A European cloud trade body has called for an investigation into Broadcom amid concerns over changes it has made to VMware licensing structures.
The Cloud Infrastructure Service Providers in Europe (CISPE) consortium called on regulatory and legislative bodies across Europe to investigate the changes Broadcom has made to the VMware operating model, which it says will “decimate” the region’s cloud infrastructure.
“CISPE calls upon regulators, legislators and courts across Europe to swiftly scrutinize the actions of Broadcom in unilaterally canceling license terms for essential virtualisation software,” the trade body said in a statement.
Since acquiring VMware in November 2023, Broadcom has embarked on a comprehensive overhaul of software licensing at the firm, which has drawn widespread criticism from customers.
The move was described as a ‘simplification’ of the VMware product portfolio by Broadcom CEO Hock Tan as the firm looks to shepherd customers from perpetual software licensing to a subscription only model.
Broadcom stated it would continue to support customers under a perpetual licensing agreement for the period defined in the contract, but following this customers would need to exchange any remaining licenses for subscription-based products.
This has left both cloud service vendors and customers in limbo, according to CISPE, without any solid information on how, when, or if they will be able to license VMware products essential for their operations from April 2024.
Moreover, even if they are able to relicense the VMware software, a number of customers reported dramatic price hikes of as much as 12 times.
Tan recently acknowledged the move had elicited ‘unease’ among customers and partners in a blog reflecting on the first 100 days since the Broadcom acquisition, but argued the changes were motivated by innovating faster and serving customers more effectively.
Broadcom accused of “holding the sector to ransom”
CISPE’s characterisation of the move was far less charitable, arguing Broadcom is using VMware’s market dominance, controlling almost 45% of the virtualization market, to charge exorbitant rents from cloud providers.
Several CISPE members admitted that without the ability to license VMware products they will be unable to operate and will go bankrupt, with some stating that over 75% of their revenue depends on VMware virtualization tech.
Members added that they often received termination notices late, if at all, with short notice periods that spanned just a few weeks.
In addition, CISPE also complained about the decision to remove hundreds of products without any notice, and re-bundle the outstanding products under new prohibitive contract terms, despite there being no changes to the products themselves.
Francisco Mingorance, secretary general of CISPE, said the changes will hurt both European customers and cloud service providers by increasing costs and reducing choice.
“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 license terms and extract unfair rents from European cloud customers,” Mingorance said.
CISPE noted that for some cloud sector applications that require certifications by software or service providers, VMware products are the only viable option.
As such, the association called for Broadcom to be recognized as a designated gatekeeper under the terms of the Digital Markets Act (DMA) that came into force on 7 March 2024.
Mingorance argued Broadcom’s moves will only further restrict an already limited set of options for cloud providers in Europe, warning that Broadcom has a dangerous degree of control over the region’s digital ecosystems .
“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,” he explained.
“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”.
