Like a lot of IT purchasing events, the VMware ELA renewal has grown more complicated over the last few years. This is due in part to VMware’s ever-expanding list of offerings – a byproduct of numerous acquisitions like Pivotal and Carbon Black, and the introduction of more cloud-based solutions. As a result, today’s VMware ELAs comprise more “stuff.”
This presents a few challenges. First, there is an inverse correlation between more stuff and pricing visibility. VMware still likes to bundle offerings into a single price making it difficult for customers to benchmark pricing. Second, as VMware’s offering portfolio evolves and new acquisitions are absorbed, the vendor’s sales behavior has become less predictable. VMware’s account teams have more flexibility to offer incentives, and they aren’t applied to customers universally.
These dynamics create new opportunities and risk for customers. We’re seeing more flexibility which opens the door to savings – and that’s great. But we’re also seeing less transparency around pricing. A lot of reverse engineering is required to determine if a deal is priced within fair market value range. Our data indicates that more often than not there is material room for improvement.
Observations and Tips to Help You Save on Your VMware ELA Renewal
Consider your ELA a maintenance protection program. ELAs are a no-brainer for many enterprise customers. Those that purchase outside of an ELA are usually subjected to abysmal pricing and discounts. Yet still there are customers who consider dropping their ELA when they don’t think they’ll need more licenses. Our advice? There may be ELA options that are palatable, and those are worth considering. In most cases, VMware will reprice maintenance one year after you exited your last ELA. It’s the vendor’s approach to encouraging ELA renewals. That $400,000 you were spending under an ELA can easily go to $1M without the application of strong maintenance discounts typically reserved for ELA customers.
Perform a usage assessment in advance of your renewal. Customers often put their VMware ELA renewal on autopilot and don’t optimize according to usage/utilization (i.e., they don’t address their install base SnS/support). It’s difficult to keep track of an enterprise-scale VMware footprint and getting the vendor to agree to reductions in install-base support costs can be difficult without a fact-based business case. Without visibility into what you own and what’s actually being used (or underutilized), the chances of overpaying for your ELA are close to 100 percent. Customers should gain a clear picture of their VMware estate, what’s being used and what’s not, what’s outdated, etc. – and use this as a data-driven baseline to inform (and negotiate) their renewal.
Make sure you’re getting a best-in-class discount for ALL tokens. VMware’s ELAs increasingly have token-based line items, but token types vary depending on whether you’re purchasing perpetual licenses (these require HPP tokens) or cloud services (SPP tokens). NPI has observed that certain tokens receive less competitive discount than others. Be sure to perform price benchmark analysis on both token types to ensure you’re receiving strong discounts that are at or better than market.
If you think your current spend doesn’t qualify for an ELA, think again – but don’t let the pendulum swing towards overbuying. There is some confusion around what spend levels qualify for a VMware ELA. Some customers are told the magic number is $200,000. Others are told it’s $1M. NPI’s experience indicates $250,000 is an acceptable threshold, but any pushback from VMware should be validated and negotiated. Just remember – you’re paying for support and licenses in advance of need, which poses the risk of shelfware. Be thorough in your analysis of future-state requirements to avoid overbuying.
Take Your VMware ELA Renewal Off Autopilot
Complacency is one of the biggest drivers of overspending with VMware. The effort spent on price benchmark analysis and license optimization almost always yields material savings that are well worth the investment. NPI can provide guidance to help you determine pricing and discount targets that are at or better than best in market as well as help you right-size your ELA to match requirements.
- Blog: Telecom and IT Price Negotiations: Should You Share Price Targets With Your Vendor?
- Blog: Tips on How to Optimize Enterprise SaaS Usage and Costs
- Bulletin: 8 Ways IT Sourcing Can Enable Business Resiliency and Continuity in 2021
- NPI Service: IT Price Benchmark Analysis & Contract Negotiation Intel
- NPI Service: Enterprise Software License Optimization Consulting