I have been seeing stories about issues with VMWare for a few weeks, with at least one major customer suing Broadcom (the supplier of VMWare), but it wasn't clear to me what was going on. This report on Heise.de (sorry - it is in German, but you can always use Google Translate) finally makes everything clear.

The headline of the report translate to "Comment on the VMware debacle: A big gamble, unfortunately lost".

If you have no dealings with server software, you may have no idea what VMWare is, but it fulfills a vital role in enterprises, and is used in an enormous number of corporations. VMWare is a virtualisation platform, enabling users to build and operate virtual machines.

Virtual machines are computers which do not run on their own hardware, but instead run on an emulation program on a host computer. You can run many virtual machines at once on one host server, as long as that server is powerful enough. Currently I have 6 virtual machines running on 2 server (normally 5 on one, and one on another, running mainly web-servers and database servers).

Many corporations use virtual machines (VMs) to host their enterprise software (accounting, customer care, billing etc.). Almost every web-server in the world runs on a VM. Cloud servers are pretty much all VMs, as are many SaaS (Software as a Service) servers. VMs allow you to set up multiple test environments with different data (e.g. customer databases), application versions, operating system versions and software architectures. In short, VMs are a very powerful tool, and are vital to enterprises.

What Broadcom has done is start charging a hefty licence fee for ancillary software that was previously free. They have also jacked up the price of support, which is what led to the law suit. Customers have seen their costs for VMWare licences jump by up to 500%, which is a lot in anyone's budget.

Broadcom thought they had a captive market, and tried to milk it for every cent. Unfortunately for Broadcom, as the article on Heise.de points out, VMWare is not the only game in town; they point out a competitor (Proxmox, based in Vienna, which is why the report is in German) who sell a packaged virtualisation solution (operating system and virtualisation tools) which is 100% based on open source software. Because the Proxmox solution is open source based, if they also try to jack up prices, their customers can simply drop Proxmox and get all the same software for free. I do not use Proxmox, but I use the tools which they provide (Linux and KVM/QEMU) without paying a cent.

Many Broadcom customers are now planning to use Proxmox, or simply to use KVM/QEMU. KVM/QEMU is in a few ways less flexible (e.g. no ability to change the virtual hardware while the VM is running), but actually has higher performance. Maybe Broadcom should have done more market research before trying to stiff their customers, because it looks like they have killed the goose that lays the golden egg.