1,050% Price Hike: AT&T Details Broadcom's VMware Cost Increase

Felix Dubois

5 min read

Post on May 04, 2025

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The Shocking 1,050% VMware Price Increase

AT&T's Public Statement

While AT&T hasn't released a detailed public statement with exact figures, news reports indicate that the company has experienced a more than tenfold increase in its VMware licensing fees. This revelation underscores the potentially devastating impact of Broadcom's acquisition on existing VMware customers. The lack of transparency surrounding the specifics of the price increase further fuels concerns about the fairness and predictability of future VMware licensing costs.

Breakdown of the Price Hike

The 1,050% figure represents an aggregate increase across AT&T's VMware licensing portfolio. While the exact breakdown of price increases across individual products like vSphere, vSAN, and NSX remains undisclosed, it's clear that the impact is substantial across the board. The dramatic surge suggests that Broadcom isn't simply adjusting for inflation; rather, the changes reflect a more aggressive pricing strategy following the acquisition.

• Specific examples of increased costs: Reports suggest that the price increases disproportionately affect specific VMware components, particularly those crucial for large-scale virtualization deployments.
• Comparison of previous pricing to new pricing: Unfortunately, precise pre- and post-acquisition pricing data is unavailable publicly, adding to the opacity surrounding the situation. However, the 1,050% figure speaks volumes about the magnitude of the change.
• Quantification of the financial impact on AT&T: The exact financial burden on AT&T remains confidential, but considering the scale of their VMware deployment, it's safe to assume the price increase represents millions, if not tens of millions, of dollars.

Broadcom's Acquisition and its Impact on VMware Pricing

The Acquisition Deal

Broadcom's $61 billion acquisition of VMware, finalized in late 2022, created one of the largest enterprise software companies globally. This deal fundamentally altered the competitive landscape, placing a significant portion of the virtualization market under a single entity's control.

Potential Reasons for the Price Increase

Several factors could explain the drastic VMware price increase:

• Increased profit margins for Broadcom: The acquisition allows Broadcom to pursue higher profit margins by increasing licensing fees.
• Consolidation of market power: With increased market share, Broadcom may leverage its dominant position to dictate pricing.
• Changes in licensing models: Broadcom might be shifting to more expensive licensing models, potentially penalizing large enterprise customers.
• Shifting market dynamics: Broadcom may be using the acquisition to adjust VMware's pricing strategy to reflect perceived market value and increasing demand.

Antitrust Concerns

The significant price hike has raised significant antitrust concerns. Regulators are scrutinizing the acquisition to ensure it doesn't stifle competition or lead to unfair pricing practices. Investigations are underway in several jurisdictions, and the outcome could significantly impact future VMware pricing.

Implications for Other VMware Customers

Similar Experiences Expected

Given AT&T's experience, other large VMware customers should expect similar, though perhaps not identical, price increases. The extent of the increase will likely depend on the size and complexity of their VMware deployments.

Strategic Planning for Enterprises

To mitigate the risk of future VMware price increases, enterprises need to develop proactive strategies:

• Cloud migration strategies: Explore migrating workloads to cloud providers offering alternative virtualization solutions.
• Open-source alternatives: Evaluate open-source virtualization platforms like Proxmox VE or oVirt as potential replacements.
• Negotiating licensing agreements effectively: Develop strong negotiating positions and leverage market power to secure more favorable licensing terms.
• Budgetary planning and forecasting: Include contingency plans for unexpected software cost increases in future budgets.

The Future of VMware Licensing and Enterprise Software Pricing

Market Analysis

The AT&T situation serves as a cautionary tale for the enterprise software market. It highlights the potential for significant price increases following large acquisitions and underscores the importance of diversification and proactive planning.

Long-Term Effects

This event may have profound long-term effects:

• Increased scrutiny of mergers and acquisitions in the tech sector: Expect greater regulatory oversight of large-scale acquisitions in the enterprise software space.
• Potential for regulatory intervention: Governments may intervene to prevent similar price hikes in the future.
• Increased pressure on open-source software development: The incident may accelerate the adoption of open-source alternatives as a means to reduce vendor lock-in and control costs.

Conclusion

The 1,050% VMware price increase faced by AT&T is a landmark event with far-reaching implications for the enterprise software industry. The magnitude of the increase, coupled with the lack of transparency, has rightly raised concerns about Broadcom's post-acquisition pricing strategy and the future of VMware licensing costs. The potential impact on other VMware customers is substantial, and proactive planning is crucial for mitigating risk. Don't be caught off guard by a massive VMware price increase. Assess your current VMware licensing costs and explore alternative virtualization strategies, including cloud migration and open-source options, today. Understanding your VMware licensing costs and developing a robust strategy to manage future price fluctuations is no longer optional; it's essential for long-term financial stability.