Channel, Cloud migration, Virtualization

Broadcom Cuts VCF Pricing as EU Investigates Licensing

Cloud computing data center.

Broadcom's relaunch of the VMware Cloud Service (VCSP) Program in March had the channel buzzing about whether the changes would increase standardization and consistency across the company’s routes to market, as Broadcom claimed.

However, this week, conversation has centered around anti-competitive practices and complaints brought before the European Commission suggesting that Broadcom is improperly changing the conditions of VMware's software licensing and support, a spokesperson said. Sudden changes by Broadcom in policy and practices allegedly resulted in steep price increases, re-bundling of licenses, a ban on the reselling of licenses, and a refusal to maintain security conditions for perpetual licenses.

The complaints come from Beltug, a Belgian association of business users, and its counterparts, France's Cigref, CIO platform Nederland, and VOICE Germany, according to Reuters. Last month, these groups, along with trade body CISPE, whose members include Amazon and 26 small EU cloud providers, also complained about Broadcom allegedly unilaterally cancelling license terms for essential virtualization software, Reuters reported. The groups took their grievances to EU antitrust chief Margrethe Vestager, EU industry chief Thierry Breton and Commission President Ursula von der Leyen.

While some of VMware's changes were already in the pipeline even before its acquisition by Broadcom, CEO Hock Tan announced in a blog post that the company was also making several changes that seem aimed at deflecting the criticism and addressing the complaints.

VCF Price Cuts

"We have dramatically reduced the price of VCF (VMware Cloud Foundation) to promote customer adoption," Tan said in the blog post. "VCF includes all compute, storage, networking, management, and support capabilities that deliver consistent infrastructure and operations across clouds, and comes at half the list price compared to past pricing," he said.

Tan also said that Broadcom was revamping "how we engage with cloud service providers. ... The core principle for our new engagement with cloud providers is that end customers should have complete freedom to move their workloads from their own data centers to cloud providers, and between cloud providers." He said Broadcom was standardizing the metric for its pricing across cloud providers to per-core licensing, and would remove technical barriers to customers moving from on-premises to cloud, switching their workloads from one cloud provider to another, or back to on-premises data centers by standardizing the technology stack for cloud providers on VCF.

Tan said this move would "intensify competition between cloud providers, leading them to deliver greater value to end customers. The license portability feature we have added to VCF is key to this strategy. Google Cloud is the first hyperscaler to support VCF license portability and we expect other partner and hyperscaler clouds to follow with similar support."

He added that Broadcom would expand the Broadcom Advantage Partner Premier Tier to accommodate any qualified, existing service provider and offer programmatic initial-year discounts for their existing installed base, "[g]iven the need to set up the on-boarding process to accommodate our smallest cloud provider partners, and to help with the transition and ensure there is continuity of service for this partner group."

Smaller service provider partners who do not meet the Premier Tier criteria can take advantage of the ‘white label’ offers from Pinnacle and Premier Tier service providers, Tan said. "To ensure there is continuity of service for this smaller partner group, we will continue existing operations with this group under modified monthly billing arrangements until the white-label offers are available," he added.

Transitioning to a Subscription Model

Finally, Tan said VMware will complete its transition to a subscription model that provides access to the most recent version plus support for a fixed term. VMware began this transition around 2018, and was one of the last software companies to adopt this model. He said the subscription model would end "upsell" practices that did not represent true innovation but instead caused customer confusion and frustration.

And, in a statement that seemed to directly address the European Commision complaints, Tan said, "It is important to emphasize that nothing about the transition to subscription pricing affects our customers’ ability to use their existing perpetual licenses. Customers have the right to continue to use older vSphere versions they have previously licensed, and they can continue to receive maintenance and support by signing up for one of our subscription offerings."

He went on to add that, for customers whose maintenance and support contracts expired and who choose to not continue with a subscription offering, they can continue to use perpetual licenses and will gain free access to zero-day security patches for supported versions of vSphere with other VMware products added over time.