Broadcom vs Tesco: Top 10 Lessons for VMware Customers
Intro: The showdown between Broadcom and Tesco over VMware licensing isn’t just tabloid fodder – it’s a cautionary tale for every VMware customer.
In 2023, Broadcom acquired VMware and swiftly overhauled its licensing: perpetual licenses were discontinued, support renewals were eliminated, and customers were transitioned into pricey subscriptions.
For Tesco (a UK retail giant running ~40,000 VMware workloads), this sudden change meant critical systems could lose patches and support.
Tesco is now suing Broadcom (and its reseller) for £100 million, arguing that Broadcom breached contracts and put its food supply operations at risk. They’re not alone – other enterprises have raised similar disputes.
The message is clear: if you rely on VMware in a Broadcom era, you must prepare to negotiate hard or face nasty surprises.
Below are 10 practical lessons drawn from the Tesco vs Broadcom saga, each highlighting a common mistake, the risk it creates, and what you should do instead to protect your organization.
For a complete overview, read our ultimate guide – Broadcom Audit Defense 101: Strategies to Handle Broadcom/VMware/CA/Symantec License Audits.
1. Don’t Assume Support Contracts Are Ironclad
Mistake: Believing a multi-year support agreement will be honored no matter what. Tesco assumed its VMware support (through 2026, plus a renewal option) was guaranteed.
Risk: Following Broadcom’s takeover, VMware ceased offering support for legacy perpetual licenses, effectively terminating those agreements. If you bank on the original support term, you could suddenly be left without critical upgrades or patches.
In Tesco’s case, tens of thousands of virtualized workloads – from store tills to supply-chain servers – were put at risk because promised support and upgrade rights were yanked.
What to do instead: Lock in continuity protections in your contracts. Insist on clauses that if the vendor stops supporting a product or changes licensing models, you retain the right to continued support on previously agreed terms (or get a refund/credit).
For example, include language like: “If Vendor ceases to offer support for the licensed software during the term, Customer may extend support under the same terms or receive a prorated refund.”
While vendors may resist, pushing for this “change of control” or continuity clause is crucial – especially knowing Broadcom’s track record.
At a minimum, be prepared to escalate within the vendor’s organization (or, if necessary, through legal channels) to enforce the spirit of your original agreement.
Read about Broadcom VMware audits.
2. Treat Perpetual Licenses as High-Risk Assets
Mistake:
Thinking you can coast on perpetual VMware licenses without active support and still stay compliant and secure. Many customers assumed, “We own it outright, we can run it forever.”
Risk:
Broadcom is aggressively targeting customers who still rely on perpetual licenses. Cease-and-desist letters have been sent to organizations using VMware software with lapsed support, warning them to cease applying updates or fixes released after the expiration of their support.
In other words, if your support contract expired and you later install a patch (even a critical bug fix), Broadcom considers it unauthorized usage of intellectual property.
They have threatened audits and even demanded the removal of those updates – a move that could leave systems vulnerable or cause them to be rolled back.
The forced push to subscription means perpetual license holders face an ultimatum: start paying for a subscription or risk running unpatched, unsupported software (and potential legal action).
What to do instead:
Don’t let your VMware support lapse without a plan in place. If you’re on perpetual licenses, evaluate your options well before the support end date.
In the short term, budget for renewal, even if Broadcom’s policy makes it more expensive or bundled – it may be cheaper than the fallout from a compliance violation.
If Broadcom won’t renew your support at all (as happened to Tesco and others), consider third-party support providers who specialize in legacy software; they might at least help with workarounds and security patches while you transition.
And if you truly cannot get support, avoid applying non-security updates beyond your entitlement – it’s not ideal, but it dodges giving Broadcom ammunition to claim breach.
Ultimately, factor this into your strategy: you may need to migrate off or subscribe in the long run, but do so on your timeline (with proper negotiations), not in panicked reaction to a C&D letter.
3. Prepare for Audits – They’re Coming, Fast
Mistake:
Being caught flat-footed by a vendor audit. Many VMware customers haven’t experienced a formal license audit in years and assume they’ll get ample warning and a cooperative process if it happens.
Risk:
Broadcom’s VMware division has ramped up audits with almost military efficiency. Customers (even mid-sized ones) are receiving “Notice of Formal Review” letters out of the blue, conducted by third-party auditors like Connor Consulting.
These letters often demand that you acknowledge and begin the audit process within an astonishing 3 business days. The scope can be sweeping – requiring deployment data, access for remote tools, interviews with IT and finance teams, and more.
If you’re unprepared, a Broadcom audit can consume countless hours, stress your staff, and potentially uncover compliance gaps (real or arguable) that result in hefty penalty true-ups or forced purchases.
In one reported case, a customer was concerned that an unfavorable audit outcome could lead to budget cuts or layoffs to cover the costs.
What to do instead:
Have an audit response playbook ready now. Don’t wait for the audit notice to scramble. Form an internal compliance team (IT, asset management, procurement, and legal) that meets periodically to review your VMware license deployments vs. entitlements.
Keep a “license documentation vault” with proof of purchase, contracts, support agreements, and records of any communications or assurances from VMware/Broadcom – you’ll need these at your fingertips to rebut any claims.
If an audit letter arrives, respond promptly but strategically: acknowledge receipt and immediately engage your legal counsel or a licensing specialist to interface with the auditor. Request reasonable extensions if needed (that 3-day timeline can often be negotiated for more time to prepare data).
Insist on a clear scope – e.g., specific products or timeframe – to prevent a fishing expedition through your entire IT environment.
A well-prepared organization can turn an audit from a frantic fire drill into a manageable, routine project. It also sends Broadcom a message that you take compliance seriously and won’t be an easy mark for exaggerated claims.
4. Don’t Rely on Resellers to Shield You
Mistake:
Assuming that if you purchased VMware licenses through a reseller or integrator, they’ll sort out any vendor issues (or be liable for breaches of contract). Some customers believe that having a middleman provides extra protection or advocacy in case things go wrong.
Risk:
As Tesco’s case highlights, your reseller can end up caught in the crossfire – and so can you. Tesco bought VMware licenses and support via Computacenter, a major reseller, under specific terms (including fixed pricing and support duration). When Broadcom changed the rules, Tesco dragged Computacenter into the lawsuit as a co-defendant for failing to deliver on the promised terms.
This underscores two problems: (1) The reseller might not have the power to compel vendor behavior (Broadcom certainly didn’t bend just because a reseller asked), and (2) your contract with the reseller could be limited in recourse – if the vendor’s policy shifts make the original deal unfulfillable, you’re left holding the bag. In disputes, the reseller may point fingers at the vendor, and vice versa, while your issue remains unresolved.
What to do instead:
Ensure critical terms “pass through” from the vendor, or involve the vendor directly in your deal. When using resellers, scrutinize the paperwork to ensure it explicitly states that support will be provided under VMware’s standard terms through 2026, for example.
Does the reseller agreement contain any clause regarding what happens if the vendor alters its programs? Ideally, get the vendor to confirm key commitments in writing – this could be an addendum or a rider signed by VMware/Broadcom, or at least an official email/statement from the vendor acknowledging what you’re being sold.
Another tactic is to structure large transactions as a three-way agreement (between you, the reseller, and the vendor) or to use the vendor’s standard terms for the main license, with the reseller serving as a fulfillment agent.
The goal is to avoid any gap where the vendor can say, “Talk to the reseller,” and the reseller says, “Our contract limits our liability for vendor actions.” If a reseller balks at stronger pass-through warranties or vendor sign-off, escalate the issue to the vendor’s account management – make it clear that you need assurance or you’ll consider other sourcing channels.
In short, use resellers for convenience and pricing competition, not as a legal firewall. You ultimately need the vendor to be accountable for the promises made.
5. Anticipate Sticker Shock at Renewal Time
Mistake:
Budgeting for your VMware renewal or expansion with the assumption of “business as usual” pricing – maybe a few percent increase, or the same discount level as last time.
Risk:
Under Broadcom’s ownership, VMware’s pricing approach has undergone a radical change. Customers across Europe and beyond have reported astronomical price hikes (in some cases, five times, ten times, or even fifteen times higher costs) compared to their previous deals. How is that possible? Broadcom has eliminated many traditional discounts and flexibility in bundles.
They’ve rolled core VMware products into a handful of all-or-nothing subscription suites (e.g., VMware Cloud Foundation), often with features you might not need but must pay for.
If you had a highly discounted enterprise license agreement in the past, those are effectively gone – expect to be quoted at or near the list price for the new bundles.
For example, a company that was paying $1 million annually for support could suddenly face a $ 10 million+ quote for a similar scope under Broadcom’s model. If you’re unprepared, this kind of increase can blow up budgets and even threaten projects or jobs.
What to do instead:
Do your homework and press for pricing protections. Early in the renewal cycle, ask your VMware/Broadcom rep for a forecast or preliminary quote – get the bad news as early as possible. This allows you to prepare management for tough decisions and to explore options.
Next, negotiate hard on price and term: seek multi-year agreements that cap annual price increases (for instance, no more than 5% per year, or even a flat fee for a 3-year term).
If they’re pushing a giant bundle, challenge its components – see if you can remove or downgrade components that you won’t use (for example, why pay for Tanzu if you’re not using containers?).
Also consider negotiating a phased renewal or smaller scope: maybe you renew only part of your licenses now and hold off on the rest, or commit for one year at a time.
Broadcom’s sales team will push for all-or-nothing, but you can sometimes gain leverage by saying “we’ll renew X now, but we want flexibility to add or reduce later without penalty.”
Finally, always have a “Plan B” budget: know what it would cost to maintain the status quo (e.g., keep older versions running for a while, or use third-party support) so you have a baseline to compare against Broadcom’s quote.
The key is not to be blindsided – expect a fight on cost and come prepared with data and alternatives.
6. Recognize That Escalation Can Turn Legal
Mistake:
Dismissing the possibility of litigation – thinking “we’ll never actually sue our software vendor” or vice versa. Many IT leaders avoid contemplating legal action, assuming vendor relationships will stay polite or at worst, result in a negotiated settlement.
Risk:
The reality is that Broadcom’s post-acquisition tactics have already led multiple Fortune-500-scale customers into court battles.
Tesco’s lawsuit is one example; a major US telecom (AT&T) and German industrial giant (Siemens) also filed suits in 2024 over similar claims that Broadcom (VMware) reneged on support obligations. This indicates that if negotiations break down, Broadcom isn’t quick to back off – and customers are willing to take the fight to court, regardless of the stakes.
Litigation brings serious risks, including huge legal costs, management distraction, public exposure of your IT issues, and no guarantee of a favorable outcome. Meanwhile, your operations could suffer (imagine running mission-critical systems without vendor support while entangled in a lawsuit).
What to do instead:
Use the threat of legal action as a last resort, but only as a means of leverage. In negotiations, it’s fair to subtly remind the vendor of their contractual obligations and mention you’re aware of how others have enforced their rights.
Often, escalating the issue to your procurement and legal teams to send a firm letter can help resolve the matter without filing suit – it shows you’re serious about enforcement.
Ensure that you have documented every promise and term (hence the importance of a documentation vault), so that if needed, you can clearly demonstrate a breach of contract. If you do reach the point of considering a lawsuit, ensure your business leadership is fully on board – it will get messy.
Sometimes, simply filing a claim (as a signal) can prompt the vendor to return to the table and settle. However, your best outcome is to avoid reaching that stage: try executive-to-executive discussions, involve a mediator, or find a compromise (e.g., a temporary extension of support while talks continue).
Remember that for every public lawsuit, there are many disputes settled quietly – proactive negotiation can save you from the nuclear option of litigation.
Be prepared to defend your rights, but strive to resolve issues amicably before they escalate.
7. Negotiate Critical Protections into Your Contract
Mistake:
Accepting the vendor’s standard contract or renewal quote without adding clauses that safeguard your interests. Under time pressure or trusting the vendor, many organizations sign agreements that lack price protections, flexibility, and remedies in the event of problems.
Risk:
A one-sided contract leaves you exposed to Broadcom’s whims. This could mean unlimited price increases after the initial term, no ability to reduce licenses if you over-provisioned, and no recourse if Broadcom changes product packaging or discontinues something you’re using.
Essentially, you’re locking yourself into a future scenario with all the risk on you – exactly what Broadcom wants, given their strategy of monetizing the installed base. Once signed, it’s very hard to fix these issues until the next renewal (which could be years away).
What to do instead: Treat the contract like a negotiation battlefield – because it is.
Aim to include provisions such as:
- Uplift Caps: Limit any year-over-year maintenance or subscription price increase (e.g., “shall not exceed 5% annually”). This prevents surprise jumps.
- Renewal Flexibility (True-Downs): Secure the right to decrease your license or subscription count if your usage drops or you migrate away. For instance, “Customer may reduce license quantity by up to 15% at renewal without penalty.” This avoids paying for shelfware you no longer need.
- Bundling/Swap Rights: If Broadcom forces product bundling, try to get the right to swap components or choose a lesser edition later. Also, ask for price transparency – e.g., an itemized price list for each component, so you know what each part of the bundle effectively costs.
- Continued Support/Upgrade Guarantees: As covered in Lesson #1, reiterate in the renewal that you are entitled to support and updates for the full term. If they won’t extend support for older licenses, perhaps negotiate a discounted transition to the new subscription in writing, rather than paying full freight again.
- Liability and Performance: If possible, include a clause that allows you to terminate the contract for cause if the vendor fails to deliver support or patches as promised, and receive a refund. Even if largely symbolic, it puts teeth into the commitment.
Not all of these requests will be accepted, but put them on the table. Broadcom’s sales reps might claim “we never do that,” yet we’ve seen some customers succeed in getting, say, a cap on renewals or a partial true-down right.
Every concession you win now will pay off later. The goal is to inject balance into an otherwise lopsided contract.
Your procurement team and lawyers should work together here; even if Broadcom resists, they’ll often compromise if it means closing the deal. Remember, once you sign, you’re stuck until the next cycle, so fight for those protections upfront.
8. Avoid “All-In” Commitments – Maintain Options
Mistake:
Committing 100% to VMware/Broadcom’s vision without evaluating alternatives or leaving any wiggle room. This often occurs when a vendor presents a comprehensive ELA or subscription bundle, and you accept it to simplify things, without considering exit strategies.
Risk:
If Broadcom knows you’re completely dependent on them, you lose leverage. You could be overpaying for features you don’t use, and the vendor has little incentive to offer concessions if they believe you won’t ever leave.
Furthermore, if Broadcom’s quality of support drops or they impose even more restrictive terms later, an all-in customer has no immediate fallback. It’s a classic eggs-in-one-basket scenario.
For example, signing a three-year deal covering your entire environment with no termination clause ties your hands – even if service levels plummet or costs skyrocket, you’re stuck.
What to do instead:
Keep a Plan B (or Plan C) alive. Even if VMware is currently the backbone of your data center, explore and nurture alternatives proactively:
- Third-Party Support: Look into independent support providers for VMware. Some firms offer maintenance for VMware products at a lower cost, and while they can’t issue official patches, they can often help extend the life of stable systems with workarounds and helpdesk support. Knowing you have this safety net can be a bargaining chip (“if we can’t agree, we might just use third-party support for a year while we evaluate options”).
- Alternative Hypervisors/Platforms: Initiate pilot projects on other platforms, such as Microsoft Hyper-V, Nutanix AHV, KVM, or emerging cloud virtualization solutions. You don’t have to migrate everything overnight, but spin up a small environment on an alternative and get your team familiar with it. This way, if Broadcom’s terms become unbearable, you’re not starting from zero in figuring out how to switch some workloads to Azure Stack, AWS, or another hypervisor.
- Phased Cloud/Off-VMware Strategy: Identify non-critical applications that could be moved to public cloud or containers now, or during the next hardware refresh. Every workload you can take off VMware reduces your licensing footprint and increases your negotiating leverage for those that remain (plus saves cost in some cases). Broadcom loves to tout how sticky VMware is (and indeed, it’s hard to migrate en masse), but even moving, say, 10-20% of your estate to alternate platforms can give you breathing room.
- Contractual Outs: If you must sign a big subscription deal, try to insert an escape hatch: maybe a penalty-free termination option after one year if certain performance or value metrics aren’t met, or a clause allowing you to convert some licenses to a cloud service instead. It’s better to have some exit provisions than none.
In summary, never let Broadcom feel like they have you cornered. Options equal power. You may ultimately remain a VMware shop for valid reasons, but if you’ve vetted other avenues, you’ll negotiate with confidence that “we can walk away (at least partially) if we need to.” That mindset alone often leads to a better outcome.
9. Unify Your Global VMware Strategy
Mistake:
Managing VMware licensing and renewals in isolated silos – e.g., each region or business unit cuts its own deal with VMware/Broadcom, each on different timelines and terms.
Risk:
A fragmented approach means you’re not leveraging your full buying power, and you might have inconsistent contract terms that the vendor can exploit. Broadcom’s sales teams might give a slight concession to one division but not another, or slip onerous terms into one region’s agreement that later becomes a precedent.
Additionally, juggling multiple contracts makes it more challenging to keep track of compliance and renewal deadlines. You could also miss out on enterprise-wide discounts because spending is split across multiple pockets.
In the worst case, one part of your organization could get audited or penalized for a term that another part had negotiated away – simply because you didn’t negotiate as one entity.
What to do instead:
Adopt a “one customer” stance with VMware. Wherever feasible, consolidate disparate contracts into a global master agreement (or at least a coordinated set of co-terminating agreements).
This master deal should encompass your total license volume, all your geographies, and all your product needs in a single negotiation. The benefits include driving larger discounts based on aggregate spend, ensuring uniform protections (such as the clauses we discussed earlier) across the board, and simplifying administration with a single renewal date.
Also, include a clause that any new licenses or services you add in the future fall under the same master terms – preventing Broadcom from sneaking in new T&Cs if a local team buys something mid-term.
If you operate in jurisdictions that require local contracts, still negotiate at headquarters first, and then have local entities sign under that umbrella of terms.
Internally, align your procurement and IT teams on the VMware strategy: no side deals, no rogue purchases without central oversight.
Vendors will sometimes try to divide and conquer – don’t let Broadcom play your left hand against your right. By presenting a united front, you’ll be in a much stronger position to dictate terms rather than chase them.
10. Be Proactive: Plan Your Renewals and Audits Before They Plan You
Mistake:
Only engaging with VMware/Broadcom at the brink of a deadline – for instance, starting renewal talks a month before expiration, or waiting until an audit notice to think about license compliance.
Risk:
Last-minute negotiations almost always favor the vendor. Broadcom’s strategy includes using time pressure as leverage – e.g., sending a quote late in the quarter with “take it or leave it” pricing, knowing you have little time to react.
If you’re unprepared, you might accept bad terms or scramble to get budget approval under duress.
Similarly, if an audit catches you off guard, you could make unforced errors in responses or miss chances to resolve it quickly. A reactive stance results in higher costs, increased stress, and a higher likelihood of mistakes.
What to do instead:
Manage the timeline and information flow actively to ensure effective communication. Mark your calendar 6-12 months before any major VMware contract renewal to begin internal prep.
That means: review your current entitlements and usage (are you using all you pay for? any license shortfalls?); survey your stakeholders for upcoming changes (are we consolidating data centers, launching new projects, facing budget cuts?); and revisit what was hard in the last negotiation to improve this time.
Develop a negotiation game plan well in advance, including target outcomes, fallback positions, and a walk-away scenario if necessary.
Engage Broadcom early: let them know you expect a proposal by a certain date, and that you have other options on the table. When you set the pace, you’re less likely to be ambushed by a ticking clock.
For audits, keep the organization audit-ready as noted in Lesson #3. Conduct internal license audits annually (or utilize software asset management tools) to ensure you are aware of your compliance posture before the vendor does.
Create an “audit response kit” that includes roles and responsibilities, communication templates, and a list of external advisors to call if needed. It’s like a fire drill – practice it so that when the real thing happens, everyone knows their part.
Finally, foster an ongoing relationship with VMware/Broadcom account reps before issues escalate. Regular touchpoints can sometimes provide you with advance notice of program changes or upcoming audits.
Just remember, while you keep things cordial, never let your guard down when it comes to planning. The mantra is: Hope for the best, plan for the worst. By being proactive and prepared, you’ll turn what could be a reactive scramble into a calculated process – and you’ll strike better deals as a result.
Quick Checklist for VMware Customers Facing Renewals or Audits
- Inventory & Entitlements: Compile a detailed list of all your VMware products, including license keys, quantities, and support contract end dates. Know exactly what you own and use.
- Contract Review: Pull out your VMware contracts (including any order forms or reseller agreements). Note any clauses about support duration, renewal options, price caps, or audit rights. Identify gaps where you have no protection (e.g., no cap on price increases).
- Budget Impact Analysis: Forecast your costs if faced with a worst-case Broadcom quote (assuming the list price for everything and minimal discounts). Prepare management for this possibility with dollar figures and impacts.
- Alternatives Research: Identify at least one viable alternative in each category – e.g., a backup hypervisor for virtualization, a third-party support vendor, or a migration plan for a subset of workloads. You don’t need to commit to them now, but have the info ready.
- Negotiation “Must-Haves”: Decide on your non-negotiables before talking to the vendor. Is it a price cap? The ability to drop licenses? An extended support period? Prioritize these and get buy-in from leadership on them.
- Audit Game Plan: Assemble an internal team for license compliance. Have a response protocol ready (who contacts the auditors, who gathers data, who reviews before anything is sent out). If you have recent internal compliance reports, even better – use them.
- Executive Alignment: Brief your CIO/CTO, CFO, and legal counsel about the potential rough road ahead. Ensure they understand the high stakes (e.g., “our entire retail operation could be affected if this goes south”) so you have support for tough negotiations or escalations.
- Timeline Check: Work backward from your support renewal deadline or enterprise agreement expiry. Set internal deadlines: e.g., “By T-6 months: complete usage analysis; T-4 months: engage Broadcom with initial requirements; T-3 months: have draft contract terms; etc.” Don’t let the clock be your enemy.
- Documentation & Evidence: Maintain a repository of all relevant communications (emails where VMware reps promised something, quotes received, etc.). In a dispute, these are gold. Also, document any vendor behavior that concerns you – if you ever need to make a case to regulators or the court, contemporaneous notes help.
- Professional Help if Needed: Don’t hesitate to consult licensing experts or legal advisors who specialize in IT contracts. Broadcom’s tactics are unique, but many organizations face similar challenges – learn from community knowledge. A small investment in expert advice now can save multimillions or lawsuits later.
Closing Thoughts: The Broadcom vs. Tesco battle is a stark reminder that passivity in vendor relationships can be costly.
VMware customers worldwide are now in a new era where contract terms can change overnight and hardball tactics are the norm. But you’re not powerless – far from it.
By learning from these 10 lessons, you can negotiate from a position of strength, mitigate risks before they explode, and ensure your VMware strategy remains under your control.
The overarching theme is proactivity over reactivity: it’s far better to hash out tough terms at the negotiating table today than to hash them out in a courtroom tomorrow. Broadcom may be betting on customer inertia, but with the right approach, you can beat them at their own game – keeping your infrastructure running smoothly and your IT budgets in check, without resorting to last-resort litigation.
In short, get ahead of the issues, and you won’t be forced to play defense when Broadcom comes knocking. Proactive negotiation beats reactive litigation every time.
Read about our Broadcom Audit Defense Service.
