The IT industry has been hit by another rip-off: with the takeover of VMware by Broadcom, costs for customers are exploding, while the new owner is gradually reducing the once renowned name of VMware to insignificance with mass redundancies and an imposed new licence policy. A shocking example and warning at the same time – because a rethink is also long overdue on the customer side.
There was hope in the beginning. Even if the tech giant Broadcom did not have a reputation in the market for dealing sensitively with acquired companies, VMware employees were still positive in December 2023 that “the next steps will certainly be considered and strategically approached”. However, just a few months after the spectacular 61 billion dollar deal, VMware, and with it its large customer base, is facing a huge shambles. What had happened?
First, Broadcom cancelled all licences with a few exceptions, and prices for customers subsequently rose to astronomical heights after the deadline of 1 April 2024, in some cases twelve times higher than the current prices. The insane calculation behind this is as banal as it is calculating – VMware is difficult or even impossible to replace for many companies and cloud services. A dependency that Broadcom is now exploiting coldly. In addition to the new subscription model, there is not much left – even free trial versions will no longer be available under the leadership of the new owners. They have also made cuts to the workforce, with 1,200 employees already having to leave and more likely to follow. In addition to the miserable public image, this approach is also attracting the attention of industry associations, and calls for political intervention are growing louder. For example, CISPE, the European association representing the interests of cloud services, is calling on authorities and legislators to carry out a strict review of Broadcom’s unilateral cancellation of licence conditions.
VMware’s low fall is a hard blow for the entire industry, as it once again shows the vulnerability of companies that rely on standard software, proprietary solutions and licence models – or, even worse, are dependent on them. Examples such as Broadcom’s approach could find imitators – but also make future decisions easier when companies are faced with the question: buy or build, i.e. programme in-house or buy in? In the dynamic IT market, standard software offers nothing more than the certainty that there is no longer any security. Even if the current framework conditions and prices are right, the next takeover, the next change of strategy or even the next CEO can quickly put an end to previous conditions. It is therefore important to get out of dependencies and away from proprietary software that companies hand over to providers. Of course, this is often easier said than done.
And yet: in-house programming, open interfaces and open source must become the priority. If companies rely on standard solutions and licence models for economic or technical reasons, such as a lack of manpower or in-house expertise, they should check the conditions very carefully. Are the individual components open so that further use is possible without the provider? What is the cancellation period? What are the deadlines for changing the payment models?
The dismantling of a respected company like VMware shows us the drastic consequences for companies that are not in control of the fundamental components of their own IT. Dependency relationships are increasingly becoming part of business practices – we must take a firm stand against this. If providers take advantage of their customers’ predicament, there can only be one consequence: an end to standard software and rip-off models.
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