CISPE Expands Its Case Against Broadcom With New Allegations

Service provider or reseller? For VMware’s European CSP partners, that is the question, according to CISPE, the association that represents them.

The association argues that they must now choose between one status or the other, following a shift in incentive structures. It shared this through its European observatory, established last year.

The observatory primarily oversees Microsoft’s commitments on cloud competition. It also monitors Broadcom’s practices. Its first report on the matter, published in February, set the tone: red flags, accompanied by a call for a formal investigation by the European regulator.

The report cited various legal actions, notably in France (Orange, Thales…) aimed at preserving previous licensing terms while awaiting negotiations for “fairer” conditions, or securing a delay to migrate to alternative solutions. In these disputes, Broadcom allegedly used dilatory tactics to delay substantive decisions. Moreover, in most cases, the parties involved reportedly did not dare to go to court for fear of retaliation, not least because the pressure would not be limited to VMware licenses but would also extend to mainframe software.

An Updated Report, an Annex Summary

The observatory has just produced a second report… and it is not any more flattering for Broadcom. It concentrates on the latest, somewhat harmful, moves by the American group. Notably, the structural changes within the partner program, seen as a restriction of competition for European CSPs, who often operate both as resellers and service providers. It also broadly denounces the “doubts that Broadcom continues to sow” concerning its licensing terms, as well as the “litigious approaches” allegedly involved in sending cease-and-desist letters to perpetual-license holders and the lawsuit against Siemens in the U.S.

The bulk of the charges is summarized in an annex that serves as a recapitulation of the facts. Front and center is the sidelining of many products in favor of bundles, “without new features or improvements.” At the same time, perpetual licenses and the pay-as-you-go model are being replaced by “three-year subscriptions with a predetermined base price.” Invoicing is no longer based on actual usage, running counter to the core principles of the cloud model, notes CISPE.

Essential Solutions with No Functionally Equivalent Alternative

The association concedes that since the publication of the first report, the majority of its members have signed new licensing agreements. But it asserts they were pressured, lacking adequate notice.

In the end, costs have often skyrocketed. Broadcom does offer reductions of 30% to 50%, but only in exchange for a three-year fixed-price commitment.

To date, only one member has managed to fully exit VMware. The nature of its workloads allowed it to implement an open-source solution after “several months of software development involving around 400 employees,” according to those familiar with the case.

For most use cases there is currently no functionally equivalent alternative, CISPE argues. Those that come close would require moving workloads to American hyperscalers… and risk even higher prices.

The essential value of VMware solutions is underscored by the fact that they are the only ones certified for certain workloads, such as SAP databases, the annex notes.

Contract Changes: CISPE Demands Six Months’ Notice

In this context, combined with a complaint to the EU filed by the VOICE association (the German counterpart of Cigref), CISPE urges Broadcom to take action. Among other measures:

• Guarantee at least six months’ notice for any modification of contractual terms or pricing structures
• Negotiate contractually the fees applicable during peak usage, while avoiding penalties for CSPs in cases of over- or under-utilization
• Adopt flexible licensing options enabling volume-based discounts
• Facilitate access for smaller CSPs to the highest partnership levels, including waivers of certain thresholds; grant onboarding extensions of at least six months when they enter white-label arrangements
• Allow CSPs to be both resellers and service providers
• Maintain end-customer confidentiality and anonymized usage reporting