Minor changes, in response to pressure from European Commission, do not address key issues

Brussels, 22nd April 2024. 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.

The subscription license model has never been the problem; indeed, CISPE members and their customers are already using it. What threatens the economic viability of many cloud services used by customers in Europe, are the massive and unjustifiable hikes in prices, the re-bundling of products, altered basis of billing and the imposition of unfair software licensing terms that restrict choice and lock-in customers and partners.

Anti-cloud licensing

Subscription licensing should allow flexible pay-as-you-go models that help customers and providers scale resources to demand. Broadcom’s new terms are the opposite and are in essence anti-cloud, forcing partners to commit and pay in advance for virtualisation capacity that they may never need. Instead of paying-as-you go for actual consumption (based on memory used), as is common for cloud infrastructure and for VMware previously, the new terms insist on up-front commitment to 3 years-worth of capacity based on server cores that could be used. This is like being forced to pay, in advance, for a fleet of taxis that you may, or may not, use in the next 3 years! The unfair software licensing practices of dominant software companies are undermining the fundamental value of the cloud; the ability to deliver services that an enterprise needs when and where they need them.

Adding Insult to Injury

The offer to continue zero-day patch support for existing perpetual license customers 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.

Lecturing customers

Finally, by lecturing customers on what they need, and insisting against real-world evidence to the contrary that new prices are lower, Broadcom further illustrates its ability and inclination to act independently and against the interests of customers and partners. New bundles, the move from memory to core-based pricing and the removal of some popular products all mean that the universal experience across CISPE members and the wider coalition of customers, is that prices are not lower, but have, in fact jumped by factors of 6, 10 or even 12 times.

Critical Impact of Regulators

Broadcom has trumpeted some very minor concessions as evidence that it is listening to the concerns of the market. However, it seems to us that this albeit unsatisfactory attempt to deflect anger, was prompted by the European Commission’s Request for Information (RFI) sent to Broadcom last week. None of our members, nor the wider coalition of customers we are working with has reported any direct engagement or offer to discuss or negotiate these terms from Broadcom.

Formal Investigations Required

CISPE welcomes the involvement of the European Commission and thanks it for this important interaction. We know that we can rely on the support of organisations representing European professional users, including Cigref, with whom we are working to find solutions and alternatives to the challenges faced by all historical VMware customers at Broadcom.

Dominant software firms increasingly feel unconstrained in their use of unfair software licensing practices to distort markets in their favour. We have seen it with Microsoft and now Broadcom. The ability for dominant software providers to unilaterally ‘pick winners’ by deciding who can and who cannot licence 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.

Francisco Mingorance, secretary general, CISPE

“It is clear to us that this blog from Broadcom was in response to the timely and precise intervention of the European Commission, and we thank them for their action. However, the response from Broadcom is insulting, unsatisfactory and has only increased the anger among our members. What is needed is concerted action by regulators to enforce, through formal investigations, a return to fair licensing principles across the software market.”

Henri d’Agrain, General manager of CIGREF

 “We are tired of Broadcom dictating what we need and what is good for us. We are fed up with claims of lower prices while witnessing an unprecedented increase in licensing costs for VMware’s core software, with no functional justification. We are weary of Broadcom’s disdain and harsh treatment towards our members. We urge the Commission to take action, to act swiftly, with a political vision, and not to leave this matter solely to the discretion of competition law technicians, as it falls outside their purview.”

Alexander Windbichler, CEO Anexia

“For us it’s like being told the pacemaker we rely upon to stay alive is suddenly going to cost multiple-times more to run. Yes, we can change it, but that requires finding an alternative, plus scheduling an operation and accounting for the rest and physiotherapy to recuperate. All of this takes time and resources which we are not being offered. We demand a pause to consider our options and viable alternatives that will allow our business to prosper.”