The Legal Dispute between AT&T and Broadcom: Lessons for CIOs on Managing On-Premises Software Licenses

Introduction

The recent legal conflict between AT&T and Broadcom over VMware license support sheds light on crucial challenges for CIOs, CTOs, IT managers, and software asset managers. This case underscores the importance of proactive software license agreement management, particularly during ownership changes or vendor business model modifications.

Background of the Dispute

In 2023, Broadcom acquired VMware for $69 billion, leading to a restructuring of VMware’s offerings, including the shift from perpetual licenses to subscriptions. AT&T, heavily utilizing VMware solutions with approximately 75,000 virtual machines on 8,600 servers, filed a lawsuit in August 2024. The company alleged that Broadcom refused to renew existing support contracts, instead requiring the purchase of costly new subscriptions. This litigation was resolved by a confidential settlement in November 2024.

Implications for Companies Using Second-Hand On-Premises Software Licenses

 1. Increased Contractual Vigilance: Companies must carefully review renewal and support clauses in their license agreements, especially when purchasing second-hand licenses.

 2. Anticipation of Business Model Changes: Vendors may change their offerings from perpetual licenses to subscriptions. Companies should anticipate these changes to avoid unexpected cost increases.

 3. Diversification Strategies: To mitigate risks associated with dependency on a single vendor, it is advisable to explore alternative or open-source solutions like Nutanix or Proxmox, although these migrations may present technical challenges.

Recommendations for Effective Software Asset Management

 • Regular License Audits: Maintain an up-to-date inventory of licenses and contracts to identify potential risks related to support and renewals.

 • Proactive Contract Negotiation: Include specific clauses ensuring the continuation of support, even in the event of vendor ownership changes.

 • Market Monitoring: Stay informed about acquisitions and strategic changes by vendors to anticipate possible impacts on current contracts.

Conclusion

The AT&T vs. Broadcom case serves as a reminder to IT leaders of the importance of proactive and informed software license management. Paying close attention to contractual details and employing diversification strategies can help mitigate risks associated with vendor market changes.