Why Are Experts Warning that Third of VMware Users Might Leave?

Is Your Business at Risk from VMware’s Shocking New Policies?

VMware, a company whose technology helps power many businesses, is now at a crossroads. Following its purchase by the company Broadcom, big changes are happening. These changes are creating a strange picture. On one hand, many customers and partners are unhappy. An important analysis predicts many will leave. A major company is even taking VMware to court. But on the other hand, VMware is making more money than ever for Broadcom. This situation presents a puzzle for anyone using or thinking about using VMware’s tools. Understanding these different pieces is important for making smart choices for your business technology.

A Forecast of Customer Departure

A significant shift appears to be on the horizon for VMware. According to a forecast from the research firm Gartner, the company is projected to lose a substantial portion of its user base in the coming years. This prediction is not a guess; it is based on recent strategic changes made by Broadcom that are altering the landscape for VMware’s customers and partners.

The 35% Workload Prediction

Julia Palmer, a Vice President of Research at Gartner, delivered this forecast at a symposium in Australia on September 10, 2025. She stated that by the year 2028, up to 35% of the work currently handled by VMware’s systems will be moved to different platforms. This means that more than a third of the applications and data running on VMware today could be gone in just a few years.

The primary reason for this predicted exodus is a fundamental change in how VMware’s software is sold and licensed, particularly concerning large-scale cloud providers, often called hyperscalers. Broadcom adjusted the licensing program, preventing these hyperscalers from selling VMware subscriptions directly to their clients. Instead, customers who want to run VMware software in these big cloud environments must now buy their licenses directly from Broadcom.

Palmer interprets this move as a signal that VMware no longer views these powerful cloud companies as strategic partners. This feeling appears to be mutual. The hyperscalers, in turn, no longer see VMware as a partner and are now actively encouraging their customers—many of whom run VMware workloads—to switch to their own native cloud services. These cloud providers will use their existing relationships with businesses to show them the benefits of moving away from VMware and onto their “proper cloud” platforms.

Gartner’s Advice for Customers

Despite the stark prediction, Gartner’s advice is not for everyone to abandon VMware immediately. Palmer cautioned against planning a full migration of all workloads away from the platform. Her reasoning is twofold: no single competitor currently offers a platform that is superior in every way, and moving everything would be a massive, complex project that could take three years or more to complete.

Instead of a complete overhaul, Gartner recommends a more measured and strategic approach:

Identify and Modernize

Businesses should first look at their applications to see which ones are ready for an update or modernization. These specific applications can then be targeted for migration to a new platform. This is a more manageable task that could be completed within a year.

Avoid Switching for Cost Alone

Palmer made an interesting point for customers thinking of leaving VMware just to get away from Broadcom’s high license fees. She suggested this is not the best reason to switch. Instead, she recommended using this moment as an opportunity to modernize applications, and to let that modernization effort guide the decision to switch platforms.

For those who do decide to move some of their work away from VMware, Gartner suggests a few alternatives to consider.

Nutanix

This is Palmer’s first recommendation. While its prices are not significantly lower than VMware’s, the Nutanix platform is considered comparable in its capabilities. A key advantage is that Nutanix provides powerful tools specifically designed to help with the migration process.

Public Clouds

The major cloud providers are another strong alternative. However, Palmer warns that their basic “Infrastructure-as-a-Service” offerings might not be a good fit for every type of application that currently runs on VMware, and costs can become a concern.

Other Options

Palmer mentioned other platforms but with significant cautions. Azure Local, a solution that brings a small piece of the Azure cloud into a company’s own data center, was seen as a third choice, limited by its small scale of only 16 hosts. Microsoft’s Hyper-V was also noted as a possibility, though Microsoft itself is not enthusiastic about it, preferring customers to move to its main Azure cloud. Red Hat Virtualization was Palmer’s last choice, with the warning that other open-source options like OpenStack or KubeVirt should be approached with extreme caution, as very few companies have the specialized skills needed to manage them effectively.

The Tesco Legal Dispute

The discontent with Broadcom’s new direction for VMware has moved beyond expert predictions and into the courtroom. Tesco, a major British supermarket chain, has filed a lawsuit against Broadcom, seeking £100 million (approximately €115 million) in damages for breach of contract. This legal action brings a major customer’s grievances into public view and highlights the real-world consequences of the licensing changes.

The lawsuit centers on software licenses Tesco purchased in January 2021. At that time, Tesco bought perpetual licenses for VMware’s vSphere Foundation and Cloud Foundation products. A perpetual license traditionally means you own the software forever. Tesco also signed a contract for support services and software upgrades that was set to last until 2026, with an option to extend it for four more years.

According to the court filings, Broadcom has refused to honor these agreements. After taking over VMware, Broadcom eliminated perpetual licenses and moved all customers toward a subscription model. Tesco alleges that Broadcom is refusing to provide necessary security updates and software fixes for its existing perpetual licenses unless it agrees to a new, costly subscription deal.

The financial implications for Tesco are substantial. The company claims the new package offered by Broadcom is £15 million more than its previous deal and includes charges for software that Tesco believes it already owns through its perpetual licenses. Tesco stated it was being asked to pay 237% more for licenses it considered “superfluous and duplicative”. The court filings describe Broadcom’s negotiating tactic as a “coercive ‘take it or leave it’ approach,” which Tesco argues is only possible because of VMware’s dominant position in the market.

This is not just a financial dispute. Tesco has warned that the lack of support and updates from VMware could have severe operational consequences. The company uses VMware software to run approximately 40,000 server workloads that are essential for its business. These systems support everything from the tills in their stores to the complex logistics that keep their grocery supply chain moving. In its legal filing, Tesco suggested that Broadcom’s actions could “jeopardize food security in Ireland and the UK”. The lawsuit also names Computacenter, the reseller that sold the licenses to Tesco, as a co-defendant in the case.

The Financial Success Story

While customer frustration and legal challenges create a negative narrative, the financial story for Broadcom tells a different tale. Since the acquisition, VMware has been a significant contributor to Broadcom’s surging profits. The company’s strategy, though unpopular with many customers, is proving to be highly lucrative.

In September 2025, Broadcom announced its financial results for the third quarter of its fiscal year. The numbers were impressive.

• Record Revenue: The company reported total revenue of $15.952 billion for the quarter, a 22% increase compared to the same period last year. Some reports rounded this to a record $16 billion.
• Strong Profits: Net income was $4.14 billion. The company’s adjusted EBITDA, a measure of profitability, was a record $10.7 billion.
• Software Growth: The infrastructure software division, which includes VMware, saw its revenue grow by a remarkable 43% to $6.79 billion.

Broadcom’s CEO, Hock Tan, explained part of the strategy behind these numbers. He revealed that the company’s top 10,000 largest customers have purchased a comprehensive software bundle called VMware Cloud Foundation (VCF). However, he also admitted that many of these customers have not actually implemented the full stack of products included in the bundle.

This practice leads to the sale of what is known as “shelfware”—software that a customer is forced to buy but that sits unused “on the shelf.” While this inflates sales figures in the short term, it raises questions about the long-term health of the business relationship if customers are paying for things they do not use.

Having successfully implemented this bundling strategy with its largest clients, Broadcom is now turning its attention to the next tier of customers. Hock Tan announced a new sales initiative targeting the next 20,000 to 30,000 medium-sized companies, aiming to convince them of the advantages of the VCF bundle. This move is seen by some industry observers as something that will please VMware’s competitors, as it may drive more of these mid-sized customers to seek out alternatives rather than sign up for an expensive bundle they do not need.

Making Sense of the VMware Situation

The current state of VMware under Broadcom is a study in contrasts. The company is simultaneously alienating a portion of its customer base and generating record profits. For any business that relies on VMware technology, this period of change requires careful attention and strategic planning.

The central issue is a shift in business philosophy. Broadcom’s approach focuses on maximizing revenue from its largest customers through bundled subscriptions. This has led to price increases, the end of perpetual licenses, and a strained relationship with cloud hyperscalers. The Gartner forecast and the Tesco lawsuit are direct results of this strategy. They signal a market that is actively exploring alternatives due to concerns about cost, vendor lock-in, and partnership stability.

However, the financial results cannot be ignored. They show that, for now, the strategy is working from a revenue perspective. Broadcom has successfully locked in many large enterprises to long-term, high-value contracts. The question is whether this is a sustainable path. Selling shelfware and using coercive tactics may generate income today, but it could erode trust and market share over time, as Gartner’s forecast suggests.

For a business leader or IT decision-maker, the path forward is not a simple one. A rush to exit the VMware platform is ill-advised, as no single competitor offers a perfect replacement for its robust and mature feature set. Instead, this moment should serve as a catalyst for a thoughtful review of your company’s technology strategy.

Consider the following actions:

• Evaluate Your Usage: Understand exactly which VMware products you use and how critical they are to your operations. Are you a candidate for the full VCF stack, or are you being asked to pay for tools you don’t need?
• Focus on Modernization: Use this as an opportunity to assess which of your applications could benefit from being modernized and potentially moved to a cloud-native platform. This aligns with Gartner’s advice to let application needs, not just cost avoidance, drive your migration strategy.
• Explore Alternatives Methodically: Begin to research the alternatives, such as Nutanix and the major public clouds. Understand their strengths, weaknesses, and the migration effort required. Start with a small, non-critical application as a pilot project.
• Open a Dialogue: Engage with your VMware or Broadcom representative to understand how the new licensing policies will affect your specific contracts and budget. The experience of Tesco shows that contractual details matter immensely.

The VMware landscape is changing rapidly. While the company’s technology remains a powerful force in the industry, its business practices under Broadcom have introduced new risks and considerations. A proactive, informed, and strategic approach will be essential to navigate this new environment and make the best decision for your organization’s future.