Enterprises are rethinking their virtualization strategies in the wake of Broadcom’s changes to VMware licensing, but most are not yet ready to make needed changes.
That’s according to a new survey by HPE, which found that two-thirds of enterprises are planning material changes to their virtualization strategy within the next two years as they assess virtualization alternatives.
There’s been plenty of talk about how VMware licensing costs are giving enterprises pause for thought, with members of CISPE, the association of Cloud Industry Service Providers in Europe, encountering price rises of 800% to 1500% following Broadcom’s acquisition of VMware.
HPE played down the impact of such licensing changes, saying that just 4 percent of respondents cited licensing costs as the “single biggest catalyst” for virtualization strategy, but analysts said that HPE was understating the effect of price increases.
Greyhound Research’s CEO Sanchit Vir Gogia looked deeper into HPE’s survey results, and found that while only 4 percent of respondents described licensing as the single biggest catalyst, “When you include those who classify it as a primary driver and those who cite it as one of several important drivers, you are looking at roughly half the market acknowledging meaningful commercial impact. That is structural disturbance.”
And IDC’s principal analyst for software-defined compute, Gary Chen, said that it was obvious that cost was the number one driver when it came to looking at new virtualization projects, but there was much more complexity involved. “Everyone is talking about virtualization strategy but it’s hard to parse what is happening; we need more context as to what is being defined.”
How ready are you?
The HPE survey also reveals that just 5 percent of companies planning these complex virtualization projects are “fully ready”. But, again, there are some semantics at play here as the research also reveals that 21 percent are “largely ready”.
Chen said that it was hard to process the details. “Looking at the timeline, these are multi-year projects. The very fact that they are talking about strategy implies something that is looking into the future.”
Gogia said that the 5 percent claim depends entirely on how readiness is defined. “If readiness means awareness, then the figure is too low. Most enterprises are aware. If readiness means having a board-approved, risk-modelled, skill-funded, rollback-tested migration factory that can execute at scale without destabilising operations, then single-digit readiness is plausible,” he added.
He set out five conditions for readiness. “First, complete workload discovery and dependency mapping, not partial inventories. Second, financial modelling that compares stay versus diversify scenarios over a multiyear horizon. This will include licensing trajectory and employee cost for migration. Third, companies need a defined target operating model. Then there needs to be alignment of skills, for example, security teams trained on hybrid governance. Finally, there needs to be tested rollback capability.”
One of the main points of the HPE survey is the drive towards a hybrid cloud strategy. But Chen pointed out that, again, the definitions need to be better explained. “How do you define hybrid? It seems to come in many forms, for example, people have a distributed environment. Or there could silos of processes in public cloud, while others are on-prem. I think you have to show more than having assets on both sides. I would prefer hybrid cloud to be something that’s truly integrated.”
One aspect of the HPE survey where there is universal agreement is the 17 percent of respondents who experienced increase in cloud costs. HPE put this down to the growing use of cloud for AI usage. “I think that’s right,” said Chen. “I don’t find that base costs are rising, it’s purely an increase in AI.”
And Gogia endorses this view. “The 17 percent figure reflects systemic overshoot rather than uniform price escalation. Enterprises are exceeding planned budgets because demand volatility is outpacing governance maturity. “
The HPE survey does indicate that many companies are now redefining their strategic approach. The shift in VMware licensing costs has certainly been an impetus to effect change. “When you’re talking about real integration then I think people are heading there,” said Chen. “And AI is driving that. We’re seeing a lot more on the edge where data is being collected and because things are becoming more scattered, then hybrid makes more sense. And once everything becomes fully integrated — that’s real hybrid.”