Vmware Price Hikes? Between 800 And 1,500%, Claim Euro Customers
Broadcom has upped VMware licensing costs by between eight to 15 times since it took over the organization, and a lack of alternatives in the tech industry means trade and end customers have no choice but to play ball.
This is the according to the European Cloud Competition Observatory (ECCO), an independent body formed by customer organizations, and CISPE – a trade association of 37 cloud providers in the region – to monitor the behavior of software vendors accused of abusing their monopoly position.
The latest report issued today by ECCO on Broadcom-owned VMware says most CISPE members were forced to renew licensing agreements.
“However, these agreements were often signed under significant pressure, influenced by a lack alternatives, abrupt contract terminations, and financial incentives such as rebates for longer-term commitments,” it claims.
Despite putting pen to paper, “these customers continue to face substantial financial burdens and operational disadvantages due to the imposed terms” of the Broadcom’s revamped licensing framework for VMware.
The chips ‘n’ software giant killed the perpetual licenses and monthly “pay-as-you-go” pricing models on VMware products, and rationalized the portfolio into a few large bundles that are only available on subscription with a three-year minimum commitment.
ECCO likens this to an electricity provider deciding to charge you based on the assumption you run your heating full-blast 24×7 rather than on actual usage, and insisting you pay up front a year or more in advance.
Broadcom, ECCO says, “unilaterally and without sufficient notice” terminated existing licensing agreements, some of which had been in place for over 10 years, in order to compel customers holding them to accept the new terms.
As The Register reported last year, it also ditched VMware’s channel program for Cloud Services Providers (CSPs) and only invited the largest such operators to join its own Broadcom partner program.
This latest report highlights that recent actions by Broadcom have, in ECCO’s words, “worsened the situation for European cloud infrastructure providers, their customers, both private and public sector, which depend on VMware virtualization software.”
It says the firm has made additional changes to its partnership program, forcing partners to choose between being a service provider or a reseller, ignoring that many fill both roles for their customers. ECCO called it “a further harmful restriction on European cloud service providers’ ability to compete and serve European customers.”
On pricing, ECCO points to the claims from AT&T in October last year that its VMware support services bill was set to rise roughly 1,050 percent – although the telco and Broadcom entered into talks to settle the dispute.
“CISPE members reported price hikes to the Commission ranging from 800 percent to 1,500 percent,” says the ECCO report. “Prices have often increased tenfold.”
It goes on to say that when customers agree to three-year fixed contracts, Broadcom entertains discounts of 30 to 50 percent on the price hike.
Also noted are the cease-and-desist letters that Broadcom sent to some perpetual license holders, ordering them to roll back patches installed after the end of their support agreements, and a copyright and licensing lawsuit filed against Siemens in the US, which it says indicate the “highly litigious approach” Broadcom adopts with trade and end-customers.
The report calls on Broadcom to restore fair licensing of VMware software for Cloud Service Providers (CSPs), and calls for changes that include:
- Broadcom guaranteeing a minimum of six months’ notice of any shifts in contractual terms, pricing structures, or conditions applicable to renewals
- Charges for peak usage to be based on contractually agreed prices, and CSPs should not be penalized for over or under-usage
- Broadcom to adopt flexible, cloud-aligned licensing options, allowing committed volume reductions, and implement pricing models aligned with flexible capacity and infrastructure realities
- CSPs should continue to be permitted to act simultaneously as both Resellers and Service Providers, particularly those providing hybrid services such as colocation and private cloud
Broadcom loses another big VMware customer: UK fintech cloud Beeks Group, and most of its 20,000 VMs
READ MOREECCO believes the software licensing terms imposed by Broadcom remain unfair and anticompetitive, and says “regulatory action is necessary.” This is something CISPE urged the European Commission to consider in March 2024.
Francisco Mingorance, secretary general at CISPE, said that Broadcom “shows no interest in finding solutions” or even working with European cloud infrastructure providers.
“Broadcom can report that most have signed new contracts, but we know that these are punitive and threaten the viability of service providers locked-in to the VMware ecosystem. Urgent action is needed.”
It is understood that German IT customer association VOICE has already filed a formal competition complaint against Broadcom with the European Commission over the matter.
In response to the report, a spokesperson at Broadcom sent a statement to The Register:
“As a strategic partner with over 140 European Cloud Service Providers, of which more than 40 provide sovereign cloud services, Broadcom is working to advance the European Union’s sovereign cloud objectives and enable enterprises of all kinds to accelerate innovation, provide more choice, and address their most complex technology challenges.
“We welcome the opportunity to have a constructive dialogue with CISPE on how our products can help their European members be more competitive and innovative.”
The ECCO report says the opposite is true, saying the price hikes “have been absorbed internally (at the expense of innovation) and externally (at the expense of consumers).”
The ECCO body was formed by the CISPE to keep an eye on software licensing practices following its compromise deal with Microsoft last year.
That saw it settle with the Redmond megacorp for a relatively small sum – estimates range from $10 million to $30 million – in exchange for dropping its complaint to the European Commission over alleged anticompetitive behavior regarding the higher cost of running Microsoft software (Windows Server, SQL server and SharePoint) in public clouds other than Azure. ®
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