According to TheRegister.com, IBM Cloud announced it will stop marketing its VMware on IBM Cloud service to new customers effective October 31, 2025. The decision means IBM cannot sell VMware licenses to customers who don’t have at least one active VMware workload running on IBM Cloud before that deadline. While other hyperscalers including Google, Microsoft, Oracle, and AWS continue operating their VMware services, IBM cited Broadcom’s licensing changes to the VMware Cloud Services Provider partner program as the reason for its withdrawal. Existing customers may continue using their current VMware environments but cannot expand to new regions or change consumption models, according to IBM’s official documentation. This strategic shift raises important questions about the future of enterprise cloud partnerships.
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The Broader Industry Context
IBM’s decision reflects a broader realignment in the cloud infrastructure market that extends beyond simple licensing disputes. While IBM Cloud hasn’t appeared in Gartner’s top IaaS provider rankings for five years, the company has been strategically repositioning its hybrid cloud strategy around Red Hat OpenShift rather than VMware partnerships. This move follows Alibaba’s earlier exit from VMware services and suggests a consolidation pattern among secondary cloud providers who find the economics of maintaining VMware partnerships increasingly challenging under Broadcom’s ownership. The hyperscale market is effectively splitting between providers who can sustain VMware partnerships at scale and those who cannot justify the investment.
Strategic Implications for IBM
IBM’s retreat from VMware cloud services represents a calculated strategic choice rather than a simple reaction to licensing changes. The company has been heavily investing in Red Hat OpenShift as its primary hybrid cloud platform, and this move effectively clears the competitive field for that offering. As IBM positions OpenShift as a direct competitor to VMware Cloud Foundation, maintaining both platforms creates internal conflict and resource allocation challenges. This decision allows IBM to concentrate sales, marketing, and technical resources behind a single strategic platform rather than splitting focus between partnership-based offerings and their owned technology stack.
Understanding Broadcom’s Licensing Strategy
Broadcom’s licensing changes represent a fundamental shift in how VMware products are distributed through cloud partners. The requirement that customers acquire licenses directly from Broadcom for hyperscale environments, rather than through cloud providers, gives Broadcom greater control over pricing, customer relationships, and revenue recognition. This aligns with Broadcom’s historical pattern of acquiring mature technology companies and restructuring their business models toward higher-margin, direct customer relationships. The bring-your-own-license approach Broadcom introduced in August 2025 fundamentally changes the economics for cloud providers who previously generated revenue from VMware license resale.
Enterprise Customer Implications
For existing IBM Cloud VMware customers, this announcement creates immediate strategic uncertainty. While current workloads can continue running, the inability to expand to new regions or change consumption models effectively freezes their VMware deployment architecture on IBM’s platform. This creates technical debt and limits future flexibility precisely when enterprises are seeking more agile cloud strategies. Customers now face a difficult choice between migrating VMware workloads to other cloud providers, repatriating to on-premises infrastructure, or accelerating plans to modernize applications away from VMware dependencies entirely. The timing is particularly challenging given that many enterprises are in the middle of multi-year digital transformation initiatives.
The Evolving Competitive Landscape
The cloud infrastructure market is experiencing significant stratification as cloud computing matures. While major hyperscalers can sustain the economics of Broadcom’s new licensing model, secondary providers like IBM are reassessing their positions. This creates a bifurcated market where enterprises have fewer options for running VMware workloads in the cloud, potentially leading to increased concentration among the remaining providers. Meanwhile, alternative platforms like Red Hat OpenShift, Azure Stack, and AWS Outposts gain competitive advantage as providers like IBM redirect resources toward these owned platforms rather than partner offerings.
Future Outlook and Market Trajectory
This development likely represents the beginning of broader market consolidation around VMware cloud services. As Gartner predicts VMware could lose 35% of current workloads within three years, IBM’s early exit may prove strategically prescient if other secondary providers follow suit. The fundamental question is whether Broadcom’s licensing strategy will ultimately strengthen VMware’s position through higher-margin direct relationships or accelerate customer migration to alternative platforms. For Broadcom, the departure of smaller partners like IBM may be an acceptable trade-off for greater control over the most valuable enterprise customer relationships and revenue streams.
