News

In Wake of VMware Changes, Broadcom Still Struggling To Win Critics Over

• By David Ramel
• April 22, 2024

Broadcom CEO Hock Tan recently shared his company's motives for controversially changing VMware licensing policies, a move that had been met by widespread backlash.

Broadcom announced last December that it is ending perpetual licenses for more than a dozen VMware products, including vSphere, vSAN and NSX, and instead pushing customers to purchase software through subscriptions. The decision came less than a month after the completion of Broadcom's acquisition of VMware for a reported $69 billion.

In a blog post last week, Tan tried to address criticisms of the all-subscription model. Customers, he said, "want a simpler product and constant innovation with an eye toward security and resilience. There have been many questions about how we're putting this feedback into action. Today, I want to clarify what we're offering VMware customers and address those questions head on."

First he reiterated a resource focus on R&D. Then, he stated, "we're making changes to deliver consistent customer experiences" by standardizing the metric for pricing across cloud providers to per-core licensing and also standardizing the technology stack for cloud providers on VMware Cloud Foundation (VCF). Then he addressed the licensing brouhaha, confirming that the company will complete its transition plan to a subscription model.

"As we roll out this strategy, we continue to learn from our customers on how best to prepare them for success by ensuring they always have the transition time and support they need," Tan said. "In particular, the subscription pricing model does involve a change in the timing of customers' expenditures and the balance of those expenditures between capital and operating spending. We heard that fast-moving change may require more time, so we have given support extensions to many customers who came up for renewal while these changes were rolling out. We have always been and remain ready to work with our customers on their specific concerns."

Another Broadcom post, "VCF go-to-market strategy: your top questions addressed," explained the reasoning for the licensing change, stating:

• The subscription model has been the enterprise software industry standard for quite some time.
• The perpetual model is costly and complex.
• The subscription model brings simplicity and innovation for customers.
• Customers face less lock-in under the subscription model because they no longer have to make large upfront license payments that would be lost if they switched to competitors.
• The transition to the subscription model does not impact customers' perpetual license rights.

However, a frequent Broadcom critic, Cloud Infrastructure Services Providers in Europe (CISPE), wasn't buying in, publishing an article on Monday whose title pretty much says it all: "Broadcom's response to market outrage solves nothing." The organization's members include Amazon Web Services (AWS), OVHcloud, Outscale and many others.

Speaking from Brussels, the organization said of Tan's post: "In a blog last week, Hock Tan, CEO and Chairman of Broadcom sought to reassure customers, partners and investors over the brutal licensing changes imposed on the market. By seeking to frame this move as pro-competition and pro-innovation through the adoption of a subscription licensing approach, Broadcom tries to obfuscate the main issues in this dispute."

Basically, CISPE contends that the subscription license model itself isn't the issue, with the real concerns being exorbitant price increases, product re-bundling, unfair billing changes, and restrictive software licensing terms imposed by certain providers, which negatively impact cloud services in Europe.

An April 15 Broadcom social media post about Tan's post was also met with derision from a couple of commenters, one of whom said: "I would love to talk to the people that came up with this change and said, hey this is a good idea! Oh and let's introduce this well after almost all businesses have completed budgeting for this year based on the old VMware licenses. It's a giant middle finger to current clients."

Other thoughts were expressed on an April 17 Slashdot thread, with comments including:

• Given that everything to date looked like the new model was squeezing the locked-in customers for everything until the business finally collapsed, I will admit to not understanding this move, even if it is just PR [BS]. VMWare is a zombie product, nobody with any brains is going to hold on longer than they have to.
• That's funny because customers are tired of being raked over the coals with the ridiculous price increases with little of value being offered in return. Apparently Broadcom doesn't understand that customers don't like being exploited. Especially when you have customers that are knowledgable about the value of the product they are using where Broadcom is coming from such a high level of understanding that they simply don't have a clue what they are doing.
• Broadcom CEO Hock Tan has realized that fast-moving changes to the subscription pricing model that force a change in customers' expenditures is causing many customers to reevaluate their loyalty to VMware products. Rather than pony up additional cash, Tan has seen many customers give Broadcom the virtual middle finger and switch to alternative platforms such as those based on OpenStack, Harvester, or other low or no-cost technologies. In a last ditch effort to salvage what's left of their customer base, Broadcom will be providing some ongoing security patches for customers who persist with their perpetual licenses instead of ceding to Broadcom's blatant extortion demands.
• I expect many VMware customers are already deep in the eval process of other technologies, and will be jumping ship as they are able. If they were smart they started this about the same time broadcom got involved. I'm getting a real mid-2000's Novell vibe off of VMware right now.

As stated, the announcement from CISPE wasn't its first criticism of Broadcom's handling of VMware products and services. The group last month published a news release claiming "Broadcom's brutal contract termination and imposition of prohibitive new licensing terms will decimate Europe's Cloud Infrastructure."

Bullet points plucked from that release include:

• Broadcom, a US technology giant, has unilaterally cancelled all licenses for VMware software following its acquisition of the company last year.
• Cloud services vendors and customers are left in limbo, without clarity as to how, when, or if they will be able to license VMware software from 1st April 2024.
• Customers have reported price hikes of as much as twelve-times, even if they are invited to relicense VMware software.

So, some five months in, with April 1 come and gone, the kerfuffle shows no signs of slowing down.