That Broadcom’s acquisition of VMware was not going to be beneficial for many of the customers of the popular virtualization software was something that almost the entire industry took for granted. And that there was going to be a change in software licensing, eliminating “perpetuity” contracts and replacing them with a pay-per-use model, was something that could be suspected.
But what perhaps did not enter into the pools of almost anyone is that for a company like AT&T, this change in the business model of its supplier could mean an increase in costs of more than 1,000% (1,050%)which has given rise to a legal dispute between both companies.
As representatives of the telecommunications company explain, Broadcom has not only applied a surprising increase in the bill, but has also failed to fulfill its commitment to extend support for the original contracts. for two additional years. AT&T’s frustration with Broadcom would have also been expressed at the highest level, with a letter signed by Susan A. Johnson, the company’s Supply Chain VP to Hock Tan, CEO of Broadcom. In the document, Johnson calls the Price increase “extreme” and describes it as “unexpected”, taking into account the strategic alliance that both organizations have maintained for years.
At the same time, AT&T has expressed concern about the difficulties it is experiencing in finding an alternative to VMware’s solutions, which it has been searching for for more than a year. In this sense, company sources recognize that due to the strong integration of VMware in network virtualization operations, a migration would not only be very complex, but would have a approximate cost of between 40 and 50 million dollars.
Despite everything (feeling that they are being treated unfairly and that they are still considering migrating to an alternative), Johnson opens a path towards negotiation and assures that they would be willing to listen to an offer that was “more reasonable.”
Of course, AT&T’s case is not the only one. The change in the licensing model has generated widespread discomfort among the company’s clients and studies such as the one recently published by the consulting firm Civio, assure that more than half of the users of its products would be looking for other alternatives.
Regarding this controversy, Broadcom has spoken lukewarmly and in a statement has assured that: «Broadcom totally disagrees with the accusations and is confident that we will prevail in the legal process. VMware has been shifting to a subscription model, the standard for the software industry, for several years (starting before the acquisition by Broadcom). “Our goal will continue to be to offer our customers choice and flexibility while helping them address their most complex technology challenges.”