How to Cut VMware License Spend by 20% — The Proven Playbook
Achieving a 20% reduction in VMware licensing costs might sound ambitious, but it’s attainable with the right approach – a mix of internal clean-up and savvy negotiation.
Now that VMware is under Broadcom’s umbrella, you can’t afford to be passive about managing licenses and contracts. This playbook covers proven tactics to help you hit that 20% savings target.
Read our ultimate guide to VMware License Optimization: Cut Shelfware & Reduce Support Costs.
Tactic 1 – Reclaim Unused Licenses (Shelfware Recovery)
Start by finding and eliminating “shelfware” – licenses you own but aren’t actually using. Many organizations accumulate VMware licenses for projects that ended or servers that were decommissioned, yet they keep paying renewal fees on those unused licenses.
Insight: Industry averages show 20–30% of VMware licenses remain unused. That’s potentially your fastest source of savings, hiding in plain sight.
How do you reclaim these? Conduct regular audits to compare your VMware entitlements (what you’re paying for) against actual usage (what’s actually running).
Identify dormant hosts, powered-off VMs, or clusters no longer in service. Every license tied to an idle resource is money leaking out.
Recommendation: Run quarterly entitlement-versus-usage reports before each renewal cycle. This way, you can flag shelfware early and remove those licenses from your renewal quote. By cutting out licenses you aren’t using, you’ll immediately trim costs without impacting operations.
Tactic 2 – Right-Size vSphere Clusters
Next, optimize the size of your vSphere clusters. Over-provisioning – running more hosts than needed – means you’re paying for VMware licenses on underutilized servers. It’s like renting a fleet of trucks that sit idle most of the time.
Insight: Cluster consolidation typically yields about 10–15% savings on annual VMware renewals. Fewer hosts with higher utilization translate directly into fewer licenses to renew.
Look at your current host utilization levels. If your vSphere hosts are only 30–40% utilized, you can consolidate virtual machines onto fewer servers.
Yes, you want some headroom for peak loads or failover, but excessive slack is pure waste.
Remember, VMware’s licensing is often per CPU or per core. Every physical host you eliminate is a license (or several) you don’t need to renew.
Pro Tip: Target host utilization above 60%. Each idle server still consumes a license and racks up support costs – an unnecessary expense if that workload can run elsewhere.
Right-sizing clusters not only reduces license counts, it also lowers power, cooling, and hardware maintenance costs – a nice bonus benefit on top of your software savings.
Tactic 3 – Optimize Support Tiers
Premium 24/7 vendor support is expensive, and not every workload truly needs it. Align your support level with how critical each system is.
Why pay for mission-critical, 30-minute response support on a development sandbox or a minor internal app?
Audit which systems are genuinely business-critical and which are not. For customer-facing or vital production systems, premium support makes sense.
But for test, dev, or less critical infrastructure, standard support (with longer response times) is perfectly adequate.
Recommendation: Match each environment to an appropriate support tier. Move low-impact servers and non-critical applications to basic support or even a third-party support provider. Save the premium (and pricier) VMware support for the systems that absolutely demand it.
Pro Tip: Third-party support for VMware (offered by independent providers) can cost 50% less than VMware’s support. Consider offloading non-critical VMware systems to these providers – you maintain coverage but at a fraction of the cost.
Optimizing support levels ensures you’re not over-paying for an insurance policy you don’t need on every system. It’s a straightforward way to shave a significant chunk off your annual VMware maintenance spend.
How to identify shelfware, Identifying “Shelfware” Licenses in VMware Environments.
Tactic 4 – Co-Term All Renewals for Negotiation Power
Do you have multiple VMware contracts or renewal dates scattered throughout the year? If so, that’s costing you negotiating leverage.
Co-terming means aligning all your license renewals to a single date, effectively bundling them into one big renewal. Vendors pay more attention when there’s a bigger deal on the table.
When you renew piecemeal – a vSphere contract one month and a vSAN or vRealize license another – each deal is smaller and you likely get only standard pricing.
If everything renews together, the combined value is higher. The vendor will be more motivated to offer a better discount to keep your business.
Pro Tip: Co-terming creates a larger deal footprint. Vendors often provide an extra 5–10% discount when they see all your licenses coming up for renewal together, because they don’t want to risk losing the whole chunk.
Coordinate internally (and with your VMware rep or reseller) to sync up all contract expiration dates.
It might take a transitional alignment but the effort pays off.
With one co-termed renewal, you negotiate from a position of strength.
Tactic 5 – Negotiate Multi-Year Discounts
If you’re ready to commit to a longer term, use that to your advantage.
A multi-year deal (say a 3-year VMware subscription or Enterprise License Agreement) can be a bargaining chip for significant savings – if you negotiate it wisely.
Insight: A three-year commitment can often lock in around 10% overall savings on VMware costs – especially if you negotiate it before Broadcom’s new pricing fully takes hold.
The idea is simple: trade a longer commitment for price protections and discounts. In return for signing multi-year, ask for concessions – an upfront discount and strict limits on future price increases.
Recommendation: Push for year-over-year price caps in your multi-year deal. Ideally, negotiate 0% increases in years 2 and 3 (or at worst a 3–5% cap).
This shields you from big jumps and lets you project costs confidently. Also ensure the contract has flexibility – for example, rights to drop unused licenses at yearly intervals or adjust if your business changes.
Multi-year contracts done right give you breathing room. You won’t face sudden price hikes if Broadcom raises rates next year, and you’ll have locked in some discounts.
Just avoid committing to more licenses than you need. Keep it right-sized so you’re not stuck paying for shelfware over multiple years.
Tactic 6 – Eliminate Legacy Maintenance
VMware environments evolve, but sometimes our contracts don’t. Companies often keep paying maintenance on legacy VMware products or features that they no longer use, simply because “it was always on the renewal.” It’s time to stop that bleed.
Maybe you have an old vRealize Operations module that isn’t deployed anymore, or a DR product that got replaced but support fees continue quietly. These maintenance dollars add up and yield no benefit if the software isn’t in active use.
Recommendation: Scrutinize your VMware support renewals line by line. Each quarter (or at least annually), audit which products still warrant maintenance.
If a product isn’t used or providing value, end its support contract. You can always re-subscribe later if needed, but stopping now saves money.
Pro Tip: Maintenance fees run ~20% of a license cost per year. Don’t waste money on unused tools – cutting their maintenance is a quick win.
Eliminating legacy maintenance has zero impact on operations (since the tool is not used anyway), yet it frees up funds you can redirect to priorities that matter.
Tactic 7 – Reuse or Transfer Licenses Across Business Units
Large organizations often find VMware licenses stranded in one department while another is out shopping for more. Break down these silos: if one unit downsizes or ends a project, repurpose its license entitlements elsewhere internally instead of buying new.
Set up a license-sharing program and treat VMware licenses as a company-wide pool, not siloed by team.
When a project retires, its licenses go back into the pool. Next time another team needs capacity, use those reclaimed licenses before buying new ones.
Pro Tip: Keep a centralized inventory of all VMware licenses. With that visibility, you can spot idle capacity and reallocate licenses. It’s like recycling – you already paid for those licenses, so use them fully before buying new ones.
Checklist – Quick Wins for 20% VMware Savings
- Audit usage vs. entitlements regularly: Know what you have and what’s actually in use.
- Cut idle or dev/test licenses: Don’t renew licenses for servers or environments that aren’t active or necessary.
- Tier support by criticality: Use premium support only for critical systems; standard or third-party support for the rest.
- Co-term your renewals: Align contract dates to negotiate one big renewal for a better discount.
- Cap multi-year price hikes: In multi-year deals, limit annual cost increases to 5% or less (or negotiate fixed pricing).
- Consolidate hosts for efficiency: Aim for >50% utilization on hosts so you need fewer licenses overall.
Summary – Your 20% Saving Roadmap
The roadmap to 20% savings on VMware is all about taking control. Instead of hoping your vendor will cut you a break, you actively reduce what you spend by being smarter in how you use and renew VMware.
Internal efficiency is your best friend here. Reclaim unused licenses and power off anything you don’t need. This ensures you stop paying for capacity that isn’t providing value.
Right-sizing clusters and trimming hardware sprawl means you’re not buying more licenses than necessary. Tailor your support levels so you’re not overspending on maintenance.
On the negotiation front, aligning renewals and cutting multi-year deals puts you back in the driver’s seat. This creates opportunities for discounts and protects your budget by setting terms upfront.
Closing Recommendation: Control your usage, align your contracts, and right-size your support commitments – that’s your direct path to a 20% VMware cost reduction.
With discipline and these tactics, you can turn escalating VMware expenses into sustainable savings.
Read about our Broadcom Audit Defense Service.
