‘Broadcom can report that most have signed new contracts, but we know that these are punitive and threaten the viability of service providers locked-in to the VMware ecosystem,’ said Francisco Mingorance, secretary general of European watchdog group CISPE.
The current VMware licensing model relies on practices that appear to breach European competition regulations, while Broadcom’s overall business model “remains legally and ethically flawed,” according to a new report by the European Cloud Competition Observatory (ECCO) group.
“Broadcom can report that most have signed new contracts, but we know that these are punitive and threaten the viability of service providers locked-in to the VMware ecosystem,” said Francisco Mingorance, secretary general of Cloud Infrastructure Services Providers In Europe (CISPE) group, a trade association of 37 cloud providers tasked with monitoring software vendors accused of monopoly practices. “Urgent action is needed.”
While Broadcom has succeeded in transitioning many VMware customers to its new licensing framework, customers “face substantial financial burdens and operational disadvantages” due to Broadcom’s terms, said the ECCO, which is made up of CISPE members, in a new report.
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“Unless Broadcom promptly implements a set of critical changes and adaptations to its licensing terms, the company’s financial model remains legally and ethically flawed,” the ECCO asserts in its report.
VMware Licensing Model And Partner Issues Breach EU ‘Competition Regulations’
Some of the biggest issues VMware cloud partners and customers in Europe include the company increasing prices after Broadcom axed VMware’s former perpetual licenses and pay-as-you-go monthly pricing models.
Another big issue was VMware cutting its product portfolio from thousands of offerings into just a few large bundles that are only available via subscription with a multi-year minimum commitment.
“The current VMware licensing model appears to rely on practices that breach EU competition regulations which, in addition to imposing harm on its customers and the European cloud ecosystem, creates a material risk for the company,” said the ECCO in its report. “Their shareholders should investigate and challenge the legality of such model.”
Additionally, the ECCO said Broadcom recently made changes to its partnership program that forced partners to choose between either being a cloud service provider or a reseller.
“It is common in Europe for CSP to play both [service provider and reseller] roles, thus these new requirements are a further harmful restriction on European cloud service providers’ ability to compete and serve European customers,” the ECCO report said.
The ECCO monitors the behavior of software companies, including Broadcom and Microsoft, whose practices may limit cloud choice for European customers. The group is urging the European Commission to review the formal competition complaint against Broadcom from the German IT customer association, otherwise known as VOICE.
VMware’s Response
When asked for comment on the report, a Broadcom spokesperson said it welcomes the opportunity to have a “constructive dialogue with CISPE on how our products can help their European members” be more competitive and innovative.
“As a strategic partner with over 140 European Cloud Service Providers, of which more than 40 provide sovereign cloud services, Broadcom is working to advance the European Union’s sovereign cloud objectives and enable enterprises of all kinds to accelerate innovation, provide more choice, and address their most complex technology challenges,” Broadcom said.
The CISPE and ECCO are asking Broadcom to adopt changes that will restore fair licensing of VMware software for cloud services providers.
One request is that Broadcom must guarantee a minimum of six months’ notice prior to any changes to contractual terms, pricing structures, or conditions applicable to renewals.
On the partner program front, the group says cloud service providers (CSPs) should continue to be permitted to act as both a reseller and service provider, particularly those providing hybrid services such as colocation and private cloud.
The group says smaller CSPs should be granted easier access to higher-tier partner statuses, including exemptions from certain minimum thresholds.
Another request includes introducing a more transparent pricing for usage variability, such as charges for peak usage must be based on contractually agreed prices, as well as implementing pricing models that align with flexible capacity and infrastructure realities.
Broadcom is set to report the financial results for its second quarter for fiscal year 2025 on June 5.
