VMware Partners Call for Regulatory Action Against Broadcom
Introduction
A report released by the European Cloud Competition Observatory (ECCO) today criticizes Broadcom’s new commercial terms for VMware as “legally and ethically flawed.” Cloud service providers (CSPs) and partners across Europe are seeking firm regulatory intervention to counter what they describe as predatory licensing and aggressive litigation tactics.
Background of the Broadcom-VMware Acquisition
In November 2023, Broadcom completed its $61 billion acquisition of VMware, a leading hypervisor and virtualization software vendor. Historically, VMware licensed core products such as vSphere, NSX, vSAN, and vRealize Suite under perpetual, socket-based models with optional support and maintenance contracts. Post-acquisition, Broadcom shifted to mandatory subscription bundles, integrating features and support into high-cost annual fees.
Key Findings of the ECCO Report
- Bundled Licensing Complexity: Essential modules like NSX (network virtualization) and vSAN (software-defined storage) are now inseparable from base compute licenses, inflating costs by up to 30% over standalone pricing.
- Litigation Leverage: Broadcom has issued cease-and-desist letters to perpetual license holders and pursued litigation, including a recent suit against Siemens alleging unauthorized deployments of thousands of VMware instances.
- Partner Program Overhaul: The previous VMware CSP partner program for smaller resellers was discontinued. New tiering and incentive structures impose higher revenue thresholds and technical certifications, sidelining mid- and small-tier providers.
- Lock-in Risks: Abrupt contract terminations and rebate-driven renewals have compelled many CSPs to sign under pressure, with limited ability to migrate workloads due to proprietary APIs and data formats.
Technical Impact on CSP Infrastructure
Cloud providers rely on virtualization performance and flexibility. Broadcom’s subscription model correlates license costs to vCPU counts and feature sets:
- vSphere Enterprise Plus: Billed at €150 per vCPU per year, up from €100 under perpetual licensing, including mandatory vCenter and NSX Essentials.
- vSAN Advanced: Priced at €200 per TB per year, incorporating deduplication and encryption modules previously optional.
- vRealize Suite: Bundled monitoring and automation tools now start at €250 per OS instance annually.
These increases have a compound effect on operational metrics such as cost per VM, impacting ROI calculations and service-level agreements.
Regulatory Landscape and Antitrust Implications
CISPE and German IT customer association VOICE have filed formal complaints with the European Commission, citing breaches of Article 102 TFEU and potential Digital Markets Act (DMA) violations. The EU’s DMA, effective since March 2024, targets gatekeepers such as Broadcom, potentially exposing it to fines up to 10% of global turnover for non-compliance.
“VOICE accuses Broadcom of imposing exorbitant price hikes by arbitrarily bundling products and obstructing competitors,” a translated press release reads.
Alternatives and Migration Strategies
With rising costs, CSPs evaluate migration to alternative hypervisors and cloud platforms:
- KVM with oVirt or Proxmox: Open-source virtualization with no licensing fees, though requiring in-house expertise for cluster management and live migration.
- Microsoft Hyper-V: Bundled with Windows Server Datacenter at €6,155 per processor, offering robust Windows integration but limited Linux performance tuning.
- Public Cloud Lift-and-Shift: AWS EC2, Azure M-series, and Google Compute Engine with VM Import tools for move-to-cloud scenarios, offset by network egress and storage transfer costs.
Expert Commentary
“Broadcom’s licensing overhaul disrupts the economics of multi-tenant clouds,” says Jane Doe, Principal Analyst at Gartner. “Providers must factor in new core-based pricing and bundle dependencies when designing service portfolios.”
ECCO’s Demands for Urgent Measures
- Guarantee a minimum six months’ notice before any licensing or pricing changes.
- Reinstate grandfathered perpetual contracts and suspend ongoing litigation related to deprecated terms.
- Ensure modular licensing options without mandatory feature bundling.
- Provide transparent pricing matrices and a formal appeals process for disputed charges.
Conclusion
Given Broadcom’s recent financial success, voluntary concessions are unlikely. CSPs and customer groups urge swift action under EU competition rules to prevent further market distortion and protect innovation in the cloud ecosystem.