AT&T's VMware bill went up by 1050%.

Broadcom's aggressive VMware license changes have given us an interesting new episode. It seems their attempts to extort AT&T have landed them in court. On August 29th, 2024, AT&T filed a court motion to, essentially, prevent Broadcom from terminating VMware support while challenging Broadcom's "king's ransom" to renew its VMware licenses and keep the lights on in its massive VMware farm.

Firstly, it's clear from the filings that VMware is?critical?to AT&T's IT infrastructure. AT&T runs 75,000 VMs across 8,600 servers in its VMware environment. AT&T relies on this critical infrastructure for needs like supporting millions of customers across public, private and critical government domains. Running the VMware environment without active support is simply not an option for AT&T. Moving away from VMware will cost an estimated $50 million.

We have downloaded the import court filings for easy reference. I encourage a quick read through these:

1. AT&T's court filing against Broadcom.
2. Email from Susan Johnson, EVP at AT&T, to Hock Tan, Broadcom CEO.
3. Affidavit from Susan Johnson.
4. Affidavit from Gordon Mansfield, VP of Global Technology Planning at AT&T.

Notably, the filing by AT&T states:

"Broadcom is threatening to withhold essential support services for previously purchased VMware perpetually licensed software unless AT&T capitulates to Broadcom’s demands that AT&T purchase hundreds of millions of dollars’ worth of bundled subscription software and services"

This brief paragraph pretty much sums up Broadcom's predatory tactics that is now significantly affecting customers around the world. In AT&T's case, they had multi-year renewal options that AT&T is relying on for some measure of protection. It's not clear how effective this tactic will be.

The key question this court case may answer is this:

Can large software vendors sell mission critical software to customers at a certain price, then arbitrarily hike prices to predatory levels, knowing that the customer has no option but to comply with the extortion?

This question applies to other potential situations as well, like Oracle's sweeping and aggressive license changes for Oracle Java that has similarly seen renewal costs for customers go up 5x-10x. Stay tuned for our coverage of this saga as it progresses.

What can you do in the meantime?

For most of our clients, the response includes short-term and long-term planning and response around VMware. We have developed a detailed roadmap that includes a combination of the following (summarized significantly below):

1. Contract review. Take a close look at your VMware contracts (EULA, ELA, etc.) and craft a rebuttal grounded in contractual language - just as the AT&T team did.
2. Technical assessment. Perform a detailed assessment of your VMware deployments to optimize and/or reduce the footprint.
3. Alternative technologies. For existing and/or residual VMware footprints, perform a detailed analysis of alternative technologies that can support the workloads and applications. Price out the migration and go-forward costs of all technologies, and account for detailed TCO. Ensure cost optimization and license compliance in the prospective environments.

The above may not be easy, but in my experience, once a vendor goes down the aggressive path of eking out every penny out of its existing customer base without providing any additional value, the path is seldom reversed. It's possible Broadcom may settle with AT&T out of court before a precedent is set, and thereby continue to leverage its extortionist approach with other customers. In short, customers may not really have a long-term option of remaining on VMware.

On this topic, one of the exciting new areas we are seeing interest in is on-premises, private cloud deployments like Canonical OpenStack (from the makers of Ubuntu) and Red Hat OpenStack on OpenShift. While these may not appear to be easy options, modern tools and methodologies are making private on-premises clouds much easier to adopt, and often represent an excellent option for VMware.

If you need expert support in navigating the Broadcom VMware license changes and are looking to reduce costs, feel free to reach out for a complimentary consultation.