How Telefónica avoided VMware price hike
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While some some organisations look for alternatives to VMware, Telefónica Germany has taken a different approach based on third-party support
The ramifications of Broadcom’s shift in strategy regarding VMware, which has seen a move to subscription-based licensing based on software bundles, is leading to many IT departments rebooting their VMware strategy.
While VMware is likely to remain a fundamental component in datacentre infrastructure for the foreseeable future, some IT leaders are considering alternative hypervisors that can be used instead of VMware for server virtualisation.
Red Hat and Nutanix are among the companies that used the changes at VMware to promote their rival hypervisors for server virtualisation. But any migration to a different platform does present risk in terms of training and potentially the need to test and recertify commercial applications to ensure they work.
Telefónica Germany has taken a different approach. Instead of swapping out VMware, it has managed to avoid paying the VMware Cloud Foundation price hike Broadcom introduced by acquiring second user licences and using third-party support. This has enabled the telco provider to expand its existing perpetual licence of VMware to cover the small proportion of virtual servers running VMware as a subscription service.
Having previously saved €15m in 2022 for the support of its Oracle 19i relational databases, by moving to third-party support provider Spinnaker, the telecoms provider found itself in negotiations with Broadcom over VMware, on which the Oracle systems run.
Telefónica Germany did not want to buy the whole VMware Cloud Foundation suite. This is a software bundle that Broadcom introduced as part of its strategy to simplify the range of VMware products it sells, even though many of its customers are happy with vSphere, the VMware virtualisation platform that supports and manages server virtualisation in software-defined datacentres.
Computer Weekly has previously reported that VCF is often seen as a costly upgrade, as it offers various components some VMware customers do not need, especially if their primary use is to virtualise servers in their datacentres.
Moving off VMware subscription
As Holger Berndt, professional lead of software asset management at Telefónica Germany, recalls, Broadcom offered the company the opportunity to buy the whole VCF suite. In effect, Broadcom wanted Telefónica Germany to move its entire server estate away from perpetual licences to a VMware annual subscription.
“They said we had to license everything,” says Berndt. “They offered a one-year subscription for the whole package, with no negotiation for about €20m. We said, ‘No, that’s not possible.’”
This figure is significantly more than the company was previously paying, as 75% of its server estate uses VMware perpetual licences, which has meant Telefónica Germany only needed to buy one set of software licences for the majority of its datacentre servers instead of paying an annual fee for usage.
Rather than pay the Broadcom subscription, Berndt says Telefónica Germany decided to work out how many perpetual licences and subscription licences existed in the business. Following this internal audit of the IT estate, Berndt says 2,500 virtual servers needed to be moved onto perpetual licences.
Since VMware is trying to move customers over to subscription-based licencing, Telefónica Germany needed to acquire around 2,500 perpetual VMware licences to migrate totally off the VMware subscription. As Berndt explains, the first step involved sourcing VMware perpetual licence from a second-hand software reseller, adding: “We decided to buy used software to get rid of the subscription-based VMware software.”
When asked about the market for second-hand VMware licences and whether Telefónica Germany was able to purchase sufficient licences to cover its VMware subscription, Berndt says: “At the moment, there are lots of licences because everybody’s running away from VMware and Broadcom.”
The second step needed to move away from VMware subscriptions involved a new support contract. Following a request for proposals, in January, Spinnaker was awarded a new contract to provide third-party support both for Oracle and now VMware across the company’s software-defined datacentre infrastructure.
The fact that Telefónica Germany has been able to grow its footprint of VMware perpetual licences by acquiring second-hand software shows that organisations can continue to use VMware without ripping it out and replacing it with an alternative hypervisor.
There are plenty of reports that VMware has increased support costs, but using third-party support offers savvy IT leaders a way to get around this, if they are prepared to put in place the requisite security measures needed to run the software unpatched.
Berndt says that in other countries Telefónica operates in, IT decision-makers are looking at the approach he is taking and the viability of using second-hand VMware licences with third-party support.
