CISPE and Broadcom: VMware Tussle Continues as EU Sends Info Request

The European trade group, which represents cloud providers, is taking issue with Broadcom CEO Hock Tan’s latest blog. Meanwhile, EU antitrust authorities want more information from Broadcom.

Kelly Teal, Contributing Editor

April 23, 2024

3 Min Read
CISPE and Broadcom in tug-of-war

CISPE and Broadcom remain at odds over the latter’s changes to VMware.

On Monday, the trade group, which represents Europe-based cloud providers, distributed a press release declaring that “Broadcom’s response to market outrage solves nothing.”

CISPE was referring to Broadcom CEO Hock Tan’s latest blog, published April 15. Contrary to what many media are reporting, that missive did not make big new announcements. Rather, it mostly rehashed − and justified − the many actions Broadcom has taken since acquiring VMware in late 2023.

Those changes have included the full-on shift to subscription licensing, something VMware was working to implement in the years leading up to the Broadcom purchase; a revamping of the reseller and cloud service provider partner programs; a “simplification” of the VMware portfolio; new steps around cloud workload portability; and more.

Even so, CISPE − whose efforts to pressure the European Commission to intervene last week led that antitrust body to request more information from Broadcom − used Tan’s latest blog as an opportunity to highlight its own agenda.

Tan, the group said, “sought to reassure customers, partners and investors over the brutal licensing changes imposed on the market. By seeking to frame [its moves] as pro-competition and pro-innovation through the adoption of a subscription licensing approach, Broadcom tries to obfuscate the main issues in this dispute.”

Those main issues, per CISPE, include “the massive and unjustifiable hikes in prices, the rebundling of products, altered basis of billing and the imposition of unfair software licensing terms that restrict choice and lock-in customers and partners.”

Subscription licensing, CISPE noted, “has never been the problem; indeed, CISPE members and their customers are already using it.” Rather, the other areas, the group said, are the ones that threaten the “economic viability of many cloud services used by customers in Europe.”

CISPE and Broadcom at Loggerheads

And yet, CISPE’s first example of Broadcom’s overreach refers directly to new VMware subscription terms. A subscription model should allow pay-as-you-go flexibility, CISPE said. Broadcom, according to the association, does the opposite. Partners, it said, now must commit and pay in advance for virtualization capacity, regardless of whether they use all of it.

“This is like being forced to pay, in advance, for a fleet of taxis that you may, or may not, use in the next three years,” CISPE said in its press release.

Note, however, that this argument overlooks the fact that nearly every cloud provider operates on a similar model, to varying degrees.

Next, even Broadcom’s recent offer to continue zero-day patch support for existing perpetual license users does nothing to assuage CISPE members. In fact, they wrote, the approach “is insulting in its limitations. Effectively promising no more than to fix critical software flaws that emerge in the product unless the customer decides to move to the new subscription license verges on racketeering.”

Finally, CISPE took issue with Tan’s tone and message, saying that he was “lecturing customers on what they need and insisting against real-world evidence to the contrary that new prices are lower.”

The group said its members and their customers are reporting VMware costs that have “jumped by factors of six, 10 or even 12 times.” Broadcom’s most recent earnings do point to that being more than hyperbole; even Tan called VMware’s higher revenue a result of “upselling.”

CISPE and Broadcom: Regulators Looking Into the Tussle

Once again, CISPE is calling on the European Commission to intervene. To that point, the antitrust body last week did send a request for information to Broadcom, according to multiple reports.

“CISPE welcomes the involvement of the European Commission and thanks it for this important interaction,” members said in the press release. “The ability for dominant software providers to unilaterally ‘pick winners’ by deciding who can and who cannot license their software is a clear form of discrimination. We urge the European Commission and other powerful regulators to act now to halt this tide of abuse that is damaging Europe’s shift to the cloud and digital growth. Formal investigations are needed now.”

Broadcom, for its part, told Reuters that it continues to create more choice within the market and that it is “focused on facilitating seamless workload management.” 

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About the Author(s)

Kelly Teal

Contributing Editor, Channel Futures

Kelly Teal has more than 20 years’ experience as a journalist, editor and analyst, with longtime expertise in the indirect channel. She worked on the Channel Partners magazine staff for 11 years. Kelly now is principal of Kreativ Energy LLC.

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