VMware customers under Broadcom are facing price increases if they do not start a subscription model on time. The penalties apply not only to renewals, but also new subscriptions.
Broadcom is imposing fines on VMware customers in the form of price increases of around 20 percent. Those penalties result from what Broadcom considers late renewals of subscriptions. Only customers let Business Insider know that they are surprised by the increases, and that they are also being imposed in situations that seem less obvious.
For example, Broadcom is forcing VMware customers to move from a perpetual licensing model to a subscription format. Adjustments to the offering are already causing some (essentially just slightly smaller) customers to see their costs increase by a factor of ten. In many cases, such customers are starting a subscription for the first time after the traditional licensing model, and that can take some searching. Penalties are also possible if Broadcom finds that such new subscriptions were not completed in a timely manner.
Threatening emails
Partners reveal that there are scenarios in which customers still have ongoing support but are already collecting fines. The fines are due to changed contractual terms. With that, customers are not yet comfortable, and moreover, many customers are not comfortable with it either. However, their reliance on VMware for the Broadcom acquisition ensures that they have no choice.
Business Insider adds that emails announcing fines appear threatening. The fines are in bold, and sometimes serve as a warning to customers for whom the deadline is approaching. Loyalty of a customer, seems to play no role.
Extra drop in the bucket
Fines for late renewals are not unheard of in the industry. In this case, they do stand out, as Broadcom’s acquisition of VMware is already such a nightmare for many customers. Prices are skyrocketing, available packages are no longer aligned with business needs, and deadlines are coming fast. Organizations, however, are stuck in VMware, and can’t migrate in time they needed to.
Interest groups are lambasting Broadcom’s behavior, but that doesn’t do much good. The company is only interested in the very largest strategic customers. That other loyal users suffer misery and may eventually drop out does not hurt the new strategy. Broadcom does see VMware’s revenue falling, but costs are falling faster so the company can record bigger margins. Customers won’t be happy about that, but shareholders will.