees (like a 20% penalty for renewing late).
Impact: These terms can significantly raise your total cost of ownership over time. A 5% yearly hike compounds to over 15% increase by year 3 without usage growth. Short payment deadlines and upfront commitments strain budgets. A missed renewal notice can trigger steep penalties for reinstating support. Broadcom is shifting more financial risk onto customers.
Negotiate: Cap the uplifts – e.g., no more than 3% per year (non-compounding) and remove any CPI floor. Better yet, negotiate fixed pricing for a multi-year term. Seek more lenient payment terms (Net 45–60 days) to align with your business cycles. If you agree to a multi-year contract, consider an extra discount for upfront payment and include a grace period (e.g., 30 days past the expiry date) to avoid punitive reinstatement fees.

Section 7 – Version & Cloud Rights

Change: Broadcom is tightening rights around software versions and cloud usage. Under VMware, if you had active support, you could upgrade to new versions at no additional cost. Broadcom, however, is ending perpetual license upgrades – once your current support term ends, you will need to transition to a subscription to receive new releases. They also restrict the use of on-premises licenses in public clouds; instead, they want customers to buy cloud-specific subscriptions (such as VMware Cloud on AWS) rather than “bring your own license” to the cloud.
Impact: If you stick with legacy perpetual licenses, you could get stuck on old versions when support expires (no access to upgrades or even patches). And if you plan to shift workloads to AWS/Azure or a VMware Cloud service, you might have to double-pay – once for your on-prem licenses that can’t be used there, and again for new cloud subscriptions. This limits flexibility in hybrid cloud strategies and forces customers toward Broadcom’s subscription model on their terms.
Negotiate: Ensure your contract grants upgrade rights for any new versions released during your term. Explicitly state that you can deploy any generally available software update for products you’ve licensed. For cloud, negotiate portability: the right to use your licenses in authorized cloud environments or to convert on-prem licenses to equivalent cloud usage without a heavy uplift. If hybrid cloud is in your plans, obtain a written agreement from Broadcom that allows you to allocate licenses to either on-premises or their cloud offerings interchangeably, up to your licensed count.

Read about How to Build Flexibility Into a Broadcom Enterprise License Agreement.

Section 8 – Portfolio ELA Considerations

Change: Broadcom is pushing customers toward broad portfolio agreements that bundle VMware with other Broadcom software (Symantec, CA, etc.). They require co-terminating all products under one contract and present a single all-in price. These multi-product deals are replacing legacy VMware-only ELAs with flexible terms. Additionally, any previously built-in growth allowances or “buffer” usage that VMware may have offered are now gone – everything is tightly metered.
Impact: A combined portfolio deal can reduce clarity and flexibility. You might overpay for certain products in the bundle without knowing, since pricing isn’t broken out per component. Dropping or downsizing one product mid-term may not be possible without renegotiating the entire deal. And with no usage buffer, any expansion will incur an additional cost. Essentially, you gain the convenience of one contract, but lose agility and potentially overpay across the bundle.
Negotiate: If you consider a portfolio ELA, demand transparency and flexibility. Insist on a price breakdown per product (at least in an exhibit) so you know the effective cost of each piece. Negotiate the right to reduce or remove a product at renewal without penalty (with a corresponding cost reduction). Ask for a small growth allowance (e.g., 10% more licenses at the same rate) to handle future needs without immediate price hikes. In short, keep as many options open as possible within the bundle so you can adapt if your needs change.

Comparison Table – Legacy vs. Broadcom Terms

Clause Snippets to Request (Plain Language)

• Renewal & Pricing: “Renewal requires mutual written agreement; fees shall not increase by more than 3% or CPI (whichever is lower).”
• True-Down: “Customer may reduce license quantities by up to 15% at each annual renewal without penalty.”
• Assignment (M&A): “Customer may assign licenses to any Affiliate or successor (e.g., merger or divestiture) with vendor consent not to be unreasonably withheld.”
• Version & Cloud: “Customer may deploy any new version released during the term. Licenses may be used on-premises or in the Customer’s cloud environments.”
• Audit & Compliance: “Vendor may audit no more than once every 24 months with at least 45 days’ notice. Any shortfall will be purchased at the discounted price under this agreement, with no penalties if cured within 30 days. Audit results shall be kept confidential.”

Read Negotiating a VMware Enterprise Agreement Under Broadcom – Strategies for Buyers.

Redline Checklist – Key Items to Negotiate

• Renewal Notice: 90+ day notice; opt-in renewal (no auto-renewal).
• Price Protection: Carry forward discounts; cap yearly increases (≤5%).
• Flexibility: True-down rights (license reduction) and swap options.
• Assignment: Allow M&A/affiliate transfers (consent not unreasonably withheld).
• Metrics/Bundles: Freeze metrics; no forced bundles (or credit for unused components); transparent pricing.
• Support SLAs: Define support response times/uptime; include credits for major failures.
• Audit Terms: Limit audit frequency (max once/2 years) with notice; true-ups at contract rates (no penalties).
• Version/Cloud: Ensure upgrade rights to new versions; permit license mobility to cloud environments.
• Payments/Uplifts: Favorable payment terms (Net 45+); cap or remove automatic uplifts; grace period to avoid reinstatement fees.

FAQs – Broadcom VMware Contract Changes

Q: Can I still true-down or swap licenses mid-term?
A: Not by default. Broadcom’s standard terms don’t allow reducing license counts or swapping products during a term – you’re stuck with what you bought until renewal. To achieve flexibility, negotiate true-down and swap provisions into your agreement upfront.

Q: How have audit rights changed under Broadcom?
A: Audits are more frequent and aggressive now. Broadcom’s contracts let them audit with less notice, and they strictly enforce compliance (often with back-charges for any shortfall). It’s crucial to negotiate limits on audit frequency/notice and ensure any required true-up uses your pre-negotiated discount rates.

5 Actionable Negotiation Moves

1. Opt-in renewal: 90–120 day notice, no auto-renewal by default.
2. Add flexibility: True-down (e.g., 15% annually) and product swap rights.
3. Protect M&A: Allow assignment to affiliates/successors; consent not unreasonably withheld.
4. Cap costs & rights: Cap yearly increases (≤3–5%); freeze metrics; keep upgrade & cloud use rights.
5. Limit audits & ensure SLAs: Max one audit every 24 months with notice; true-ups at contract rates only. Include support SLAs for accountability.

Read about our Broadcom Negotiation Service.

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