What is VMware
VMware is a software company that helps businesses run multiple virtual machines (VMs) on one physical computer. This makes better use of hardware, saves money, and makes IT systems easier to manage. VMware is commonly used in data centers and large company networks. Recently, it was bought by Broadcom, a company known for tough business tactics. Since the deal, VMware has ended its lifetime licenses, raised prices, increased audits, and started suing some customers.
Who uses VMware
Many companies need to have multiple different applications that each need their own server to run properly. Purchasing multiple servers is cost-prohibitive and inefficient for most companies. Instead of buying separate physical servers—which takes up space, uses a lot of electricity, and costs more—the companies install VMware software on one powerful server.
With VMware, they can create multiple virtual machines (VMs) on that single server, and each VM runs one of the applications independently, just like it would on a separate physical machine. This setup saves money, reduces hardware needs, and makes it easier to manage or move the applications if needed.
Common VMware Licensing Issues
While VMware seems like a good and cost-efficient solution for customers, installation can lead to some significant issues.
- Licensing Audits – VMware performs software license audits. If your company is audited and they determine you are using their software without a proper license (even unintentionally), they can issue
- A compliance notice;
- A requirement to purchase proper licenses;
- Back-payment for unauthorized usage.
- Financial Penalties – If the audit determines you are using features or capacity beyond what your license, VMware can required you to:
- Pay for the correct number/type of licenses retroactively;
- Pay penalties or fees for the period you were out of compliance
- Support Denial – If your company uses VMware, your company relies on support. VMware will not assist customers using unlicensed or expired trial versions. That means you will not have help with bug fixes, updated patches or technical assistance. This can cripple your you system.
- Incorrect License Type – VMware offers different types of licenses (e.g., Essentials, Standard, Enterprise Plus) depending on usage and features. Using a cheaper or incorrect license for a larger-scale deployment can lead to non-compliance.
- Overprovisioning CPUs – VMware licenses are often based on per-CPU or per-core models. If a company adds more CPUs or cores without updating its license, it can result in compliance violations. This exposes customers to expensive audits
- Expired or Evaluation Licenses – Organizations sometimes continue to use VMware software beyond the trial period without realizing they are out of compliance. Using expired VMware licensing has its own set of consequences:
- Loss of Functionality – After the evaluation period VMware will disable many of the advanced features. You may only be able to run VMs that were already powered on, and you may not be able to create or manage new ones. If your business relies on running in a virtualized environment, your systems will come to a halt.
- Third-Party Cloud Use – Running VMware in a cloud environment (like AWS or Azure) will likely require special licensing such as VMware Cloud.
Dangers of Handling Software Licensing Disputes In-House
Some companies attempt to handle these licensing issues without the help of experts like Palisade Compliance. Unfortunately, they are learning the hard way. In March 2025, VMware, (owned by Broadcom), filed a lawsuit against Siemens AG in U.S. District Court, accusing the industrial giant of pirating “thousands” of copies of VMware software. The dispute began when Siemens submitted a request for support services and included a list of installed VMware products. VMware responded and said that many of the products listed were never actually licensed by Siemens.
Siemens initially stood by the accuracy of the list and even threatened legal action to obtain support, despite VMware’s claim that it had no record of licenses for a significant portion of the software in use. Later, Siemens tried to revise the list but offered no explanation for the discrepancy. In the lawsuit, VMware alleges Siemens refused to allow an audit and believes the original list accurately reflects the extent of unauthorized use. The complaint specifically mentions unlicensed deployments of products like vSphere, vCenter Server, and vRealize Suite Advanced—some of which retail for thousands of dollars per copy. VMware is seeking damages, a jury trial, and profits attributed to the alleged infringement.
If successful, this lawsuit will cost Siemens billions of dollars. The key takeaway is that companies should not tackle these issues on their own—they should bring in experts to help navigate them effectively.
A Perfect Storm: Oracle and VMware Users Face Escalating Threats
- Oracle and VMware risks – Oracle’s standard contracts (like the OLSA or Oracle Master Agreement) do not explicitly mention VMware. Despite this, Oracle has taken the position (especially in audits) that if Oracle software is installed on any VMware host, you need to license every physical server in the entire cluster, even if the Oracle software is only running on one host. This is called “soft partitioning” and Oracle does not recognize it as a valid way to limit processor licensing.
Here is how this scenario unfolds in real life. If your company has a 10-host VMware cluster, and you’re only running Oracle Database on one of those hosts. Technically, this configuration works fine. If Oracle becomes aware of this configuration, it will audit you and say you need to license all 10 hosts. Essentially, Oracle forces its customers to pay for licenses that it could theoretically access.
What Happens During an Oracle Audit (If You’re Using VMware)
Oracle will Issue a License Audit Notice – typically these notices come from Oracle’s LMS (License Management Services) or a third-party auditor acting on their behalf.
Oracle will Review Your Architecture – If Oracle software is installed on a VMware cluster, they will claim you must license every physical host in that cluster—even if the Oracle workloads only run on one or two of them.
Oracle will Reject “Soft Partitioning” – Even if you are using VMware to contain Oracle to a subset of hosts, Oracle will not accept this as a valid way to reduce licensing. Oracle’s position is that if the software could potentially run on a host, you need to license that host.
Oracle Calculates the Shortfall – Oracle calculates how many processors you should have licensed under their interpretation of the contract. This can result in huge retroactive fees, including:
- Backdated license costs (sometimes 2–3 years back)
- Support costs (23% annually, compounded)
- Fines or penalties
- Oracle will send you a Noncompliance Bill – The retractive costs can be in the hundreds of thousands to millions of dollars, depending on the size of your environment.
How Palisade Compliance helps clients using both VMware and Oracle
Organizations that run Oracle software in VMware environments often face aggressive claims from Oracle that can result in unnecessary licensing costs, unexpected penalties, and pressure to purchase licenses they do not actually need. Oracle has long maintained an unofficial position that customers must license every physical host in every vCenter or cluster that could potentially run Oracle—even if the software isn’t installed or used there. This position is not supported by the language in Oracle’s contracts, but many customers, lacking specialized knowledge, feel compelled to comply under audit pressure.
At Palisade Compliance, we specialize in helping organizations defend against these aggressive tactics and ensure they remain compliant and cost-efficient without over-licensing. Our team includes former Oracle licensing, audit, and legal executives who understand both the letter and intent of Oracle’s policies. We work with your legal, IT, and procurement teams to:
- Analyze your current Oracle deployment on VMware to determine your actual compliance posture based on contractual obligations—not Oracle’s sales-driven interpretations.
- Architect your VMware environment in a way that aligns with your Oracle agreements, minimizing licensing exposure while maintaining operational flexibility.
- Prepare for and defend against Oracle audits, including providing strategic responses and documentation that challenge audit findings based on contractual facts.
- Negotiate with Oracle from a position of knowledge and independence, helping you avoid unnecessary purchases and secure better terms when needed.
- Educate your team so that future infrastructure decisions—like data center expansion or consolidation—are made with Oracle compliance in mind.
Palisade Compliance empowers your organization to maintain control of your IT environment, reduce Oracle-related risk, and avoid becoming a victim of licensing misinformation. Whether you’re actively using VMware today or planning a virtualized deployment, Palisade Compliance provides the roadmap and support you need to stay protected and cost-efficient.