Broadcom Faces EU Scrutiny Over Controversial VMware Licensing Practices

Broadcom’s recent overhaul of VMware’s licensing model has sparked significant backlash from European cloud service providers, leading to calls for regulatory intervention. The European Cloud Infrastructure Services Providers in Europe (CISPE) and its monitoring body, the European Cloud Competition Observatory (ECCO), have raised concerns about substantial price hikes and restrictive licensing terms imposed by Broadcom following its acquisition of VMware in 2023. 

Unprecedented Price Increases

According to ECCO, Broadcom has increased VMware licensing costs by 800% to 1,500% for many European customers. These hikes are attributed to the elimination of perpetual licenses in favor of bundled subscriptions requiring multi-year commitments. The abrupt changes have left many cloud providers with little choice but to accept the new terms, given the lack of viable alternatives and the critical role VMware software plays in their operations.  

Impact on European Cloud Providers

The new licensing model has had a profound impact on European cloud providers, particularly smaller firms. Many report that the increased costs threaten their financial viability, with some anticipating their earnings before interest, taxes, depreciation, and amortization (EBITDA) to fall to zero. The forced bundling of products and the shift to subscription-based licensing have also been criticized for reducing flexibility and increasing operational complexity.  

Calls for Regulatory Action

In response to these developments, CISPE and ECCO have called on the European Commission to investigate Broadcom’s licensing practices for potential violations of EU competition law. They argue that Broadcom’s actions constitute an abuse of its dominant market position and have urged regulators to enforce measures that ensure fair competition and protect the interests of European cloud service providers.  

Broadcom’s Response

Broadcom has defended its licensing changes, stating that the shift to a subscription model is intended to simplify its product offerings and provide better value to customers. The company has also expressed willingness to engage in dialogue with European cloud providers to address their concerns. However, critics argue that Broadcom’s actions have been unilateral and dismissive of the needs of its partners and customers.  

The controversy surrounding Broadcom’s licensing practices underscores the importance of proactive software asset management (SAM). Organizations must stay informed about changes in licensing models and assess their impact on operational costs and compliance. Effective SAM strategies can help mitigate risks associated with sudden licensing changes and ensure that organizations maintain control over their software assets.

As the situation develops, it remains to be seen how regulators will respond to the calls for action and whether Broadcom will adjust its licensing practices to address the concerns of European cloud providers.