IT Strategy

Broadcom CEO admits VMware takeover has resulted in ‘some unease among our customers’

Some customers say Broadcom’s decision to end VMware perpetual licensing has dramatically increased costs.
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Francis Scialabba

· 3 min read

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Broadcom’s CEO has admitted that not everyone is happy since the company closed its contentious, $69 billion takeover of VMware late last year.

In a blog post last month, CEO and President Hock Tan argued Broadcom had made “substantial progress” related to its VMware acquisition, although he “[recognized] that this level of change has understandably created some unease among our customers and partners.”

“But all of these moves have been with the goals of innovating faster, meeting our customers’ needs more effectively, and making it easier to do business with us,” Tan said.

As Ars Technica reported, there’s a laundry list of reasons some IT solution providers that rely on VMware’s virtualization technology might be wary. Those include Broadcom taking over the top 2,000 customer accounts for VMware and then trying to upsell them, as well as Broadcom canceling VMware partner programs and replacing them with an invitation-only alternative, which could affect resellers of VMware products.

Broadcom has also eliminated perpetual licensing in favor of term licenses or subscriptions. The Register and ServeTheHome independently reported that some users have complained the cost of using VMware software has risen by five or even 10 times its previous price as a result. VMware’s new management has laid off hundreds of staff and terminated the free version of ESXi, a bare-metal hypervisor.

VMware’s virtualization software is baked in at a fundamental level to the data center operations of many large enterprises, and transferring back to other products can be extremely time- and talent-intensive.

“We’ve completed the software business-model transition that began to accelerate in 2019, from selling perpetual software to subscription licensing only—the industry standard,” Tan wrote in his March 14 blog post.

Broadcom’s acquisition of VMware has generated opposition from the Cloud Infrastructure Service Providers of Europe (CISPE), a trade industry group that has also filed complaints against Microsoft’s software licensing practices.

The Wall Street Journal reported that CISPE has urged European regulators to classify Broadcom as a “gatekeeper” under the EU’s Digital Markets Act (DMA), a recently passed law intended to encourage large tech firms to allow smaller competitors greater access to their users. So far, regulators have ruled that a range of services offered by tech giants like Apple, Google, Meta, and Microsoft fall under the act, but not cloud services.

Broadcom’s “actions should be seen as those of a dominant player as it forces ‘take it or leave it’ terms on customers,” CISPE wrote in a press release.

Top insights for IT pros

From cybersecurity and big data to cloud computing, IT Brew covers the latest trends shaping business tech in our 4x weekly newsletter, virtual events with industry experts, and digital guides.