Dutch Court Forces Broadcom to Support VMware Migration After 85% Price Hike Backlash
In a significant legal victory for enterprise customers pushing back against aggressive software licensing changes, the Dutch Ministry of Infrastructure and Water Management (Rijkswaterstaat) has secured a court order compelling Broadcom and its acquired subsidiary, VMware, to provide essential support during the agency's migration away from VMware products.
The dispute arose following Broadcom's acquisition of VMware and the subsequent overhaul of its licensing model. Rijkswaterstaat, a long-standing VMware customer relying on its software for managing critical national infrastructure like tunnels, locks, and bridges, faced an unsustainable 85% increase in annual costs under the new subscription-based model. Their annual expenses were set to skyrocket from €2.1 million ($2.4 million) to nearly €4 million ($4.6 million).
For years, Rijkswaterstaat had invested heavily in perpetual licenses for a suite of VMware products, including vSphere, NSX, vSAN, vCenter Server, Aria Automation/Operations, and Site Recovery Manager. These products were deeply embedded in the agency's operations, forming the backbone of the IT infrastructure that supports vital public services.
The Licensing Shift and the Support Stalemate
Following the completion of Broadcom's $69 billion acquisition of VMware in late 2023, the technology landscape for VMware customers underwent a dramatic transformation. Broadcom moved swiftly to eliminate perpetual license sales, forcing customers onto a new, often more expensive, bundled subscription model. This strategic shift was aimed at increasing recurring revenue and, from Broadcom's perspective, simplifying the product portfolio. However, for many customers, particularly those with significant investments in perpetual licenses and tailored deployments, the changes meant substantial cost increases and a loss of flexibility.
Rijkswaterstaat's three-year support agreement for its extensive VMware deployment was due to expire in July 2024. Recognizing the impending deadline and the unfeasibility of the new pricing structure, the agency initiated discussions with its reseller in the spring of 2024 to explore renewal options. The reseller, however, indicated that a suitable offer under Broadcom's new subscription terms was not possible for Rijkswaterstaat's specific needs and scale.
Broadcom offered limited extensions, first through September, then November 2024, and finally a hard deadline of July 23, 2025. Crucially, Broadcom refused to commit to providing any form of 'exit support' beyond this final date. Exit support, in this context, refers to the necessary maintenance updates, bug fixes, technical assistance, and potentially access to source code or tools required for an organization to safely and effectively migrate away from the vendor's products without risking operational disruption.
Given the critical nature of the infrastructure managed by Rijkswaterstaat's VMware systems – tunnels, bridges, and locks that are integral to Dutch transportation and water management – the lack of guaranteed support during a complex migration period posed a significant risk to public safety and national operations. Faced with this impasse, the Dutch agency sought legal recourse.
The Court's Ruling: A Duty of Care
The preliminary relief judge at the District Court of The Hague heard Rijkswaterstaat's case. The agency argued that Broadcom's refusal to provide adequate exit support, especially given the critical nature of the services relying on the software and Rijkswaterstaat's long history as a customer with significant prior investment, constituted a breach of good faith and a failure to uphold a necessary duty of care.
In a landmark decision, the court ruled in favor of Rijkswaterstaat. The judge determined that “Broadcom acts in breach of its duty of care” by failing to ensure a reasonable transition path for an organization managing vital national infrastructure. This concept of a 'duty of care' in the context of enterprise software vendors and critical customers is a significant legal point, suggesting that vendors may have obligations beyond the strict letter of a contract, particularly when their software is deeply embedded in essential services.
The court order mandates that VMware and Broadcom must continue to provide exit support to Rijkswaterstaat for a period of up to two years. This support must include essential services such as maintenance updates, bug fixes, and technical support necessary for the agency to safely and effectively migrate its systems to alternative platforms. To ensure compliance, the court imposed a substantial penalty: failure to adhere to the ruling will result in fines of €250,000 ($290,000) per day, capped at a maximum of €25 million ($29 million).
Escalating Pushback and Broader Implications
The Dutch ruling is not an isolated incident but rather the latest and perhaps most forceful example of growing legal and regulatory pushback against Broadcom's post-acquisition strategies. Large customers and regulatory bodies worldwide have voiced concerns and initiated actions.
Telecom giant AT&T, for instance, has reportedly filed similar litigation against Broadcom concerning changes to support contracts following the VMware acquisition. In Europe, antitrust regulators have launched investigations into Broadcom's practices, prompted by complaints from various European business groups alleging anti-competitive behavior related to the new licensing terms and bundling.
Industry analysts view the Dutch verdict as a critical development. Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research, commented, “The Dutch verdict represents a formal rebuke of how enterprise software monetization has decoupled from operational continuity. Vendors that revoke support for perpetual licenses without reasonable transition mechanisms risk creating a contractual choke point.” This highlights the tension between a vendor's right to change its business model and a customer's need for stability and support, especially after significant prior investment and integration.
Broadcom's transformation of VMware involved not only the elimination of perpetual licenses but also the bundling of products into often larger, more expensive packages. Customers have reported VMware license cost increases ranging up to 500% in some cases. Furthermore, starting in 2025, Broadcom introduced minimum licensing requirements, mandating customers license a minimum of 72 cores per order regardless of their actual usage or deployment size. This disproportionately impacts smaller deployments and further compounds the pricing pressure on many organizations.
Legal experts suggest that the Dutch ruling could serve as a powerful precedent, potentially emboldening other customers, particularly in Europe where legal frameworks often provide stronger protections for businesses against potentially unfair practices by dominant suppliers. The court's emphasis on a 'duty of care' could be particularly relevant for organizations in other sectors managing essential services, such as medical systems, power grids, or other critical transportation networks, that rely heavily on VMware infrastructure.
The timing of the ruling is also crucial. Many large VMware customers face contract renewals throughout 2025. Armed with the knowledge of the Dutch precedent, these organizations may be in a stronger position to negotiate for continued support during their own potential migrations or to challenge Broadcom's terms in court if necessary.
“This ruling validates the rising concern among CIOs that vendor strategy can no longer operate in a vacuum,” Gogia added. “Whether in the form of legal injunctions, class action suits, or regulatory probes, buyer-led resistance to coercive licensing tactics is becoming structured, public, and repeatable.” This suggests a potential shift in the power dynamic between large software vendors and their enterprise customers, particularly when vendor actions threaten operational stability or impose unexpectedly high costs.
Accelerating Migrations and Exploring Alternatives
The upheaval caused by Broadcom's changes has already had a tangible impact on the market. Forrester Research analysts estimated that up to 20% of VMware's enterprise customers might rapidly seek alternative vendors, citing 'exhaustion' with the cycle of price increases and forced bundling. This figure represents a significant portion of VMware's installed base, indicating the depth of dissatisfaction within the customer community.
The broader implications of the Dutch ruling and the overall market reaction extend beyond individual legal disputes. Gogia argued that the ruling is “reshaping the boundaries of acceptable vendor conduct” as governments and large enterprises become increasingly vocal and active in demanding license continuity and reasonable transition paths.
“For customers in regulated or public service environments, the stakes extend far beyond financial impact: they touch on risk, compliance, and service reliability,” he said. This underscores why organizations like Rijkswaterstaat, responsible for critical national infrastructure, are compelled to take strong action when vendor changes threaten their ability to operate reliably and securely.
The uncertainty and increased costs associated with VMware under Broadcom have significantly accelerated the exploration and adoption of VMware alternatives. Competitors are actively courting disgruntled VMware customers. Nutanix, a long-time competitor in the hyperconverged infrastructure space, has been particularly aggressive in highlighting its platform as a viable alternative. Other options gaining traction include Microsoft's Hyper-V, Red Hat's OpenShift Virtualization, and open-source platforms like Proxmox. Many organizations are also fast-tracking their cloud migration strategies, viewing a move to public or private cloud infrastructure as a way to reduce their dependency on specific on-premises virtualization vendors.
The impact is also being felt by smaller cloud providers who previously built services on VMware's platform. Reports indicate that Broadcom's new partner program requires minimum commitments that are prohibitively expensive for many smaller providers, effectively pricing them out of the VMware ecosystem. For example, some European cloud providers report minimum commitments of 3,500 cores, costing around $800,000 annually with mandatory three-year terms. This forces these providers to either absorb massive costs, pass them onto their customers (making their services less competitive), or migrate their infrastructure to alternative virtualization technologies.
Broadcom's Path Forward
For Broadcom, the maximum penalty of €25 million ($29 million) in the Dutch case represents a relatively small financial impact compared to its target of achieving $8.5 billion in annual revenue from VMware. However, the true significance of the ruling lies not in the monetary penalty itself, but in the precedent it sets. A court compelling Broadcom to provide specific, extended migration support directly challenges the company's ability to dictate terms unilaterally and could complicate its hardball negotiation tactics with other large customers facing similar situations.
The ruling forces Broadcom to confront the potential legal and reputational risks associated with rapidly changing terms for deeply integrated, critical software. It highlights the potential for collective action and legal challenges from customers who feel unfairly treated or whose operations are jeopardized by abrupt policy shifts.
Gogia's assessment encapsulates the situation: vendors like Broadcom are facing “a binary choice: retrofit their models to respect legacy contractual expectations, or risk building their future revenue on top of contested trust.” The Dutch court's decision signals that for some customers, particularly those providing essential services, the courts may intervene to ensure that the pursuit of new revenue models does not come at the expense of operational continuity and a vendor's fundamental duty of care.
The outcome of this case, and others like it, will likely influence how future technology acquisitions are handled, particularly regarding the transition and support of existing customer bases. It serves as a powerful reminder that in the complex world of enterprise software, the relationship between vendor and customer involves more than just licenses and price lists; it often involves deep integration, operational reliance, and, as the Dutch court has affirmed, a degree of responsibility and care.