Over the past year, VMware has been threatening customers with list price increases on their maintenance costs if they did not re-up their ELA agreements. Though this scare tactic was commonly used, ClearEdge had never seen a VMware sales rep follow through with their list price increase threat, indicating that the supplier was bluffing to make customers sign a different deal structure. Essentially, clients who faced ELA renewals with VMware could safely push back on the vendor for the same terms and extended discounts, with little or no financial repercussion. However, new evidence observed in 2021 suggests that this is no longer the case.
VMware’s standard ELA language states that support pricing will revert to list price after the “guaranteed out” year of support on an ELA. Now, for the first time, we’re seeing that customers with no net new demand are facing tremendous price hikes for continued support. In two client cases last month, for example, continued VMware support is predicted to cost very large customers between 3X and 4X more, unless they immediately agree to a new ELA.
This change in vendor behavior puts buyers between the proverbial rock and hard place: maintain your existing level of VMware support and risk price increases of 300% or sign up for an agreement that may include a level of product and support that is not needed. The following chart summarizes the VMware approach.
To prevent these situations, we counsel clients to be pro-active with VMware before these renewals arise and demand strong renewal rights, price transparency and limit increases to those in line with market trends (3% to 5%) in new ELA contracts.
Another way to create leverage with VMware is to vet the competition, such as comparable offerings from Citrix and Microsoft, shown below.
Although this process requires time and effort, introducing competition is consistently the most effective way to counter the VMware’s playbook. To learn more about VMware sales tactics and how to neutralize them, view our VMware Supplier Briefing from our IT Deal-Makers Summit, or contact your ClearEdge representative.
- Meghan Smith is a Senior Analyst at ClearEdge Partners.