From VMware ESXi to Proxmox VE: A 64% Reduction in Annual Licensing Costs

How a routine hardware refresh, forced by VMware’s pricing shakeup, became an opportunity to reduce costs, modernise the infrastructure and simplify day-to-day IT operations.

A US data center company had to replace an aging internal server just as Broadcom, VMware’s new owner, overhauled its pricing model.

Renewing VMware on the replacement infrastructure was estimated at ~$3,500 (approx. €3,000) per year, with costs expected to increase as the business grew.

Rather than automatically renew, the customer asked us to assess whether VMware still made sense for an environment running just three production VMs.

We migrated to Proxmox VE, reducing annual virtualization licensing costs by approximately 64% while building a more modern and manageable infrastructure platform.

“Predictable costs were the priority for us alongside a platform that actually fits our infrastructure needs. We got both.”

Eugene Rutberg, Partner, Level IV

At a glance

Before: a single VMware ESXi host at the end of its hardware life, running three production VMs (2× Windows Server and 1× Linux)

Drivers: a planned hardware refresh combined with Broadcom’s changes to VMware licensing and packaging

Target platform: a single-socket Proxmox VE node with a 16-core Xeon Silver, 256 GB RAM and approximately 14 TB of usable storage

Migration: all three production VMs moved within one planned extended maintenance window using Proxmox VE’s native ESXi import tooling

Automation: around 90% of the infrastructure configuration applied without manual intervention through Ansible

Managed operations: Zabbix monitoring, Splunk log collection, Veeam off-site backup and AD-backed access with 2FA

Platform subscription: €1,100/year for Proxmox VE Premium, compared with approximately $3,500/year modelled for VMware

Result: approximately 64% lower annual virtualization licensing costs with a predictable subscription cost based on a single occupied socket, regardless of future core density

Background

Level IV is a US-based company providing data-centre and related infrastructure services to its customers.

Its aging VMware ESXi host was approaching end of life just as VMware’s licensing model was changing. As part of our ongoing VMware-to-Proxmox programme, we designed and deployed a new single-socket Proxmox VE environment for its three production VMs.

When a hardware refresh becomes a platform decision

The existing VMware ESXi host had been in service well beyond the point where the customer was comfortable continuing to rely on the underlying hardware, particularly its storage.

A hardware refresh was therefore already planned. But the timing turned a routine server replacement into a broader platform decision.

Following Broadcom’s acquisition, perpetual VMware licenses were discontinued, the portfolio was consolidated into subscription-based bundles and pricing became increasingly tied to physical core counts.

For a three-VM environment, the available VMware package represented significantly more functionality and cost than the customer required.

With vSphere Standard discontinued, vSphere Foundation was the realistic option, estimated at approximately $3,500 per year for the replacement node, with the potential to increase if future hardware introduced more CPU cores.

Rather than automatically renew, the customer asked us to compare the five-year outlook of staying with VMware against a credible alternative.

VMware vs. Proxmox VE for this environment

The decision was not based on licensing cost alone. We compared both platforms against what this environment actually required: three production VMs, one physical host, straightforward storage and networking, and no dependency on VMware-specific technologies such as vSAN or NSX.

For this particular environment, Proxmox VE offered a better fit between the capabilities the customer actually needed, the infrastructure they wanted to operate and the cost model they wanted going forward.

“When the VMware renewal quote came in, we knew we needed an alternative. Now we pay one fixed price a year, and it won’t change no matter how our hardware grows.”

Eugene Rutberg, Partner, Level IV

The business impact: 64% lower licensing costs

The new platform runs on Proxmox VE Premium at €1,100 per year for one occupied socket.

Against the annual VMware estimate, this represents a reduction of around 64% in annual virtualization licensing costs.

Premium was selected for the initial production period to provide the customer with the highest level of vendor support during the transition as it provides unlimited support tickets with a 24/7 two-hour response time.

Potential for further savings

After the first year in production, the customer can reassess the required support level and consider moving to Standard (€550) or Basic (€370), potentially increasing licensing savings to approximately 85% compared with the original VMware estimate.

As the Proxmox subscription is based on occupied CPU sockets rather than individual CPU cores, the subscription would remain the same even if the current Xeon Silver were replaced with a significantly higher-core-count CPU in the future.

Migration

The environment was well suited to a straightforward migration: one ESXi host, no cluster dependencies, no vSAN and no NSX. All three production VMs were transferred using Proxmox VE’s native ESXi import tooling within one planned extended maintenance window.

The previous VMware server remained available until customer acceptance, providing a clear rollback option.

The migration was completed within the agreed maintenance window, with no unplanned downtime or major complications.

More than a VMware replacement

The migration was not only about reducing licensing costs. It also gave us an opportunity to improve how the environment is configured and operated.

Around 90% of the infrastructure configuration is applied automatically through Ansible, reducing reliance on manual setup. The new platform is also integrated into the customer’s existing managed-service stack:

Zabbix for infrastructure and VM monitoring
Splunk for centralized logging
Veeam for off-site backup
AD-backed RBAC with 2FA for administrative access

The result is a more reproducible, observable and manageable environment.

Following a training session provided by our team, Level IV team quickly became familiar with the new platform.

What’s next?

The current single-node architecture matches the customer’s requirements today without introducing unnecessary complexity. If those requirements grow, the platform can be expanded into a three-node Proxmox cluster.

Additional automation is also planned to complement the existing Ansible configuration and extend infrastructure automation further.

Summary

What started as a routine hardware refresh became an opportunity to rethink the customer’s virtualization platform.

The customer retained the same workloads while moving to a platform with 64% lower annual virtualization licensing costs, greater automation and a clear path for future growth.

For organizations approaching a VMware renewal or hardware refresh, the question may not simply be “How do we renew VMware?” It may be: “Does VMware still make sense for the environment we actually run?”