CISPE seeks to annul Broadcom’s VMware takeover

The Cloud Infrastructure Service Providers in Europe (CISPE) on Thursday filed an action for annulment in a bid to overturn the decision by the European Commission approving Broadcom’s acquisition of VMware.

CISPE spokesperson Ben Maynard said that the appeal, which is now before the European General Court, “argues that the Commission did not properly test the licensing remedies offered by Broadcom and under-estimated the risk the deal poses to European cloud infrastructure providers and their customers. CISPE believes the clearance would entrench VMware’s licensing gatekeeper position and limit choice and innovation in Europe’s cloud market.”

CISPE stated in a release announcing the appeal that since the acquisition was finalised by the Commission in July 2023, “Broadcom has unilaterally terminated existing contracts, often with only weeks’ notice, and imposed onerous new licensing conditions. These include drastic cost increases (sometimes exceeding tenfold) and mandatory multi-year commitments for access to essential VMware software.”

It went on to say that Broadcom has “further escalated the situation by announcing new restrictive licensing terms that may exclude smaller cloud providers, including many CISPE members. These providers could now be barred from purchasing and reselling VMware-based cloud services — critical tools for delivering secure, flexible, and European cloud solutions.”

Maynard said that appeals of this kind typically take 18–24 months, and complex cases can stretch closer to three years. During that time, the Commission’s original decision remains in force, but, he said, “it would be annulled if CISPE prevails.”

Broadcom disputes CISPE allegations

When reached for comment, a Broadcom spokesperson said, “[the firm] strongly disagrees with these allegations. The European Commission, along with 12 other jurisdictions around the world, approved our acquisition of VMware following a thorough merger review process, and we will uphold the commitments made to the Commission at that time. We continue to bring our customers better choices and solutions to address their most complex technology challenges.”

However, Forrester Research Senior Analyst Dario Maisto said, “Broadcom VMware commercial practices have been under the lenses for quite some time now. While we may agree or disagree with the European Commission’s decision to approve Broadcom’s acquisition of VMware, the fact is that a number of European organisations are suffering from unilateral price increases and arbitrary closure of services.”

European organisations, he pointed out, “are too much dependent on IT vendors that act as monopolies or oligopolies in the best case scenario. Something like the sought-for Buy European Act may be a way to promote better competition in the European cloud and IT markets.”

The appeal, said Maisto, “is a long term play, though. In the short term, CISPE should keep seeking a fairer cloud market in Europe. Results will come sooner or later, as it was for the Microsoft case.”

‘Time to find a new dance partner’

John Annand, digital infrastructure practice lead at Info-Tech Research Group, is of two minds on the topic. “No doubt that what Broadcom is doing is manifestly geared towards their own benefit at the expense of (soon to be in many cases former) partners and customers,” he said. “When Broadcom completed the acquisition of VMWare, they promised an end to special back-room pricing deals that gave differential discounts to preferred hardware or public cloud providers.”

Basically, he said, “Broadcom changed the licence deals for all their cloud provider partners, and they did so equally. However, a subset of those partners are [part of] CISPE, and all the members of that subset are on the small side. So, while the vast majority of CSPs worldwide are affected negatively by the Broadcom changes, for CISPE members, 100 per cent of them will be negatively affected. Does this affect competition? Sure.”

Annand also noted that, as of October, European clients will not be able to buy VMware from European-owned cloud providers who don’t comply with Broadcom’s new licensing restrictions.

But European customers will still have sovereign options, he pointed out. “Microsoft on 16 June reaffirmed its commitment to European sovereign cloud, including announcing (but with suspiciously little follow-up since) M365 Local,” he said. “Will that meet the technical needs of European customers? Probably. But it is unlikely to meet the needs of customers who are concerned about their exposure to the unpredictable international political changes we’re living through.”   

Annand’s second thought was “why do we care so much? I kind of get it — VMWare has a massive install base, and change is hard (and costs money), but there are literally dozens of alternatives for virtualisation,” he said, pointing out that local European companies like Proxmox have reported massive increases in expressions of interest since the acquisition was finalised. And companies like Veeam and Datamotiv are being looked at for VM migration rather than just for backup and recovery and replication capabilities.

Broadcom “is clearly signaling they don’t want a certain class of business; it’s never been easier to migrate, so let’s migrate. Grief is hard, but it’s time for enthusiasts like myself to acknowledge that VMware is no longer the company we fell in love with during the 2000s,” he said.

He added, “[it is] time to find a new dance partner. This is an opportunity for OVH, Exoscale, gridscale, and Proxmox. Why would we advocate for a legal remedy to maintain a legacy relationship when one party is so clearly contemptuous of the other?”