The IT acquisition that puts Canberra in a tough spot

Many of Canberra’s IT teams are in a tough spot.

It’s not cyber attackers, hacktivists or foreign belligerents turning the screws, but a long-time and trusted IT vendor.

In 2023, Broadcom acquired the IT infrastructure firm VMware. Without getting too into the weeds, VMware provides software that allows a computer to share its hardware resources across multiple, digitally separated environments. It is not only used across major enterprises, but many — if not most — federal government departments have some element of VMware in their environment.

What’s important to note about this kind of technology is that a) it is critical to maintaining IT operations, and b) migrating away from it once it has been embedded has traditionally been complex, costly and convoluted.

So, what did Broadcom do after it acquired this central component of IT environments across the country?

According to the European Cloud Competition Observatory (ECCO) and CISPE — a trade association of 37 cloud providers across Europe — “CISPE members reported price hikes to the Commission ranging from 800% to 1500%. Prices have often increased tenfold.”

Further, a press release accompanying one of its reports states in no uncertain terms “Broadcom’s wide-ranging and brutal imposition of unfair contract terms for cloud infrastructure service providers continue unabated.”

Highlighting the potential for customer impact, UK supermarket giant Tesco sued Broadcom for breach of contract due to its changes to VMware licensing and support.

While these reports are from the other side of the world, a similar scenario is reportedly playing out in Australia. Price hikes are one part of the issue. Service degradation concern is another. In just one example, a local civil and construction firm, Golding, migrated from VMware after it abruptly ended its partnership with AWS. The changes left IT leaders at the company “pretty infuriated”.

This is just one example, but it shows how services and integrations upon which organisations previously relied to run their businesses risk being degraded or shut down — all while being charged more. VMware appears to be reducing the number of supported partners, enforcing stricter licensing compliance, and doubling down on forced bundling of products.

Whether in the energy, resources, entertainment, education or public sectors, Broadcom’s forced bundling of products — which some customers don’t want or need — and the higher prices that the bundling brings along with it, are fuelling reports of unhappy customers across the country.

These are not isolated cases. Rather, they are consistent with Broadcom’s playbook; one which it followed in the wake of previous acquisitions.

Tracy Woo, a senior analyst at Forrester, wrote ahead of the latest acquisition: “Following the purchases of CA and Symantec, Broadcom raised prices, decreased support and stopped investing in innovation.”

“VMware customers would be wise to have an exit plan,” she added.

Exit planning is, of course, something wise customers always think about. It is common for IT contracts to run on three-year terms. It stands to reason then that some of Canberra’s agencies will have their agreements with Broadcom coming up for renewal in the next 12–18 months. The turmoil since the Broadcom acquisition has raised the stakes considerably.

Those looking to end their relationship and migrate to an alternative need to start planning as soon as possible. Migrating away from a core infrastructure component like virtualisation technology is nowhere near as complicated as it used to be, but it does require some planning and foresight.

A fundamental question is, do you replace a like-for-like or do you use this opportunity to transform your infrastructure for the future?

Public sector agencies could use the opportunity to reimagine their infrastructure for an AI age. One defined by containers, cloud-native application development, and next-generation workloads. It is a shift that will need to happen eventually, so some might choose to take the lemons Broadcom has given them and use the migration window afforded to them to make lemonade.

Whichever path is chosen, those conversations need to start soon. Although the migration process has been greatly simplified in recent years, it does still take time. Critically, for such a project to extricate an agency from Broadcom, applications and workloads need to be ready to switch over to the new provider as soon as the current contract expires — otherwise they are likely to find themselves on the hook for another three years.

Top image credit: iStock.com/JHVEPhoto