VMware: Broadcom faces EU complaint over unfair licensing

CEO Hock Tan responds to complaints, opening up partner programme to smaller resellers and standardising on core licensing

Cliff Saran,
Managing Editor

Published: 17 Apr 2024 12:45

Earlier this week, Reuters reported that Broadcom was being investigated by the European Union (EU) over its changes to software licensing of VMware. The news service said Belgium’s Beltug, Cigref in France and Voice Germany have written to the European commissioner for competition, Margrethe Vestager, complaining of Broadcom’s licensing practices regarding VMware.

There has been growing discontent among VMware customers. Earlier this month, Computer Weekly reported that customers in the education sector faced large hikes in licensing fees due to education discounts being dropped from the new price list.

Concerns have also been raised that the switch from per processor to per core licensing negatively impacts those organisations who have chosen to deploy powerful multi-core servers, which tend to require fewer physical processors. Others have complained that the new software bundles Broadcom has introduced means they are paying for products they do not need.

In an open letter published at the end of March, the associations of business users of digital technologies in the public and private sectors, in Belgium, France, Germany and the Netherlands, said they strongly condemn the conduct of Broadcom in the EU with regard to VMware products.

Prior to Broadcom’s acquisition of VMware in November 2023, French IT user association Cigref wrote to the EU competitions regulator. “Broadcom is seen by most of its customers as an aggressive player, with practices that could be described as abusive and unfair,” it warned. “The previous takeovers of CA Technologies in 2018 and Symantec in 2020 have led to changes in commercial and contractual practices that the customers of these companies judge very harshly.”

Responding to growing criticism over the company’s changes to VMware licensing, Broadcom CEO Hock Tan posted a blog claiming the company would continue to create value for its customers.

“One of the hot topics across customer and partner communities has been the changes to how we engage with cloud service providers,” he said. “Broadcom will continue to create value within the VMware partner ecosystem, because partners are critical to our customers’ success and our own success. That said, Broadcom is updating and incorporating the VMware partner ecosystem into the Broadcom partner programs, which requires some adjustments.”

In March, the Cloud Infrastructure Service Providers in Europe (Cispe) association called on regulators, legislators and courts across Europe to swiftly scrutinise the actions of Broadcom in unilaterally cancelling licence terms for essential virtualisation software.

Francisco Mingorance, secretary general of Cispe, said: “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.”

Looking at this specific allegation, Hock said Broadcom would standardise the metric for pricing across cloud providers to per-core licensing. This is the same metric used in end-customer licensing. He said Broadcom would also be providing licence portability for VCF.

According to Hock, this ensures customers will not face any licensing mismatch as they move between providers, and will avoid switching and additional licensing costs. “This licensing metric is also consistent across our entire ecosystem, which will enable customers to compare proposals from partners, and increase choice and competition,” he added.

Hock has additionally made changes to its partner programme following criticism that it has been mainly focusing on major VMware resellers. He said the company would expand the Broadcom Advantage Partner Premier Tier to accommodate any qualified, existing service provider and offer programmatic initial-year discounts for their existing installed base.

Hock added that smaller service provider partners who do not yet meet the Premier Tier criteria are able to take advantage of the “white label” offers from Pinnacle and Premier Tier Service Providers.