Thought Leadership
The German Association of IT Users (VOICE) has sharply criticized the business practices of the technology group Broadcom and its subsidiary VMware. In a letter to EU Commission President Ursula von der Leyen, the association calls for action to be taken against what it describes as abusive market behavior.
At the heart of the criticism is the fundamental change in VMware ‘s licensing model following the takeover by Broadcom. The company has replaced its traditional licensing model with a cloud subscription system – a move that VOICE believes will lead to “serious disadvantages and significant cost increases” for customer companies. With over 440 members and 3,000 companies, VOICE is the largest interest group for digital decision-makers in German-speaking countries, networking companies of various sizes.
The new bundling strategy for applications and services that were previously available separately is particularly problematic. According to the association, this practice has led to price increases of more than one hundred percent for some companies. In addition, Broadcom/VMware has introduced a categorization system that either makes access to certain services much more expensive for different customer groups or restricts them completely: “Broadcom/VMware is abusing its market power here,” says the association.
In coordination with its European sister organizations – including Beltug, Cigref and CIO Platform Nederland – VOICE has presented a list of demands with eight concrete points. One of the core demands is that VMware products for server, storage and network virtualization must once again be offered individually and without the need for bundling. All customers should also have unrestricted access to all products, regardless of their categorization. The scope of the demands is remarkable: The association is not only demanding a change in current business practices, but also a retroactive adjustment of contracts already concluded and the reimbursement of any additional costs incurred as a result. In addition, existing perpetual licenses should be “appropriately compensated” in the transition to subscription models.
These are the 8 demands
- VMware products for server, storage and network virtualization (vSphere/vCenter, vSAN, NSX) are (also) sold individually without commercial bundling with each other or with other products (such as Aria).
- Additional costs for contracts already concluded under the new license system will be reimbursed immediately.
- All VMware customers can purchase all VMware products without restrictions in terms of categorization such as customer groups, etc.
- Discounts are granted on all products without a clear preference, so that no effect equivalent to bundling is achieved.
- Broadcom/VMware grants the contractually agreed renewal clauses at the end of the contract term (so-called “outyear renewal clause”).
- Existing perpetual licenses are appropriately compensated when subscription licenses are purchased.
- The requirement of at least 16 cores per CPU when determining the license costs is deleted without replacement.
- All contracts already concluded under the license system introduced by Broadcom will be retroactively converted to the system described in sections 1 to 8, so that customers can also retroactively select the desired products individually without commercial bundling.
VOICE’s initiative is not an isolated action. The association had already pointed out the problematic developments in an initial open letter to the EU Commission in March of this year. If the requested changes are not implemented, VOICE expressly reserves the right to take legal action.
