EU cloud provider: Broadcom raised VMware license prices by 800 to 1500 percent

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Broadcom is still under fire for its licensing policy at virtualization specialist VMware, which it acquired in 2023. In a new report, ECCO, the observatory set up by the EU cloud provider association CISPE, accuses the company of having caused price increases of 800 to 1500 percent for CISPE member companies with its license changes, among other things. Broadcom is continuing its “far-reaching and brutal imposition of unfair contractual terms on cloud infrastructure service providers” unabated.

For example, Broadcom has unilaterally terminated license terms for important virtualization software and replaced perpetual licenses with subscriptions, ECCO criticizes in the report. The bundling of previously individually available licenses also means that companies often have to book more than they need. ECCO had already sharply criticized Broadcom in February. Meanwhile, the situation has even worsened somewhat, including regarding the remuneration structures in the partner program. Broadcom has yet to comment on the criticism.

Contracts that “threaten the viability of service providers”

Francisco Mingorance, Secretary General of the EU cloud association CISPE, explained: “Unlike Microsoft, Broadcom shows no interest in finding solutions or even working with European cloud infrastructure providers. Broadcom can report that most of them have signed new contracts, but we know that these contracts come with penalties and threaten the viability of service providers tied to the VMware ecosystem.”

According to the appendix to the report, all but one of the more than 30 smaller cloud providers organized in CISPE would have had to sign the new contracts. Extremely short notice periods, the speed of the changes and the indispensability of VMware software ultimately forced acceptance of the new conditions. According to the report, alternatives such as Nutanix or the large hyperscalers are not yet suitable for all workloads, require significant infrastructure changes or create new dependencies.

The demands made of Broadcom include guaranteeing at least six months' notice in future before changes are made to contract terms or price structures. Prices should also be made more flexible and transparent. Incidentally, Microsoft's willingness to find a solution, which Mingorance praises, is probably because the software company paid 20 million euros in the summer of 2024 to settle disputes with the CISPE. After Microsoft promised changes to the license terms and compensated CISPE members, the association withdrew an EU complaint.

Complaint to the EU Commission

The German IT user association Voice, to which ECCO also refers, had already submitted a complaint about Broadcom to the EU Commission at the beginning of May. Like ECCO, Voice criticizes Broadcom for exploiting VMware's dominant market position and pushing through “exorbitant and unfair price increases” with product bundles when switching licenses. “Broadcom is exploiting its customers' dependence on VMware products in a highly questionable manner,” explained VOICE Managing Director Robin Kaufmann. A direct dialog with Broadcom has brought nothing.

According to a Reuters report, Broadcom had already received a request for information from the EU competition authority in mid-April following numerous complaints to EU institutions. In response, Broadcom boss Hock Tan had probably also held out the prospect of simplifying the product portfolio at VMware and admitted that the changes to the licensing conditions had caused “some displeasure” among customers and partners.

Carrot and stick?

Most recently, the company had made the entry-level version of the vSphere hypervisor available free of charge again, which had previously been discontinued without replacement in February 2024. Broadcom also reversed its decision to increase the minimum number of licensable cores from 16 to 72 just one week after the announcement. However, it remains questionable whether this is a genuine change of course or merely a tactical maneuver to correct the company's image.

On the other hand, Broadcom has also reportedly sent cease and desist letters to VMware customers with unlimited usage licenses after their support contracts expired. In the USA, VMware has also sued the US division and several Siemens subsidiaries for using software without a license. This rather points to a carrot and stick strategy.

(axk)