VMware licenses: Supermarket chain Tesco sues Broadcom for 100 million pounds

The British supermarket chain Tesco has sued Broadcom for 100 million pounds sterling (currently around 115 million euros) for breach of contract regarding VMware licenses, as reported by the specialist service The Register. The British IT service provider Computacenter, which acted as a reseller of VMware products, is also a co-defendant. According to Supermarketnews, Tesco warned in the context of the lawsuit of impairments to its own digital infrastructure, which could also affect the supply of individual supermarket stores.

According to the court documents cited by The Register, Tesco purchased perpetual licenses for the vSphere Foundation and Cloud Foundation products and subscriptions for the Tanzu products in January 2021. It entered into a contract for support services and software upgrades until January 2021. 2026. Tesco claims that VMware has also agreed to grant an option to extend the support services for a further four years.

Price shock after the takeover

Following the takeover of VMware by Broadcom, however, the British supermarket giant was confronted with a licensing model that ties support to the newly introduced subscription licenses. It had to pay "inflated and inflated prices for virtualization software that Tesco had already paid for". In addition, the company could no longer purchase standalone virtualization support services for its perpetually licensed software without having to "purchase subscription licenses for the same software products it already owns".

Broadcom would also not allow Tesco to upgrade its perpetual licenses to the new Cloud Foundation 9, even though the contracts concluded with VMware at the time included the right to software upgrades. And finally, Tesco also sees Broadcom's patch policy as a breach of its contracts –, according to which users who do not purchase a subscription cannot receive all security updates and other bug fixes.

Dependent on VMware

The supermarket chain also provides an insight into its technical dependence on VMware: software and support from the virtualization specialist are "critical to the operation and resilience of Tesco and its ability to deliver groceries to consumers across the UK and the Republic of Ireland." VMware software is the foundation for servers and data systems behind Tesco stores. It hosts around 40,000 server workloads and connects the tills in Tesco stores, among other things.

Broadcom acquired VMware at the end of 2023 – and has since radically ploughed through the virtualization landscape. The VMware product portfolio and partner program have been extensively restructured. Broadcom has switched perpetual licenses to subscription models and bundled products that were previously available individually.

Tesco is not alone in complaining that this changeover has led to drastic additional costs. The European cloud association CISPE, for example, reports that Broadcom's approach has led to price increases of 800 to 1500 percent for the association's companies. At the beginning of May, the German IT user association VOICE lodged a complaint with the EU Commission against Broadcom's business practices. Among other things, the association accuses Broadcom of exploiting VMware's dominant market position and pushing through "exorbitant and unfair price increases" with product bundling. The CISPE association has in turn taken legal action against the competition law approval granted by the EU Commission for the takeover of VMware by Broadcom.

(axk)