Tesco’s £100M lawsuit underscores the wider-reaching implications of VMware licensing changes
Tesco has filed a £100 million lawsuit against Broadcom over VMware licensing changes. The case has raised significant concerns across the IT industry. As a major UK retailer warns that these licensing disputes could potentially disrupt food supply chains, businesses across sectors are rightfully concerned about their own VMware deployments and the implications of Broadcom’s acquisition.
At Northdoor, we’ve been closely monitoring the situation since Broadcom’s $61 billion acquisition of VMware was completed in November 2023. The subsequent VMware licensing changes have created significant challenges for many of our clients, and the Tesco case brings these issues into sharp focus. In this blog, we explore what these changes mean for your business and offer expert analysis and strategic recommendations to help you respond.
Key VMware licensing changes after Broadcom acquisition
The VMware licensing changes implemented following Broadcom’s acquisition represent a fundamental shift in how organisations access and pay for virtualisation technology. Previously, VMware offered both perpetual and subscription licensing options, giving customers flexibility in how they deployed and paid for solutions.
Under Broadcom’s direction, VMware has dramatically transformed its licensing model:
- Shifted from perpetual licenses to subscription-only models
- Consolidated 168 products into just 4 main bundles
- Moved from socket-based to per-core licensing
- Implemented minimum requirements of 72 cores per order
- Added a 20% penalty for late renewals.
Cost impact of VMware subscription licensing
The perpetual vs. subscription VMware licensing debate has intensified as organisations with existing perpetual licenses report being pressured to move to subscription models, often with substantial price increases. As reported by TechRadar Pro, European customers have reported cost increases ranging from 400% to 1,500% in some cases.
Tesco vs. Broadcom: VMware Licensing Lawsuit
Tesco’s legal action against both Broadcom and reseller Computacenter highlights the serious business implications of these licensing changes. According to court documents, Tesco purchased perpetual licenses for VMware’s vSphere Foundation and Cloud Foundation software in 2021, with support services contracted through 2026 and an option to extend for four additional years.
The retailer claims Broadcom has refused to honour these agreements, instead insisting on new subscription-based licenses at what Tesco describes as “excessive and inflated prices for virtualisation software for which Tesco has already paid.” According to Computing, Tesco alleges it’s being denied security patches and upgrades to which it’s entitled under the original agreement.
Tesco runs around 40,000 server workloads on VMware, powering tills, logistics, and supply chain systems. The retailer warns the dispute could impact food supply in the UK and Ireland. This demonstrates how VMware licensing changes can affect not only IT operations but also core business functions and even critical infrastructure.
Broader industry implications and other VMware licensing cases
The cost impact of the Broadcom acquisition extends far beyond Tesco. This case follows similar legal challenges from other enterprise giants:
- AT&T reported a 1,050% cost increase and filed a lawsuit that was later settled out of court
- Siemens is engaged in an ongoing legal battle over licensing compliance and audit requirements
These cases highlight the need for organisations of all sizes to carefully evaluate their VMware deployments and licensing agreements. Effective VMware license key management has become more critical than ever, as companies need to understand exactly what they’re entitled to under existing agreements and what options they have moving forward.
Expert insight: AJ Thompson on VMware licensing risks
This is more than a contractual dispute. It challenges how enterprise software is licensed and supported. Share on X“The Tesco VMware lawsuit represents a critical moment for enterprise IT leaders,” says AJ Thompson, CCO at Northdoor. “This is more than a contractual dispute—it challenges how enterprise software is licensed and supported. Any organisation relying on VMware needs to assess its exposure and plan a strategic response.”
“At Northdoor, we’re helping clients by auditing current licences, reviewing contractual positions, and developing both short- and long-term strategies. For some, this means negotiating new terms with Broadcom; for others, it may involve exploring alternative virtualisation platforms as part of a multi-vendor approach.”
“Broadcom’s shift to subscription licensing creates immediate challenges and long-term questions around vendor dependency and IT flexibility. While subscription models can bring benefits such as regular updates, the sharp price rises and restricted support raise serious concerns about value and business continuity.”
Strategic recommendations for IT Leaders
Organisations using VMware technologies should consider the following steps:
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Audit current licences and usage
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Check contracts for vulnerabilities
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Map critical dependencies on VMware
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Assess alternative virtualisation platforms
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Strengthen vendor relationships
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Adopt a multi-vendor strategy
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Explore expert guidance on VMware licensing challenges. Learn more
Looking ahead: the future of VMware and enterprise virtualisation
The shift from perpetual to subscription VMware licensing reflects a broader industry trend toward subscription-based software models. Broadcom’s rapid changes, however, have created challenges for organisations built around VMware’s previous licensing approach.
As the Tesco case progresses through the UK courts, it may set important precedents on whether vendors can change licence terms for existing customers. The outcome could influence not just VMware licensing but enterprise software licensing more broadly.
At Northdoor, we remain committed to helping clients navigate these challenges. Whether you’re assessing VMware licensing changes or reviewing your overall virtualisation strategy, our experts provide guidance to make informed decisions and protect business continuity.