Services Australia’s VMware Licensing and Support Costs Reach $94 Million

Services Australia has committed to renewing its licensing and support agreements with VMware for almost $94 million over the next three years, marking a 20 percent increase from previous contracts. This new agreement replaces two three-year deals that were worth $78 million combined, which covered VMware licenses and maintenance from 2021 to 2024.

The renewed contract is essential for Services Australia, as it ensures the continuation of software, support, and related services vital for the agency’s delivery of programs such as Centrelink and Medicare. The agency stated that this new contract consolidates the expiring agreements, ensuring a seamless continuation of its services.

The increased expenditure has raised questions about whether the hike is due to increased usage or a reflection of VMware’s pricing adjustments following its acquisition by Broadcom. In 2022, Broadcom announced its intention to acquire VMware for $61 billion, and since then, there have been reports of significant price hikes for VMware renewals. Customers have been switched to a new per-core subscription model, contributing to increased costs. VMware has acknowledged "pricing challenges" for some of its long-term customers, which may explain part of the increased expenditure for Services Australia.

Services Australia, previously known as the Department of Human Services, has a long history of using VMware software, with enterprise agreements dating back to at least 2009. Over the years, several licensing deals have been signed under this standing offer, with the latest major deal reaching $44 million for both hardware and software. In light of these developments, Services Australia's Chief Information and Digital Officer, Charles McHardie, announced plans to conduct an end-to-end architecture review this year. This review will focus on evaluating the agency's major systems, which include both newly implemented systems and older ones. The outcomes of this review are expected to guide future investments and strategic decisions regarding the agency's IT infrastructure.

The review aims to ensure that Services Australia’s IT architecture is robust and capable of supporting its operations efficiently. By examining each major system comprehensively, the agency seeks to identify areas for improvement and potential upgrades, ensuring that it can continue to deliver essential services effectively.

The decision to renew the contract with VMware despite the increased costs reflects the critical role that VMware’s solutions play in Services Australia's IT infrastructure. VMware’s software is integral to the agency’s operations, providing the necessary support for its various service delivery programs. Additionally, the increased expenditure could also be seen as a proactive move by Services Australia to secure its IT infrastructure amidst the changing landscape of software licensing. By renewing the contract, the agency ensures continued access to the necessary support and updates from VMware, which is crucial for maintaining its service delivery capabilities.

The architecture review, coupled with the renewed contract, positions Services Australia to better manage its IT resources and plan for future needs. By understanding the strengths and weaknesses of its current systems, the agency can make informed decisions about where to invest and how to optimize its IT operations.

In conclusion, Services Australia’s renewal of its licensing and support agreements with VMware at a higher cost highlights the importance of VMware’s solutions to the agency’s operations. While the increased costs raise questions about the impact of VMware’s acquisition by Broadcom and subsequent pricing changes, the decision reflects a commitment to maintaining robust IT support for critical services. The upcoming end-to-end architecture review will further guide the agency in optimizing its IT infrastructure and planning for future investments, ensuring it can continue to deliver essential services effectively.