Broadcom increases the minimum number of cores for a VMware license by more than a factor of four and introduces new penalties for customers who don’t pay quickly. The move fits into the series of earlier measures aimed at driving away smaller customers.
Broadcom further capitalizes on its market position by adjusting the license requirements for VMware products. The minimum number of cores for which a license is available increases from sixteen to 72. The Register learned this after viewing an email from distributor Arrow, addressed to French partners.
As of April 10, VMware will charge a customer with a single server with, for example, eight cores, for a license of 72 cores. Existing customers must take this adjustment into account. The change likely affects companies worldwide, but official communication from Broadcom and VMware remains absent at this time.
Those who doubt the extent to which a renewal under these conditions is desirable (or even financially feasible) get the opposite of breathing room. Broadcom will retroactively charge customers penalties of twenty percent on the price of the first subscription year when renewals are not completed on time. Arrow advises customers to check the status of their VMware environments as soon as possible.
No Alternative
The adjustment of the condition is painful for smaller customers, but should not come as a surprise. Almost the entire technology sector warned of such practices when Broadcom proposed the acquisition of VMware. Broadcom has no interest in small or medium-sized parties and only wants to serve the very largest companies in the world. Immediately after the acquisition, it restructured its offering with a view to serving those customers, at the expense of smaller parties.
Although smaller companies worldwide are stuck with VMware with infrastructure they cannot easily migrate, the acquisition was allowed to proceed without protective conditions. The consequences were not long in coming. Organizations saw license costs double and invoices even increase by a factor of ten, even before this recent adjustment. Belgian and European interest groups have already unsuccessfully addressed these practices. The words exploitation, contempt, and brutality were used in this context.
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Broadcom Continues Vendetta Against Smaller Customers with New Price Increase
With the new license increase, Broadcom continues its fight against smaller VMware customers. Keep in mind that the definition of ‘small’ is broad. European cloud provider Anexia, for example, saw its license cost increase by 500 percent, and managed to migrate 12,000 virtual machines away.
Higher Margins at the Expense of Small Customers
Customers who can, flee. Parties that cannot migrate are involuntarily stuck with much higher bills. Only for very large parties is the new offer an advantage, so they stay. The result is, of course, a difficult exodus of squeezed businesses towards alternatives, causing VMware’s revenue to decline somewhat. On the other hand, VMware’s costs under Broadcom are going down faster due to the exclusive focus on the top of the market. The margins are thus increasing, and that makes shareholders happy.
The new license increase for small subscriptions and accompanying penalties for late renewals fit perfectly into that story. Small businesses are suffocating under the bills, but Broadcom would rather lose them than keep them as customers. As long as margins rise and shareholders are satisfied, Broadcom continues the strategy.