Broadcom tinkers with VMware licencing terms as EU gets involved
Trade groups concerned over unilateral changes to licencing conditions
US chipmaker Broadcom is under scrutiny by EU antitrust regulators over alterations to the licencing conditions of its recently acquired cloud computing company VMware, following complaints from several EU business users and trade groups. On the same day Broadcom announced licencing changes.
A European Commission spokesperson told Reuters on Monday that the antitrust regulator had requested information from Broadcom to look into the matter.
"The [European] Commission has received information suggesting that Broadcom is changing the conditions of VMware's software licencing and support," the spokesperson added.
Last month, trade group CISPE (Cloud Infrastructure Services Providers in Europe) called on European regulators, lawmakers, and judiciary to scrutinise Broadcom's actions.
It urged the imposition of new regulations on the US chipmaker's enforcement of contract terms.
CISPE, which includes members like Amazon and 26 smaller EU cloud providers, voiced concerns about Broadcom unilaterally revoking licence terms for crucial virtualisation software.
The group cautioned that Broadcom's actions could threaten the sustainability of many of CISPE members who depend extensively on licencing and using VMware products. CISPE said many of its members had indicated that without the capacity to license and use VMware products, they would rapidly face bankruptcy and closure.
Some CISPE members said that more than 75% of their revenue relies on VMware's software virtualisation technologies.
"End customers, ranging from large national champions and public sector services to SMEs and start-ups, report that they will not be able to deliver some or all of their online services if this licencing issue is not resolved. In some cases, these include vital medical services," the group noted.
According to CISPE, VMware held almost 45% of the virtualisation market in 2023, giving Broadcom significant influence over contract terms, product availability, and determining which third-party vendors can provide these services.
Last month, the Belgian business users' association, Beltug, along with its counterparts Cigref in France, CIO Platform Nederland and VOICE Germany, expressed their concerns to EU industry chief Thierry Breton, EU antitrust chief Margrethe Vestager, and Commission president Ursula von der Leyen regarding sudden changes in Broadcom's policies and practices.
The joint complaint alleged that those changes have led to substantial price increases and changes in licence bundling. In addition, they have also resulted in a ban on licence resale, and a refusal to uphold security conditions for perpetual licences.
A source with direct knowledge of the matter told Reuters that some of the modifications to VMware's licencing were already in motion prior to its acquisition by Broadcom.
Broadcom concluded its $69 billion acquisition of VMware in November last year after facing significant regulatory hurdles worldwide.
The European Commission approved the deal after Broadcom proposed remedies to address issues related to rival Marvell Technology. Additionally, the UK's Competition and Markets Authority gave its approval following a thorough investigation.
In December, Broadcom ceased the sale of perpetual licences for VMware products, in a move aimed at transforming VMware into a subscription-based business.
The affected products included VMware offerings such as Cloud Foundation, HCX, NSX, Site Recovery Manager, vCloud Suite, vSAN, vSphere, Aria Suite, Aria Automation, Aria Universal, Aria Operations, Aria Operations for Networks and Aria Operations for Logs.
Broadcom changes its terms
On the same day that the EU revealed its investigation, Broadcom announced changes for VMware customers in an effort to address criticism over modifications to licencing terms for VMware, which have proved deeply unpopular with many customers.
"We have dramatically reduced the price of VCF (VMware Cloud Foundation) to promote customer adoption," Broadcom CEO Hock Tan said in a blog post.
He added that Broadcom would standardise its pricing metric across cloud providers to a per-core licencing model, now priced at half of the previous list price.
Another measure detailed in Tan's post included standardising the technology stack for cloud providers on VCF. "This ensures customers will enjoy the same technology and support experience across any VMware-supported cloud provider, and will remove technical barriers to customers moving from on-prem to cloud, switching their workloads from one cloud provider to another, or back to on-premise datacentres, if their needs change."