A Deeper Look into VMware’s New Pricing Model

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom, transportation and energy.

Back in July, VMware announced a major change to its vSphere licensing and pricing model that includes a pooled virtual RAM entitlement (vRAM). So, what does that mean for you? Here is what VMware has to say on its blog:

"When we began the process of developing the new model, we set out to find a way to evolve vSphere's licensing to lay the foundation for customers to adopt a more "cloud-like" IT cost model. We were looking to develop a model that would be more congruent with the technology architecture of the virtual and cloud world, where resources are pooled for maximum utilization. In short, we wanted a model based on consumption and value rather than physical components and capacity. The design point of the licensing change was not to increase licensing costs, and we believe 90+% of our customers will not see a licensing cost increase."

Contrary to VMware's statement, our analysis at NPI shows that many of our clients will see a licensing cost increase as they pursue the latest versions of VMware products and are forced into the new vRAM pricing model. However, this forced change gives enterprises a good reason to re-evaluate their VMware agreements and align their pricing and terms more closely with their business requirements. By doing this, they can understand how to bundle the best product and service mix for their current and future state as well as neutralize any "gotcha" terms in their Volume Purchasing Program agreement or Enterprise License Agreement.

Speaking of agreements, if you are on the Volume Purchase Program, consider these cost-saving questions:

  • Are you capitalizing on all of the cost optimization it offers you? (Many enterprises are not.)
  • Do you qualify to move to an ELA?
  • If so, is that more advantageous for you? (Depending on your VMWare situation, you may be able to double your discount by moving to an ELA)

Changes to vendor licensing and pricing can be a headache, if not costly. But, it also forces purchasers into IT pricing alignment and that process often uncovers savings opportunities. The question is -- will companies be complacent? Or will they save?

-- Jeff Muscarella, EVP of IT, NPI

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