Another cloud provider is leaving VMware after receiving a 900 percent price increase

Face palm: Another cloud service provider just left VMware because of its outrageous price increases and switched to an open source competitor. The company was a large customer with tens of thousands of virtual machines. While some VMware machines are still running, the bulk of the migration is complete, leaving Broadcom with another big gap 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 company has more than 20 data centers supporting “over 20,000” virtual machines and approximately 3,000 bare metal servers. The company recently migrated its VMware-provided VMs to open source provider OpenNebula, leaving only a handful of virtual servers that proved more problematic to move.

Matthew Cretney, head of production management at Beeks Group, said the migration was triggered when the company received a license invoice from VMware parent Broadcom that was 10 times the amount previously invoiced. The massive interest rate hike is not unprecedented.

Recently, AT&T filed a breach of contract lawsuit alleging that Broadcom had refused to honor VMware’s existing license agreement. Instead, Broadcom wanted to switch Telekom with over 75,000 VMs to a license subscription that cost 1,050 percent more. Of course AT&T said, “See you in court.”

Previously, an Australian company parted ways with VMware after Broadcom hit the company with a tariff increase 10 to 15 times higher than it had previously paid. This company switched its 24,000 VMs to VMware competitor Nutanix.

If you keep up, Broadcom lost at least 45,000 VMs to competitors due to unreasonable price increases, presumably looking for a quick ROI on a $61 billion investment. Meanwhile, AT&T’s 75,000 VMs await the outcome of the litigation. Even if the judge rules that Broadcom must honor the previous agreement, the telco plans to exit when the contract expires.

Also keep in mind that these are only the companies that have publicly complained. The number of companies that quietly left Broadcom because of rate hikes is not disclosed.

The reason for Broadcom’s madness is that the company knows that the cost of a migration is often higher than paying the expensive tariff increase, especially for small and medium-sized businesses with less capital. AT&T said migrating 75,000 VMs will cost between $40 million and $50 million. Smaller companies don’t have as much money in their budget.

It will be interesting to see if Broadcom continues to hold on to its VMware customer base. There has to be a tipping point, but I don’t think we’ve reached that point yet.

Photo credit: Chad Scott