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 highlights crucial challenges for CIOs, CTOs, IT managers, and software asset managers. This case underscores the importance of proactive management of software license contracts, especially during changes in ownership or modifications in vendors' business models.

Context of the Dispute

In 2023, Broadcom acquired VMware for $69 billion, leading to a restructuring of VMware's offerings, including a shift from perpetual licenses to subscriptions. AT&T, which heavily uses VMware solutions with approximately 75,000 virtual machines across 8,600 servers, filed a lawsuit in August 2024. The company alleged that Broadcom refused to renew existing support contracts, instead demanding the purchase of new, expensive subscriptions. This dispute was resolved through 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 contracts, especially when purchasing second-hand licenses.

2. Anticipating Changes in Business Models**: Vendors may alter their offerings, shifting from perpetual licenses to subscriptions. Companies should anticipate these changes to avoid unexpected cost increases.

3. Diversification Strategies**: To mitigate risks associated with dependence on a single vendor, it is advisable to explore alternative or open-source solutions, such as 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 continued support, even in the event of a change in vendor ownership.

- Market Monitoring**: Stay informed about acquisitions and strategic changes among vendors to anticipate potential impacts on existing contracts.

Conclusion

The AT&T vs. Broadcom case serves as a reminder to IT managers of the importance of proactive and informed management of software licenses. Paying particular attention to contractual details and adopting a diversification strategy can help mitigate risks associated with market changes among vendors.