VMware customers across Europe are facing massive price increases of up to 1,500% imposed by Broadcom following its acquisition of the virtualization software giant, with some companies now confronting the prospect of zero profitability, according to a damning new report.
The European Cloud Competition Observatory (ECCO), a monitoring body established by the association of Cloud Infrastructure Services Providers in Europe (CISPE) as a way to keep cloud licensing practices fair in the region, has delivered a scathing assessment of Broadcom’s licensing practices, giving the software giant a “RED” status rating and warning that its business model breaches EU competition law.
ECCO operates as an independent watchdog under CISPE, the trade body representing Europe’s cloud infrastructure providers.
The scale of the price shock is unprecedented in enterprise software. CISPE members reported increases ranging from 800% to 1,500% to the European Commission, with many seeing their licensing costs rise tenfold. In the US, telecommunications giant AT&T faced a 1,050% increase, highlighting the global reach of Broadcom’s aggressive pricing strategy, the report said.
The pricing crisis has devastated Europe’s business landscape, hitting hospitals, public services, and private companies, the report said. “The viability of certain businesses and cloud service providers—highly dependent on these unique software solutions—has been threatened with some predicted EBITDA reduced to zero.”
Sanchit Vir Gogia, chief analyst at Greyhound Research, said Europe’s assertive stance on digital market fairness positions Broadcom as a prime candidate for formal antitrust scrutiny. “The growing visibility of licensing-related friction has broadened regulatory interest beyond technical compliance towards structural market behaviors,” he explained.
Broadcom did not respond to a request for comment by the time of publication.
Complete licensing overhaul
Broadcom fundamentally changed how VMware software is sold after the acquisition. The company scrapped perpetual licenses and flexible pay-as-you-go models, forcing customers into mandatory three-year subscriptions with predetermined pricing that ignores actual usage—a direct contradiction of cloud computing principles.
The company also discontinued individual product sales in favor of bundled packages without adding new technical features, compelling customers to pay for software they don’t need.
“Billing is no longer based on actual usage, contrary to the fundamental operating principle of cloud computing,” the report added. “To compel customers to accept these new terms, Broadcom unilaterally and without sufficient notice terminated existing licensing agreements, some of which had been in place for over 10 years.”
ECCO illustrated this with a simple analogy: it’s like an electricity provider that previously charged based on actual consumption suddenly billing customers as if their heating systems run at maximum power 24/7, while forcing them to pay a full year in advance.
Deepti Sekhri, practice director at Everest Group, noted that compared to other enterprise software giants, Broadcom’s approach is notably aggressive. “While companies like Oracle and Microsoft have pursued similar models, they’ve often done so more gradually or through ecosystem incentives,” she said.
Market alternatives emerge
European enterprises are actively exploring alternatives to VMware, including platforms like Nutanix, OpenStack, and Proxmox. However, Sekhri cautioned that adoption is growing but “this isn’t a simple switch — it carries long-term implications for architecture, operational models, and partner ecosystems.”
The difficulty of escaping VMware’s grip is illustrated by the only unnamed CISPE member who successfully migrated away entirely. The company invested several months mobilizing all 400 employees in an intensive development effort to implement open-source alternatives — a complete business transformation that most organizations simply cannot afford.
“While alternatives to VMware exist, transitioning away is neither easy nor inexpensive,” Gogia said. “Options like open-source hypervisors or cloud-native stacks promise long-term independence but demand significant interim investment in skills, tooling, and customer change management.”
Legal intimidation escalates
Since ECCO’s February 2025 report, Broadcom has intensified its restrictive practices and legal pressure tactics. The company restructured partnership programs, forcing European cloud service providers to choose between operating as service providers or resellers, eliminating the dual role that’s common in Europe’s market structure.
More troubling, Broadcom has escalated to legal intimidation, sending cease and desist letters to subscription-less VMware users and filing lawsuits against major customers, including Siemens’ US operations. CISPE members fear these actions signal the company’s willingness to pursue litigation against any organization that resists its imposed terms, the report added.
ECCO has outlined four critical measures Broadcom must implement immediately: provide at least six months’ advance notice for contractual changes, establish cloud-aligned pricing based on contractually agreed rates, give smaller cloud providers easier access to higher-tier partner programs, and implement privacy protections for end-user data.
Regulatory storm brewing
The pricing crisis has triggered formal regulatory attention across Europe. Germany’s VOICE IT customer association has filed a complaint with the European Commission, while ECCO explicitly calls for regulatory intervention, including reinstating previous contracts and suspending Broadcom’s ongoing litigation.
“Unless Broadcom promptly implements critical changes, the company’s financial model remains legally and ethically flawed,” ECCO warned, noting that current practices appear to violate EU competition regulations.
Sekhri observed that Broadcom’s licensing overhaul has drawn fresh attention from EU regulators, though “it remains unclear whether formal action will meaningfully alter licensing behavior or lead to structural remedies.”
Strategic risks mount
Broadcom’s aggressive licensing realignment may secure short-term revenue gains, but risks long-term erosion of the strategic value from its VMware acquisition. “If customer attrition and compliance overheads accelerate, the very basis for acquisition ROI could be compromised,” Gogia warned.
Sekhri added that this growing tension introduces risk to Broadcom’s VMware monetization strategy. “The pace and rigidity of the licensing changes have triggered pushback from partners and customers alike, especially in regulated and sovereignty-sensitive markets,” she said.
For Broadcom, the approach reflects what Sekhri described as “a high-control, margin-maximization playbook that may yield short-term gains but invites long-term risks — especially if it alienates partners or accelerates customer exit paths.”
With regulatory pressure mounting and customer complaints escalating, Broadcom faces a critical juncture. The company’s response to ECCO’s reform demands will determine whether it confronts a formal EU antitrust investigation and potential penalties for practices that have already imposed billions in additional costs on European businesses.
Source:: Network World