VMware Forcing Third Parties to NOT Sell Products for Free ESXi

I have previous blogged about the nature of the various End User License Agreements that VMware has put into place (Do VMware SDK License Limits Make Third-Party Developers Into Outlaws?). However, this bears looking into once more. Veeam has posted a blog of their own trying to explain why they are no longer selling Veeam Backup 3.x for the Free version of VMware ESXi. It is perfectly understandable that Veeam would comply with VMware’s requests in this matter as Veeam as a company depends upon their relationship with VMware to further their own business aims. In other words, Veeam has done nothing that could be considered wrong. However, VMware making the request in the first place should be a major concern to current and future vendors of VMware products.

Veeam’s blog post mentions that they have made these changes due to licensing issues with Free VMware ESXi . Here is a link to VMware’s EULA and the text of section 3.3…


3.3 Restrictions. You may not (i) sell, lease, license, sublicense, distribute or otherwise transfer in whole or in part the Software or the Software License Key to another party; (ii) provide, disclose, divulge or make available to, or permit use of the Software in whole or in part by, any third party (except Designated Administrative Access) without VMware’s prior written consent; (iii) modify or create derivative works based upon the Software; or (iv) create, develop, license, install, use, or deploy any third party software or services to circumvent, enable,

modify or provide access, permissions or rights which violate the technical restrictions of the Software, any additional licensing terms provided by VMware via product documentation, notification, and/or policy change posted at www.vmware.com, and the terms of this EULA. Except to the extent expressly permitted by applicable law, and to the extent that VMware is not permitted by that applicable law to exclude or limit the following rights, you may not decompile, disassemble, reverse

engineer, or otherwise attempt to derive source code from the Software, in whole or in part. Before you exercise any rights that you believe to be entitled to based on mandatory law, you provide VMware with 30 days prior written notice at info@vmware.com and provide all reasonablyrequested information to allow VMware to assess your claim and, at VMware’s sole discretion, to provide alternatives that reduce any adverse impact on VMware’s intellectual property or other rights. You

may use the Software to conduct internal performance testing and benchmarking studies, the results of which you (and not unauthorized third parties) may publish or publicly disseminate; provided that VMware has reviewed and approved of the methodology, assumptions and other parameters of the study. Please contact VMware at benchmark@vmware.com to request such review.

Let’s look into these sections some more:

(i) You cannot sell or transfer any license keys

This is normal language within many a EULA and basically means any license granted to you either due to it being free or for sale is yours alone. So if you are going to download free VMware ESXi for a third party (if you are a consultant) you are downloading only for that third party and no other, including yourself.

(ii) Ship free VMware ESXi with your own products

This is normal language as well. Your customers must download their own copy of Free VMware ESXi and you can not include it as part of your own packaging.

(iii) modify or create derivative works

This is also normal language and relates to protecting VMware intellectual property, however, derivative work could be considered an issue. If for example, you use any of the VI SDK or built-in tools for your product. Your product could technically be deemed a derivative work. Some would argue that such usage is not a derivative work but more a usage within a standalone product. How the tools and VI SDK is used and how the code created is the real issue going forward.

(iv) use or create third party software to circumvent technical restrictions of the software

These refer specifically the technical restriction that VMware has placed on their free VMware ESXi that its own tools such as the VI SDK, Remote CLI, and others be read-only tools. These tools cannot write to the VMware ESXi host, but they can read structures, etc. A backup tool is by its very nature a read appliance, but since it is also creating a snapshot, it is writing to the Free VMware ESXi host as well. Yet, VMware’s own tools allow you to create snapshots so how would this be a violation? In additional through VMware ESXi 3.5U3 VMware allowed write access to VMware ESXi by many of the SDKs.

I do not believe that Veeams product is violating any of these restrictions, but what it is really going against is VMware’s Marketing restrictions. VMware wants the Free VMware ESXi distribution to be solely used by enthusiasts and not by any company or corporation for production reasons. VMware wants to sell VMware ESX not give it away. This is also understandable. VMware is in the software business to make money.

VMware however has an open statement that they like 3rd party vendors but have then gone ahead and created competing products. Competing products is also a normal part of doing business. For example, VMware VCB was seen as a competing backup product, VMware vShield Zones is definitely competes in the virtual firewall space, and VDR is a competing backup product. Many of the VMware products compete in some way with 3rd party vendor products. This forces vendors to find a niche market or to create better software in order to compete effectively. Competition is not bad.

However, when VMware goes to a vendor and no matter how politely done, forces them to no longer sell a product for purely marketing reasons, VMware is in effect crossing a line that starts them down what could be considered the slippery slope to being a litigation engine instead of a product development company. These could easily be considered strong arm tactics to limit the effectiveness of 3rd party competitors to their own solutions.

While Veeam certainly complied with VMware’s request, how many other requests like this have been made that will in effect hurt 3rd parties and eventually hurt VMware itself.

The last sounds counter to VMware’s stated goals. At the moment VMware is in a fight for dominance with Microsoft and Citrix. The battleground for this is the SMB, not the SMB by VMware’s statement of less than 100 VMs but the SMB in the normal sense of the term. This is one area that VMware is currently losing ground and denying access to an effective backup solution in this space appears to be misguided. VMware should allow this solution as the SMB regardless of what VMware thinks will look at using Free VMware ESXi and if there are no tools for it will switch to Microsoft Hyper-V or Citrix XenServer and when that happens VMware loses.

Personally I am confused by VMware’s approach to the SMB. They raise their prices in effect pushing them out of many an SMBs reach and then limit the functionality of 3rd party tools that would allow SMBs and smaller Enterprises to use VMware’s product even if free. Getting in the door is an important first step to winning the SMB market. Will VMware realize this too late? Or will they continue down slippery slope they have started down? When will VMware realize that their free version of ESXi is all that stands between them and complete loss of the SMB market where funds are extremely tight? Use of Free ESXi often turns into sales of the costlier but much more effective versions of VMware ESX.

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