A European trade group has issued a scathing report about Broadcom’s management of VMware licensing practices, grading the company with a “red” status that signifies insufficient progress on addressing customer concerns.

The trade group, the European Cloud Competition Observatory (ECCO), monitors software licensing practices within the European cloud sector. ECCO’s May 2025 report found that over the recent months, many European cloud companies have entered into new licensing agreements with Broadcom that allow them to continue to use their legacy VMware installations. However, the report said, “these customers continue to face substantial financial burdens and operational disadvantages due to the imposed terms.”

By ECCO’s account, Broadcom has terminated VMware licenses that have been the foundation of the cloud providers’ virtualization deployments for years, and have offered higher cost subscriptions without sufficient warning. VMware’s legacy perpetual licenses and the manageable monthly payment plans have been replaced by three-year plans with fixed pricing—so even limited users must pay full cost.

In some cases, ECCO asserts, licensing costs have soared to levels ranging from 800% to 1500% higher. In situations where customers have then signed three-year contracts at higher rates, Broadcom has offered discounts up to 50%, yet even this hasn’t reduced costs to manageable levels. As a result, some European cloud firms have seen their business’s profitability endangered.

Even sharper criticism came from Francisco Mingorance, secretary general of the Cloud Infrastructure Services Providers in Europe (CISPE), the group that launched ECCO to monitor software licensing practices. “Unlike Microsoft, Broadcom shows no interest in finding solutions, or even of working with European cloud infrastructure providers. Broadcom can report that most have signed new contracts, but we know that these are punitive and threaten the viability of service providers locked-in to the VMware ecosystem. Urgent action is needed.”

Broadcom, after acquiring VMware in 2023, has moved decisively to improve VMware’s return on investment. Its current strategy appears to cater exclusively to VMware’s largest enterprise users, which are companies that are better able to absorb cost increases; they’re also customers with infrastructures that are so complex that switching to a new virtualization provider is a massive logistical challenge.

“Broadcom’s aggressive stance on terminating VMware perpetual licenses underscores their commitment to the new pricing models and recurring revenue stream,” said Mitch Ashley, VP and practice lead, DevOps and Application Development at Futurum. He noted that while new subscription-based plans boost costs, having to hand migration to a new provider requires weighing some major concerns.

But ECCO, as an advocate for European cloud companies, says that Broadcom’s business strategy is “legally and ethically flawed.” The organization says that regulatory action is imperative.

CISPE is requesting that Broadcom make a series of fundamental reforms, including more continuous conversation between cloud customers and Broadcom, with a goal of fostering a collaborative relationship between vendor and customer. More specifically, CISPE wants a return to a flexible pricing model that reflects actual usage instead of a high-priced subscription price that doesn’t account for limited usage patterns.

It’s possible that Broadcom and the European groups are headed toward greater regulatory conflict. As the ECCO report states, “The current VMware licensing model appears to rely on practices that breach EU competition regulations which, in addition to imposing harm on its customers and the European cloud ecosystem, creates a material risk for the company and their shareholders should regulators investigate and challenge the legality of such model.”