European trade body lashes out at Broadcom’s VMware licensing changes

The European trade organization, Cloud Infrastructure Services Providers in Europe (CISPE), has strongly criticized Broadcom’s response to concerns regarding the licensing changes it has imposed on the market.

Earlier this month, Broadcom CEO Hock Tan announced changes to VMware’s licensing conditions following questions from EU antitrust regulators and some trade groups about the tech giant’s acquisition of the cloud computing company.

The changes announced included price reductions and new provisions enabling customers to transfer their workloads from private data centers to cloud providers and between different cloud services. Additionally, VMware outlined a complete transition plan for adopting a subscription model.

CISPE dismissed these changes, arguing that the prices have not actually decreased, and accusing Broadcom of trying to obscure the main issues in the dispute.

In a statement, the organization said the economic viability of many cloud services utilized by customers in Europe is threatened by “the massive and unjustifiable hikes in prices, the re-bundling of products, the altered basis of billing, and the imposition of unfair software licensing terms that restrict choice and lock-in customers and partners.”

Significantly, this comes amidst reports from Forrester Research that up to 20% of VMware’s enterprise customers are likely to switch to alternative virtual machine vendors due to price increases, deteriorating support, and compulsory subscriptions to software bundles.

Anti-cloud practices

CISPE pointed out that the issue is not the subscription license model itself but that it doesn’t allow flexible pay-as-you-go models that help customers and providers scale resources to demand.

“Broadcom’s new terms are the opposite and are in essence anti-cloud, forcing partners to commit and pay in advance for virtualization capacity that they may never need,” the trade body said. 

CISPE noted that under the new terms, rather than employing a pay-as-you-go model based on actual usage — a common practice for cloud infrastructure and previously for VMware — customers are now required to make an upfront commitment to three years’ worth of capacity based on potential server core usage.

Members of CISPE include AWS and several other cloud companies like Aruba and Anexia.

“For us, it’s like being told the pacemaker we rely upon to stay alive is suddenly going to cost multiple times more to run,” Alexander Windbichler, CEO of Anexia, said in CISPE’s statement. “Yes, we can change it, but that requires finding an alternative, plus scheduling an operation and accounting for the rest and physiotherapy to recuperate. All of this takes time and resources, which we are not being offered. We demand a pause to consider our options and viable alternatives that will allow our business to prosper.”

In response to the accusations, a Broadcom spokesperson said, “Broadcom and VMware’s robust solutions are creating more choice and enabling enterprises of all kinds to accelerate innovation and address their most complex technology challenges. Our simplified offering at a significantly reduced price responds to customer feedback, and is focused on facilitating seamless workload management. We welcome ongoing customer and partner dialogue and collaboration to ensure that our efforts remain aligned with their expectations and objectives.”

Patronizing customers?

CISPE also criticized Broadcom for dictating customer needs and insisting that new prices are lower despite real-world evidence to the contrary.

It said that changes such as new bundles, a shift from memory-based to core-based pricing, and the removal of some popular products have led to a significant price increase, with rates rising by factors of 6, 10, or even 12, contrary to claims of reduced costs.

The trade body called on the European Commission and other regulatory authorities to initiate formal investigations into the practices of dominant software firms, which it accuses of using unfair licensing practices to manipulate market dynamics in their favor.

“We have witnessed similar behavior from Microsoft, and now Broadcom,” CISPE said. “The ability of these dominant providers to discriminate by choosing who can and cannot license their software is a blatant form of market distortion.”

Rejecting zero-day security offer

Broadcom had also announced that it would provide free access to zero-day security patches for supported versions of vSphere, with plans to extend this to other VMware products over time.

However, CISPE dismissed this gesture as well, criticizing it for its limitations. The trade body described the continuation of zero-day patch support for existing perpetual license holders as inadequate, arguing that merely promising to address critical software flaws unless customers switch to the new subscription model borders on exploitative practices.