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CISPE, which counts AWS as a member, called for European lawmakers and courts to halt Broadcom's changes to VMware licensing
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The group claimed customers are facing price increases of up to 12X, though Gartner told Silverlinings 2X-3X is more common
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CISPE warned without intervention, some of its members and end-users might not be able to provide essential services
A coalition of European cloud providers called on lawmakers and courts to intervene in Broadcom’s overhaul of its newly acquired VMware assets, warning licensing changes and price hikes could force some providers to go offline or out of business entirely. It’s unclear, though, whether the pressure will result in any action.
Since taking over VMware at the end of last year, Broadcom has slashed jobs, scrapped products, cancelled reseller partnerships and licenses, and raised prices for customers invited for renewals. Gartner Distinguished VP Andrew Lerner told Silverlinings the research firm has heard from enterprises that they are “facing large [price] uplifts at renewal post-acquisition.”
Lerner said “it is common to hear of 2X and 3X increases in cost from clients negotiating with Broadcom.” But in a call to action issued this week, industry group Cloud Infrastructure Services Providers in Europe (CISPE), which counts Amazon Web Services among its members, claimed cost increases range as high as 12X.
Lerner explained the cost increases Gartner has heard about stem from a number of factors, including Broadcom’s shift from perpetual to subscription licensing, SKU bundling and metric changes for price per CPU socket.
But CISPE stated over 75% of some of its members’ revenue depends on VMware software and warned end-users large and small “report that they will not be able to deliver some or all of their online services if this licensing issue is not resolved.”
The group added vendors remain uncertain whether they will be invited to continue offering VMware products and those who have received renewal invites “feel pressured” to accept “unfair” terms.
“Broadcom is holding the sector to ransom by leveraging VMware’s dominance of the virtualization sector to enforce unfair license terms and extract unfair rents from European cloud customers,” Francisco Mingorance, secretary general of CISPE, said in a statement.
Broadcom declined to comment. Instead, a company representative pointed Silverlinings to CEO Hock Tan’s recent blog, in which he acknowledged customer “unease” about its reseller, portfolio and go-to-market shifts. However, Tan said the changes were designed to accelerate innovation, increase profitability and make VMware “easier to do business with.”
Will it matter?
Despite the pushback, it’s not really clear that CISPE’s griping will amount to much.
Lerner pointed out that similar public pleas have been issued by trade groups before. He specifically highlighted one from French digital enterprise association CIGREF that came out in June 2022 after the Broadcom-VMware deal was announced.
At the time, Cigref warned regulatory authorities that the merger would increase the risk of “abusive practices” given VMware’s dominant position in the virtualization market.
But the message didn’t seem to hold much weight. European officials gave the deal the greenlight in July 2023.