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Home Vendor

‘Holding sector to ransom’ – Cloud body slams Broadcom over VMware changes

Broadcom claims it "has acted decisively to increase customer value"

Doug Woodburn by Doug Woodburn
20 March 2024
in Blog, Vendor
‘Holding sector to ransom’ – Cloud body slams Broadcom over VMware changes

Image by Gerd Altmann from Pixabay

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A European trade body for cloud providers has accused Broadcom of “holding the sector to ransom” with its impending VMware licensing changes.

Having completed its acquisition of VMware in November, Broadcom has moved swiftly to make sweeping changes to the virtualisation giant’s software portfolio, pricing, organisational structure and go-to-market strategy.

As first reported by The Register, VMware’s cloud provider programme is set to be terminated at the end of the month, after which customers will transition to a subscription model (see here for a more detailed timeline).

This reflects “the industry’s move towards simplified and predictable subscription models”, according to the official line.

“Left in limbo”

Not for profit trade association the CISPE said that its members and VMware customers will be “left in limbo, without clarity as to how, when, or if they will be able to license VMware software from 1 April 2024”, however.

In additional comments to IT Channel Oxygen, one of VMware’s UK cloud services partners branded the changes “super naughty”, adding that his company’s monthly VMware bill is set to double from next month (see further down).

CISPE’s circa 30 members include “national champions” such as Italian Aruba.it and Spanish Gigas. UK members include BlackBox and Hyve.

Customers have reported price hikes of as much as twelve times (in the event they are invited to relicense VMware software), the CISEP claimed.

It is therefore calling on regulators, legislators and courts across Europe to “swiftly scrutinise the actions of Broadcom in unilaterally cancelling license terms for essential virtualisation software”.

“CISPE is calling for, at minimum, an immediate pause to contract terminations and the ability of customers to exit the multi-year contract imposed by Broadcom as soon as viable alternatives become available,” it stated.

VMware holds almost 45% of the virtualisation market in 2023, the CISPE claimed, adding that it is the “only viable option” in some specific cloud applications.

Francisco Mingorance, secretary general of CISPE
Francisco Mingorance

“At a time when our members are moving to support the requirements for switching and portability between cloud services outlined in the Data Act, Broadcom is holding the sector to ransom by leveraging VMware’s dominance of the virtualisation sector to enforce unfair licence terms and extract unfair rents from European cloud customers,” said Francisco Mingorance, secretary general of CISPE.

“These changes harm European customers and cloud service providers, increasing costs and reducing choice.”

Several CISPE members have stated that without the ability to license and use VMware products they will quickly go out of business, the body claimed.

“As well as inflicting financial damage on the European digital economy, these actions will decimate Europe’s independent cloud infrastructure sector and further reduce the diversity of choice for customers,” Mingorance added.

“Dominant software providers, in any sector from productivity software to virtualisation, must not be allowed to wield life or death power over Europe’s digital ecosystems.”

“Super naughty”

Talking on the condition of anonymity, one top executive at a UK VMware cloud partner told IT Channel Oxygen that its VMware bill is set to double from £21,000 to £42,000 as a result of the changes.

Despite having a large VMware estate, it has been classified as a ‘tier 3’ partner under the new regime, and must now buy from a tier 1, he said.

“We still don’t have a license agreement we can read to see the ts and cs. It’s mindblowing,” they said.

The VMware partner in question must now commit to buying 2,500 cores over three years, the source added.

“The thing that’s most frustrating is the three-year minimum commit. It goes against the ethos of what we get when we’re consuming licenses as an MSP. With most providers we work with, it’s a maximum of 12 months, and even then it’s quite loose.

“I think this is a way for Broadcom to lock in smaller partners that were on that programme that were clearly looking at moving away.

“We’re going to move away from VMware as much as we can. We’ll keep what we need on the platform. For anything customer facing, where we’re delivering a service, VMware is still the best thing on the planet, so have to keep that. But for a lot of our internal systems, we will look to move to an alternative hypervisor. We are still evaluating options, but it will probably be something based on open source.”

They concluded: “What they’ve done is super naughty – it’s everything they said they wouldn’t do.”

“Acting decisively to increase customer value”

Broadcom declined to comment beyond referring us towards a blog post issued last week by CEO Hok Tan, in which he claimed the vendor “has acted decisively to increase customer value” since the acquisition closed.

“We overhauled our software portfolio, our go-to-market approach and the overall organisational structure. We’ve changed how and through whom we will sell our software. And we’ve completed the software business-model transition that began to accelerate in 2019, from selling perpetual software to subscription licensing only – the industry standard,” Tan said.

“Of course, we recognise that this level of change has understandably created some unease among our customers and partners. But all of these moves have been with the goals of innovating faster, meeting our customers’ needs more effectively, and making it easier to do business with us. We also expect these changes to provide greater profitability and improved market opportunities for our partners.”

Doug Woodburn
Website |  + postsBio

Doug Woodburn is editor of IT Channel Oxygen

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