There is a classic business book on pricing strategy and the lifecycle of a product. When I heard about VMWare's change, this immediately came to mind. Some of the ideas are presented at this link http://www.imakenews.com/strategicpricing/e_article000586549.cfm?x=b11,bbH759jg,w and may help to explain VMWare's position.
Here is an excerpt: My first thought was that this was "harvest" phase, but perhaps "retrenchment" is more accurate; the cloud is the focus.
"Market Decline
Reduced buyer demand and excess capacity characterize this phase. If costs are largely variable or if capital can be easily reallocated to more promising markets, prices need fall only slightly to induce some firms to cut capacity. If costs are largely fixed and sunk, average costs soar due to reduced capacity utilization, while price competition increases as firms attempt to increase their capacity utilization by capturing a larger share of a declining market. Three options are available to deal with this challenge: retrench to one’s strongest product lines and price to defend one’s share in them, harvest one’s entire business by pricing for maximum cash flow, or consolidate one’s position by price-cutting to drive out weak competitors and capture their markets.
Retrenchment
A retrenchment strategy involves either partial or complete capitulation of some market segments to refocus resources on others where the firm has a stronger position. The firm deliberately forgoes market share but positions itself to be more profitable with the share it retains. Retrenchment is a carefully planned and executed strategy to put the firm in a more viable competitive position, not an immediate necessity to stave off collapse.
Harvesting
A harvesting strategy is a phased withdrawal from an industry. It begins like retrenchment with abandonment of the weakest links, but the goal of harvesting is a departure rather than a reallocation of resources. The harvesting firm does not price to defend its remaining market share but rather to maximize its income. The harvesting firm may make short-term investments in the industry to keep its position from deteriorating too rapidly, but it avoids fundamental long-term investments, preferring instead to treat its competitive position in the declining market as a “cash cow” for funding more promising ventures in other markets. ....."
Thanks for the clarification. Glad to hear it's not going to be as crazy-expensive as I once thought, still disappointed that when we expand it's going to cost us even more.