Customer comment on the VMware pricing/licensing/terms dance

I've been receiving comments from VMware's customers about the company's recent pricing, packaging and licensing moves. This comment from a Virtually Speaking reader that articulates many of the issues that have come up in these conversations:

Hi Dan,

I've read a lot lately about how angry people are about VMware's licensing changes with vSphere 5.0. What I haven't heard about is what will potentially cost them far more than than the licenses.

For any user that purchased Advanced licenses, and that's likely thousands of customers given how popular Advanced was, VMware eliminated the Advanced license and is forcing customers purchasing new licenses to now choose between the Standard and Enterprise licenses (Advanced used to be a middle road between Standard and Enterprise, features-wise). To make licensing changes going forward on new purchases is one thing, but here's where the changes get downright criminal.

VMware is claiming they're doing current vSphere 4 Advanced customers a *favor* by upgrading them for "free" to the Enterprise license when they upgrade to vSphere 5, since Advanced is no longer offered. Now, despite this claim of "free upgrade", what VMware is not talking about is that going forward, they will be charging Advanced customers that accept the (forced) upgrade to vSphere 5 Enterprise to stay current, the support cost of Enterprise! Depending on where you read, the cost of Enterprise per socket is 28-45% higher than Advanced. Since support costs are a percent of the license cost, that means that any customers that purchased Advanced licenses will now have to pay VMware 28-45% MORE per year in support, with no choice other than to walk away from their investment and switch hypervisors. That's an insanely sharp spike in support costs for customers. If you had a $50,000 yearly VMware support contract renewal coming up and you had purchased Advanced, your renewal just jumped to between $64,000-$72,500.

I realized this on day one of the VMware vSphere 5 announcements, and waited to make a public stink about it until I had a series of meetings with VMware reps to get them to back down and treat their Advanced customers right. I repeatedly requested that they respect the purchase decision of their Advanced customers, and create a "grandfather" skew of sorts, so that even after being forced to Enterprise with vSphere 5, they would continue to be charged the support pricing of Advanced. VMware has refused to budge no matter what I've said, and told me to either accept the support price hike or lose support. Now it's time to make a public stink.

I think the only reason people haven't made a stink about this yet, is because most won't notice until their next VMware support renewal quote comes in. That could be from about a month ago, when vSphere 5's changes went into affect, to 3 years from now, depending on when and for how long everyone's support contracts were signed.

Does this sound like a company that treats their customers right?

Snapshot analysis

At this point, VMware owns the lion's share of the virtual machine software market and is doing its level best to turn that position into owning the same share of several other virtualization markets including:

• virtual access
• application virtualization
• several processing virtualization markets including:
  • clustering
  • high availability and reliability

• management of virtual environments
• security for virtual environments

The company hasn't yet addressed operating system virtualization and partitioning. It appears that they're leaving that market to the operating system suppliers. The company also has only begun to address storage and network virtualization. I expect we'll see more in those categories over time.

What's interesting to see is that VMware appears to believe that its technology offers more value to businesses than many other categories of software including operating systems that actually host workloads. This view is made clear by the pricing/licensing/business terms dance the company has been engaged in over the last while.

The facts are, however, that there are other options in each of the above categories and VMware's recent moves are causing IT decision makers to consider them. This will lead some organizations to move towards Microsoft, others to move towards Citrix and still others to move in the direction of open source tools, such as KVM.

I'll be watching this trend and commenting on it from time to time.