Broadcom changes VMware pricing amid customer backlash and EU questioning

US chipmaker Broadcom this week unveiled key changes to its customer and partner engagement around the VMware product line as the company faces an investigation by the European Union (EU) about how it’s handled software licensing and support for the essential cloud-infrastructure software.

The European Commission (EC) has sent a request for information to Broadcom to investigate its changing of the conditions of VMware’s software licensing and support, an EC spokesperson told Network World Tuesday.

The investigation coincides with an announcement Monday by Broadcom President and CEO Hock Tan – in an apparent move to appease frustrated VMware customers – pledging support to them and clarifying how the company would offer VMware products and support going forward.

“The core principle for our new engagement with cloud providers is that end customers should have complete freedom to move their workloads from their own data centers to cloud providers, and between cloud providers,” Tan wrote in a blog post.

VMware pricing changes

Since its purchase of VMware last November, Broadcom has streamlined VMware offerings into two basic bundles: VMware Cloud Foundation (VCF), which includes compute, storage, networking, management, and support capabilities to deliver infrastructure and operations across clouds; and VMware vSphere Foundation, or VVF, which provides enhanced compute, operational and management capabilities for customers who need to manage across VMs and containers but don’t want a full stack.

Changes unveiled by Tan Tuesday include a standardization of the metric for pricing offerings across cloud providers to per-core licensing – the same metric used in end-customer licensing – as well as providing license portability for VCF.

“This ensures customers will not face any licensing mismatch as they move between providers, and will avoid switching and additional licensing costs,” Tan wrote in the post.

VCF also will now come “at half the list price compared to past pricing” as a standard technology stack for cloud providers to provide the same technology and support experience across them all, he wrote, but did not specify pricing.

VMware also will complete its transition plan to a subscription model that provides access to the most recent version of products plus support for a fixed term, something that began in 2018, long before Broadcom unveiled plans to purchase the company, Tan wrote.

He said the transition will not affect customers’ ability to use existing perpetual licenses, including those for older vSphere versions they have previously licensed. Customers also can continue to receive maintenance and support for VSphere by signing up for one of the new subscription offerings; however, if they choose not to sign up for a subscription, they will still receive free access to zero-day security patches for supported versions of vSphere, Tan said.

Uphill battle

The pending EC investigation into its VMware licensing practices is the latest concern facing Broadcom after its initial announcement of its plans to purchase of the company back in May 2022, which has been an uphill battle from the start for Tan and his team and has drawn considerable fire from customers.

It took Broadcom 18 months to get all of the requisite approvals needed to finalize the $61 billion purchase. And then once the deal was finalized, Broadcom laid off thousands of employees, sold off parts of the business, and then proceeded to change licensing terms in ways that were costly to customers.

In late December, Broadcom announced the abrupt termination of all of its partner agreements with VMware resellers and service providers, forcing existing partners to reapply for their roles. While Broadcom’s actions were concerning, they were not largely unexpected, as Tan was fairly transparent about his plans for the company, even when the acquisition was first announced.

However, the last two actions were apparently the last straw for some cloud providers in Europe. Members of the EU-based CIPSE.cloud trade group, which include Amazon and 26 smaller cloud providers, rallied together to write an open letter in March to regulators to challenge some of the Broadcom’s decisions, claiming that its “brutal contract termination and imposition of prohibitive new licensing terms” for essential cloud software “will decimate Europe’s cloud infrastructure.”

A spokesperson for CIPSE said the group is continuing to work with its members and other aligned parties to resolve what it deems as “unfair” software licensing terms, and several potential actions are being considered. CIPSE is not commenting directly on Tan’s blog post.