The District Court of The Hague has ordered VMware and Broadcom to provide ongoing support to the Ministry of Infrastructure and Water Management (“Rijkswaterstaat”) until the latter has migrated to an alternative. After years of investing millions in VMware products, the government agency cannot be left without support due to a new licensing model, the court ruled.
The ministry uses VMware to manage critical infrastructure such as tunnels, locks, and bridges. After Broadcom acquired VMware at the end of 2023, the new owner introduced a subscription model. Research showed that the costs for RWS would rise from €2.1 million to €4 million per year.
This 85 percent increase in costs did not fit within the government agency’s budget. In March, RWS announced that it wanted to phase out VMware products within two to three years. Until then, it would remain dependent on support.
Refusal of exit support
Broadcom offered a temporary support extension until July 2025. After that, the American company refused to provide further assistance with the phase-out. Source code was also not made available so that RWS could arrange its own support.
“By failing to do so, Broadcom et al. are acting contrary to the duty of care that society expects them to exercise towards RWS,” ruled the preliminary relief judge.
The stubborn Broadcom is behaving as expected. Since the VMware takeover, the company has focused on large, profitable customers and has quickly made the transition to a subscription-based business model. Cease-and-desist letters were sent to perpetual license holders earlier this year.
Penalty of 250,000 euros per day
VMware and Broadcom must now provide exit support to RWS for up to two years. This means “maintenance updates and upgrades, bug and security fixes, and technical support” until the phase-out is complete. Failure to comply with this obligation will result in a penalty of €250,000 per day. This can amount to a maximum of €25 million.
For Broadcom, this ruling is another setback, although it will probably be able to pay the maximum penalty with ease. European customers report cost increases of 8 to 15 times the original amount since the acquisition. Some parties cannot simply migrate to Nutanix, Proxmox, or the countless other VM players. The strategy of generating more profit from VMware through bundling and price increases works financially, but is now also facing legal resistance in the Netherlands.