Facepalm: Another cloud service provider just left VMware for an open-source competitor over its outrageous price hikes. The firm was a sizable client with tens of thousands of virtual machines. While it still runs a few VMware machines, most of the migration is complete, leaving Broadcom with another big hole in its customer base.
Private server provider Beeks Group, headquartered in the UK, offers virtual and physical servers to companies in the financial sector. The Register notes that the firm has over 20 data centers supporting “20,000-plus” virtual machines and about 3,000 bare metal servers. It recently migrated its VMs provided by VMware to open-source provider OpenNebula, leaving just a handful of virtual servers that proved more problematic to move.
Matthew Cretney, Beeks Group’s head of production management, said that the migration was triggered when the company received a licensing invoice from VMware parent company Broadcom that was 10 times the previously billed amount. The massive rate hike is not unprecedented.
Recently, AT&T filed a breach of contract lawsuit saying that Broadcom refused to honor VMware’s existing licensing agreement. Instead, Broadcom wanted to switch the telecom with over 75,000 VMs to a licensing subscription that cost 1,050 percent more. Of course, AT&T said, “We’ll see you in court.”
Before that, an Australian firm dumped VMware after Broadcom hit it with a rate hike 10-15 times higher than it had previously paid. That company switched its 24,000 VMs to VMware competitor Nutanix.
If you’re keeping score, Broadcom has lost at least 45,000 VMs to competitors due to unreasonable price hikes, presumably chasing a quick ROI in a $61 billion investment. Meanwhile, AT&T’s 75,000 VMs stand in limbo pending the lawsuit’s outcome. Even if the judge rules that Broadcom must honor the previous agreement, the telecom plans to bail after running out that contract.
Also, consider that these are only the companies that have publicly complained. The number of firms that have quietly left Broadcom over rate hikes is undisclosed.
The method to Broadcom’s madness is that it knows that the cost of migrating is often more than paying the expensive rate hike, especially for small to mid-sized businesses with less capital. AT&T said its migration of 75,000 VMs will cost between $40 million and $50 million. Smaller companies don’t have that kind of money in the budget.
It will be interesting to see if Broadcom continues sticking it to its VMware client base. There has to be a tipping point, but I don’t think we’re there yet.
Image credit: Chad Scott
