The recent move by Broadcom to adjust its pricing model comes as a response to customer feedback and the increasing scrutiny from both the industry and regulators. Broadcom CEO Hock Tan announced the significant change following complaints and criticism regarding the company’s pricing practices, particularly after its acquisition of VMware in November 2023.
Under the new leadership post-acquisition, VMware’s offerings have undergone substantial changes, such as the discontinuation of perpetual licenses, which did not sit well with many longstanding customers. Tan emphasized the company’s commitment to simplifying pricing and making it more cost-effective. The prior pricing structure was described as complex and expensive, prompting the need for a shift.
Recognizing that the transition to a subscription-based model had left some customers with unsupported perpetual licenses, Broadcom has now pledged to provide free access to zero-day security patches for supported versions of vSphere, with similar support planned for other products in the future. This move aims to address concerns raised by customers regarding balancing expenditures between capital and operating costs amidst the evolving technology landscape.
Despite the adjustments, Broadcom remains steadfast in its plan to shift VMware to a subscription-based model, a process that had commenced in 2018, albeit later than some competitors in the industry. The company has also committed to significant new investments in backing VMware services and announced substantial price reductions for VMware Cloud Foundation (VCF).
Antitrust concerns have been raised by the European Union, with regulators initiating an investigation into changes in VMware’s licensing conditions after Broadcom’s acquisition. The EU is seeking clarification from Broadcom regarding alterations to the software licensing and support under VMware, indicating a close monitoring of the situation.
