Broadcom's Aggressive Move: Prices Increase by Twelvefold! CISPE Calls for Investigation
ICTIME's Chip Talk reported on March 24 that the European Cloud Computing Services Provider Association (CISPE) is calling on regulatory bodies to investigate Broadcom VMware's software licensing arrangements, claiming they could bankrupt some of its members and harm end users.
On Tuesday, CISPE voiced its opposition to Broadcom's "unilateral cancellation of the licensing terms for basic virtualization software."
The organization roared, "Cloud customers, including public sector institutions, large European enterprises, SMEs, and startups, are all threatened by shocking and unreasonable new contract terms and price hikes. Then it called for an immediate halt to contract terminations, allowing customers the ability to exit the multi-year contracts imposed by Broadcom once viable alternatives are available."
This refers to Broadcom canceling VMware's previous partnership programs, replacing them with its own, and requiring companies offering VMware products as a service to have at least 3,500 production cores to obtain licenses. These licenses are valid for several years. Broadcom will later this month cease selling licenses to small clouds, preventing them from offering VMware services and possibly necessitating sudden, unrequested migrations for their customers.
Few VMware-supported cloud operators can run 3,500 cores, leaving most cloud operators facing a very uncertain future. Broadcom appears to offer a lifeline to these operators, arranging for small clouds not authorized to join the Broadcom channel program as "tier two" providers, who can purchase licenses from "primary" providers meeting the 3,500 core requirement.
However, an organization familiar with the arrangement noted that it is not going smoothly, as primary partners must support the VMware software for secondary partners. Primary partners are set up to host multiple tenants, so dealing with secondary partners wouldn't be a huge complexity, but primary partners seldom provide the same level of software support as the vendors. Therefore, the primary/secondary plan has drawn criticism, as some believe it's not a viable arrangement for secondary partners.
CISPE reports dissatisfaction among those invited to become primary partners.
CISPE wrote, "Due to the short signing deadline, invitees felt pressured to accept unfair licensing terms. New terms include a minimum commitment of tens of millions of euros over three years. Licensing costs have increased by up to twelve times (i.e., 1,200%)."
CISPE fears that secondary partners might go bankrupt.
CISPE claims, "Some CISPE members stated that they would quickly go bankrupt and close down if they couldn't obtain licenses and use VMware products." The organization added that some complainants derive over 75% of their revenue from VMware software.
Clients of these high-risk CISPE members include "essential medical service" providers.
CISPE added, "Citizens will be deprived of everyday, cost-effective cloud services, severely damaging Europe's digital ambitions."
CISPE Secretary-General Francisco Mingorance stated that Broadcom "is exploiting VMware's dominant position in the virtualization field to enforce unfair licensing terms and charge European cloud customers unfair rents, thereby extorting the industry."
He called for Broadcom to be designated as a gatekeeper under the European Digital Markets Act, a status that would subject it to the EU's strictest regulatory oversight.
He added, "CISPE calls on regulators to swiftly examine Broadcom's actions and hold it accountable."
CISPE recently called for changes to Microsoft's software licensing practices to make its products cheaper to run on the Azure cloud and more expensive when hosted by CISPE members. Microsoft made some concessions in this area as required by European law, but CISPE believes more work is needed to create a fair competitive environment and rejected the proposed fixes.
Broadcom insists its new VMware licensing regime will not change and will not be affected by the loss of small customers.
However, under the current circumstances, it might unsettle some big customers (primary partners) by making it difficult for them to easily onboard secondary partners.
EU regulators have yet to respond to CISPE's call. Some small VMware-supported clouds will be forced into sudden, disruptive migrations to competitors' platforms.