[German]Ever since Broadcom terminated the contracts of its VMware partners, streamlined its product portfolio and switched everything to (very expensive) subscriptions in the VMware Cloud, there has been a great deal of uproar. Now some small and medium sized cloud service providers are hoping that they can continue to offer VMware virtualization to their customers via white label contracts from the VMware by Broadcom CSP program. Here's a quick look at what our colleagues at The Register have found out off the record. And I received an assessment from the "partners" that sheds some light on the matter.
I had written extensively here in the blog about that topic: after the purchase of VMware by Broadcom, a shakeout has started since the end of 2023. The previous VMware partners were terminated (see Contracts for all VMware partners terminated by Broadcom for 2024) and customers are being switched to subscription solutions and cloud contracts for VMware virtualization products (see Broadcom ends perpetual licenses for VMware products – End of the free ESXi server?).
Broadcom has probably only offered contracts for a new partnership to large partners with annual sales in excess of 500,000 US dollars. Smaller VMware partners were probably left empty-handed and have to help themselves to licenses from the large VMware by Broadcom partners.
A lifeline for small CSPs?
The story has been pointed out by blog readers in various places (including here). A few days ago, The Register published the article VMware by Broadcom offers a lifeline to small cloud service providers on the question of "what happens to small cloud service providers in the VMware environment now that their contracts have been terminated?". The Register wrote about a "lifeline for terminated VMware partners". Here are a few key points.
- Currently, only those who are invited by VMware by Broadcom and offered a contract can become a partner. The above-mentioned sales thresholds and the "licensing of at least 3,500 CPU cores" are likely to separate the wheat from the chaff – in other words, only large cloud service providers will be granted partner status.
- The rest of the cloud service providers would no longer even be allowed to acquire VMware licenses. However, this would effectively mean the end of the business model for many of these providers. It also seems to be slowly dawning on Broadcom that it is cutting off a larger market because these providers would have to switch to the competition or give up.
- The Register has now been able to view documents that provide a licensing gimmick for the new "primary VMware cloud service providers" (the new partners). New members of the VMware by Broadcom partner program are allowed to work with a "secondary VMware Cloud Service Provider" that is not a Broadcom partner. In other words, the secondary partner can purchase licenses from the VMware partner and resell them.
The latter point amounts to a "fastball system": a few VMware partners acting as "primary VMware cloud service providers" are allowed to sell licenses to any secondary "partners" to keep them in business.
- The primary partners must handle all billing and license monitoring. VMware by Broadcom has outsourced the work, and still has control over the primary terms for licensing.
- While the primary VMware partners have the option to expand the business through secondary partners, they will be compensated for their efforts through the terms and conditions.
However, the small cloud service providers (CSPs) are still dependent on the whims and pricing of Broadcom and its primary partners. Above all, the streamlining of the product portfolio with the elimination of on-premises products with purchase licenses will not change anything. And I assume that the hefty price increases that I have discussed in some German blog posts (see Der Fluch der neuen Broadcom/VMware VCF-Lizenzierung in der Praxis and VMware Produktportfolio: Interna der Lizenzierung; und Lenovo ist seit 27. Feb. 2024 raus).
The Register writes that the trick outlined above about "primary partners" serving "secondary partners" may be a lifeline for former VMware Cloud Services Providers (VCSP) and VMware Cloud Providers Program Partners (VCPP) who were not invited to participate in the new partner program. Those "left out" could continue to serve their customers as before, purchasing licenses from the primary partner instead of VMware.
However, my impression is that the whole thing will not change the tricky situation, the product changeover and the price increase. The above measure is probably just a short breather for this clientele to stay in business. However, providers would do well to draw up an exit plan to switch to alternative virtualization solutions. And for the companies that operate virtualization as end customers, the above constellation – at least in my view – does not change anything for the better. Or do you see it differently?
Another piece of inner-circle information
In response to my article here, I received an assessment from the circle of potential "Whitelabel Primary Partners" that sheds some light on the matter. If the information is correct, there are the following levels in the VMware Cloud Services Provider (VCSP) program:
- Pinnacle (less than a dozen partners in Germany)
- Premier (perhaps 30 partners in Germany)
The two partner groups mentioned should be able to continue selling licenses. The rest of the VMware partners are in the so-called Registered Group. They are still registered as VCSP partners.
This classification information is important because, according to my source, only "Pinnacle" and "Premier" are so-called Primary White Label Providers and are allowed to resell licenses to "Selected" VCSPs, which are Secondary White Label Providers. This would then refute the information that secondary partners do not have to be partners.
So let's keep in mind: Roughly speaking, there will be a maximum of 40 VCSPs in Germany that could act as primary white label providers. These would then have to take on duties such as reporting and support. The source assumes that many of the Pinnacle/Premier VCSPs mentioned above will primarily use the licenses for their own operations and will not make an offer for resale.
For those customers who then, despite the limited choice of potential primary partners, are still able to "get a license this way", there are then some horse's feet. Customers no longer have direct support access to Broadcom/VMware, but have to go through the Primary Service Provider. The Primary Service Providers only receive engineering support (3rd level) from VMware by Broadcom. Off the top of my head, I would call it a "difficult case".
There also seems to be a clause in the partner contracts that only allows secondary service providers to sell to end customers. Resellers (resellers or similar) would then automatically be out – how a cloud service provider who has bought virtualization to then offer this to customers as virtual hosts etc. is not clear to me.
The other topic are the terms of costs (assumed, that the other conditions are met). According to my sources, discounts are only available with a guaranteed minimum purchase for three years. Those who cannot estimate this will be billed according to the list price, i.e. according to the consumption of virtualization performance. This performance is measured on an hourly basis, but always at least 16 cores/socket. I would spontaneously say that many business models are simply dead.
The recommendation that I heard off the record is: Anyone who wants to continue to obtain CSP licenses and is still allowed to do so under the new terms of use must register as a "Selected" VCSP. In addition, it would not be a bad idea to use the latest version 4.8 of the vCloud Usage Meter. This provides figures on the virtualization performance used. You should then immediately look around for a primary service provider and go into the details with them to determine the terms and conditions. The latter is probably easier said than done – at least I have always heard a great deal of uncertainty from representatives from the VMware partner camp. From my point of view, I would say "the horse is dead, it's done, make sure you can move to another platform".
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