Beltug and other unions of CIOs from neighboring countries are calling on the European Commission to take action against Broadcom’s market behavior following its acquisition of VMware.

“We believe that Broadcom’s behavior contradicts the principles of fair competition and may be an indication of exploitative abuse.” We read these unmistakable words in an open letter about the way Broadcom deals with VMware, written by Beltug in Belgium, Cigref in France, CIO Platform Netherlands and VOICE in Germany. The four organizations represent the interests of CIOs and business IT users in their respective countries. The letter is addressed to the European Commission.

Seven plagues

The CIO associations identify seven specific forms of abuse that they believe are only possible because of customers’ pre-acquisition commitment to the VMware ecosystem. Since the acquisition, organizations have faced:

• Significantly increased prices;
• Failure to fulfill existing contractual agreements;
• A ban on the resale of licenses;
• A refusal to ensure the security of perpetual licenses;
• (Re)bundling licenses leads to higher costs;
• A restructuring of the reseller and partner ecosystem;
• A loss of knowledge.

Invoice x 10

The problems that Beltug and the other associations mention do not come out of the blue. We have already received several reports from the editorial team in which the license costs have suddenly increased to more than double.

In some cases, Broadcom forces existing customers to purchase a significantly more expensive bundle with unnecessary solutions, which also have to be purchased as a prepaid offer over several years. For example, we have heard that the cost of a license under a hundred thousand euros quadruples and that the next bill even increases to almost a million euros due to the prepaid obligation.

In the open letter, the CIO associations call on the European Commission to take the necessary steps to stop the chaos in the virtualization market. “The Commission must protect the European user of VMware from this type of behavior.” They also point out that this exact scenario was predicted by them in an earlier letter from the Commission to Margrethe Vestager, when the proposed acquisition was still being investigated.

Beltug and its sister associations are calling for Broadcom’s drastic changes to at least be slowed down and the company’s unethical behavior to be stopped. They are also calling for strong action to prevent other providers from following Broadcom’s example. “This approach cannot and must not become a precedent.”

No anecdotes, just broad experience

Broadcom, for its part, has continued to share good news since the acquisition. The company went no further than an admission of some inconvenience to certain customers. Even then, this discomfort was written off as fear of change that would benefit customers. This view was at odds with the numerous criticisms Broadcom has received since the acquisition, although the company dismissed it as anecdotal. This damning letter from the four industry associations shows that the strategy is actually perceived as an abuse by the majority of the market.

The industry associations point out that VMware users looking for an alternative will quickly turn to the public cloud. By undermining VMware’s virtualization offering, Broadcom is indirectly pushing customers toward hyperscalers so they can become more dominant.

Unseen

“Broadcom’s contempt and brutality towards its customers is unprecedented in the recent history of Europe’s digital economy,” the letter said. “This behavior has a negative impact on the entire European market. If the EU allows Broadcom to continue like this, it will send a signal of weakness to other organizations. The Commission must present its view of the situation and clarify what measures are possible.”