Four years have passed since Broadcom announced its intention to acquire VMware, and the market is still wondering whether the semiconductor giant's controversial strategy will pay off in the long run. What initially sparked skepticism and calls for alternatives has now become a case study on how a company can transform a technology platform into a recurring revenue machine, albeit at the cost of alienating a significant portion of its customer base.

Broadcom's Radical Shift: From Perpetual Licenses to Forced Subscriptions

Since the acquisition closed, Broadcom has implemented drastic changes: it eliminated perpetual licenses, forced customers into costly subscriptions, raised the minimum licensed cores from 16 to 72, and bundled all products under the Virtual Cloud Foundation (VCF) brand. Additionally, it drastically reduced the number of resellers and focused on the top 10,000 customers, leaving out more than 290,000 smaller businesses.

These measures, though aggressive, have yielded immediate financial results. In the first quarter of 2026, Broadcom's revenue grew 29%, and VMware's revenue increased 13% year-over-year, with recurring revenue growing 19%. CEO Hock Tan has defended the strategy, stating that more than 87% of the top 10,000 customers have already adopted VCF.

The Duality of Data: Renewal or Reduction?

However, a CloudBolt survey reveals that 87% of customers are actively reducing their VMware footprint, and only 4% have completed a full migration. How to explain these contradictory figures? According to Forrester analyst Naveen Chhabra, customers renew but reduce their usage: the average customer is renewing only 25% of their VMware environment. This suggests that while the total bill remains high, the volume of workloads on VMware is decreasing.

The Complexity of Migration: A Dead End for Many

Migration away from VMware is not trivial. Paul Delory, an analyst at Gartner, estimates that a medium-sized organization can take two years to untangle its dependency, and a large one up to four years. The cost and operational complexity often offset any potential savings. Keith Townsend, founder of The CTO Advisor, points out that VMware is not just technology but an operating model encompassing capacity management, procurement, and audits. The risk of disruption and distraction from other projects, such as AI infrastructure, deters many companies.

A success story is that of law firm Simpson Thacher & Bartlett LLP, which migrated to Nutanix. Its CIO, Tim Conners, states that the migration was smooth thanks to live migration tools, but admits their situation was exceptional: they needed to modernize data centers and expand globally. They didn't have to move existing equipment but deployed new hyperconverged infrastructure in parallel.

The AI Factor: Salvation or Mirage?

Broadcom bets that companies will continue investing in private clouds, especially for AI workloads. Hock Tan has stated that VCF is the essential software layer in data centers, integrating CPU, GPU, storage, and networking. However, Chhabra questions how many companies can afford the necessary infrastructure to run private AI models, given energy and capital requirements.

Is the Strategy Sustainable in the Long Term?

Steve McDowell of NAND Research sums it up: "Broadcom's strategy prioritizes monetizing the existing base over expansion. It has generated strong short-term results but pushes many customers toward competitors. The key question is whether higher revenue per customer can offset customer loss."

Broadcom also seeks to capture the next 20,000 to 30,000 mid-sized enterprises, but success will depend on whether they find value in VCF. Meanwhile, customers unable to migrate find themselves trapped in a spiral of rising costs. For companies evaluating their future, the recommendation is clear: diversify and explore alternatives like Nutanix, as seen in cases like Simpson Thacher, or even consider the public cloud. The decision is not easy, but inaction can be more costly.

To delve deeper into how companies are redefining their technology strategies, we recommend reading our analysis on how agentic AI turns the operations platform into the most important layer, or explore the return to the edge with Intel's bet on physical AI.

Original source: ComputerWorld. Analysis and adaptation by ForgeNEX.