Broadcom receives another reprimand for its treatment of VMware customers, this time from the European Cloud Competition Observatory.
Broadcom employs a licensing model that is both legally and ethically inadequate. This is the conclusion reached by the European Cloud Competition Observatory (ECCO). This body was established last year by CISPE, the trade association of cloud infrastructure providers in Europe. ECCO is tasked with monitoring unfair licensing practices within the European cloud sector and was initially established following a dispute between CISPE and Microsoft. However, the observatory now also has its hands full with Broadcom.
Signing under Pressure
ECCO launched a new report on Broadcom, and it contains no words of praise. Since ECCO’s first report in February, many customers have signed new license agreements with Broadcom, but these were reportedly often signed under significant pressure. A lack of alternatives, abruptly terminated contracts, and incentives such as less exorbitant increases in license costs compel companies to sign anyway, often for longer terms.
According to ECCO’s analysis, the current license terms would be in violation of European regulations. A first complaint about this has already been filed by the German trade association VOICE.
Increasingly Difficult to Compete
Broadcom has reportedly only worsened the conditions for European cloud infrastructure managers in recent months. For instance, parties can no longer simultaneously be a reseller and service provider, while in the EU it is normal for an organization to take on this dual role. Broadcom’s artificial and unilateral restriction puts a new brake on the competitiveness of resellers and providers of VMware solutions.
Moreover, Broadcom is creating confusion and uncertainty by quickly and unilaterally changing terms. Furthermore, the company threatens customers with legal action, even when they are in the midst of negotiations for new licenses.
Immense Price Increases
The Register refers to price increases for European customers of 800 or even 1,500 percent. That’s a lot, but it’s in line with what customers (dare to) say. Part of this price increase comes from a licensing system where customers suddenly have to pay for the maximum use of the purchased software for long periods, which Broadcom has also bundled into packages that customers are not allowed to partially purchase.
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No Progress: Broadcom’s Licensing Practices Still ‘Anti-Competitive, Unfair, and Unethical’
It’s not the first time that trade associations have criticized Broadcom’s practices, but it all has little effect. Despite the overwhelming criticism, Broadcom remains certain that it is on the right track.
The Register received the following response from the company: “As a strategic partner to more than 140 European cloud service providers, including more than 40 delivering sovereign cloud services, Broadcom is working to achieve the European Union’s sovereign cloud services objectives. The company enables all types of enterprises to accelerate innovation, provide more choice, and address their most complex technological challenges.”
Code Red
This statement directly contradicts what ECCO reports, which after all stems from CISPE and thus the cloud service providers Broadcom refers to. ECCO itself summarizes the situation as follows:
“ECCO believes that the software license terms imposed by Broadcom remain unfair and anti-competitive. Regardless of the number of CISPE members (and members in the wider cloud sector) that have since signed new contracts, ECCO believes that regulatory measures are necessary.”
“In the absence of far-reaching changes and adjustments to the license terms, measures, including the restoration of previous contracts and the suspension of lawsuits filed by Broadcom as a result of the change in terms, must be urgently considered by the regulator.”
The body calls Broadcom’s practices unfair and anti-competitive and gives the company a red status, which indicates a critical situation where no progress is being made towards fairer licenses.