Virtualization

Telefónica Germany offloads VMware support to Spinnaker due to high renewal costs

'Our offer from Broadcom was five times higher than we expected'

The German arm of telecoms biz Telefónica has shifted support for its VMware installed base to Spinnaker after Broadcom quoted it a renewal figure five times the size of what it was previously paying.

Telefónica Germany made the switch to Spinnaker at the start of the year when its existing support with VMware, now a subsidiary of silicon-and-software giant Broadcom, expired.

The telco was running vSphere, largely on perpetual licenses it had purchased previously, with regularly renewed agreements to cover maintenance and other support.

However, as Reg readers will be aware, Broadcom decided to end perpetual licenses after it bought VMware, and has sought to move customers to subscription packages covering both software and support.

These bundle together multiple pieces of software, typified by VMware Cloud Foundation (VCF), which includes vSphere, vSAN, NSX and other components to provide a complete private cloud platform. The result is often a far higher price tag than customers paid before.

"Our offer from Broadcom was five times higher than we expected," Holger Berndt, Professional Lead for Software Asset Management at Telefónica told The Register.

"We told them that we don't use all parts of the VCF. They offered us the whole solution, and it was very good, and it's a lot of things that we don't need, that was the main problem," he added.

Telefónica currently uses only vSphere 8.0 and 7.0, so the full-blown VCF suite is considered somewhat overkill for its requirements.

"They told us we are a valued customer, then they offered us a price it was, let me think, five times higher than expected. And that was not acceptable, because we had paid approximately €5 to €8 million over three years already, and so you can figure out what they offer[ed] us," Berndt said.

It seems Broadcom was not prepared to be flexible on licensing in order to keep the telco, one of Germany's largest, as a customer. VMware previously indicated it believes users will come to realize the value of what's on offer, if they would just use more of everything that is included in the subscription package.

That price rise came as a shock, especially to Telefónica's management, but the timing was good because Broadcom approached the firm about licensing in August, according to Berndt, and so Telefónica knew it had until the end of the year when its maintenance would expire to do something about it.

At this stage, Telefónica had already been using Spinnaker for a couple of years to provide support for the Oracle software it operates, so the biz was an obvious choice, although Berndt says Telefónica did its due diligence and compared what it was offering against rivals.

The process threw up one minor hurdle: Telefónica was running some subscription-based software, for which it acquired a secondhand perpetual licence so that it didn't have to prolong any contracts with VMware.

Berndt claims his company is actually saving money from moving support to Spinnaker. It's clear that he is less than happy with Broadcom over this whole matter.

"We never thought to go away from VMware until Broadcom [came] up with this new solution, and we are not angry with Broadcom, but it's not acceptable. It's not acceptable what they're doing at the moment, that they tell you that you are the one of the valuable customers, and then they do this," he said.

Now, Telefónica has an exit program, but it will take time to follow this through, as the department is still in the process of preparing a request for quotation (RFQ) to go out to potential bidders.

"The earliest we move away from VMware will be the end of '26 something like that," Berndt told us. "It's a lot of planning, it's a lot of calculating, budget wise, and so on, so it was not the easiest thing for the IT department to plan this, and until now, we were quite happy with it [VMware]. We have a lot of VMs in production that are working everything."

That number of virtual machines currently stands at 8752, running across 660 host servers.

Telefónica isn't the only company going down this path; Dutch government agency the Rijkswaterstaat (RWS) recently won a case where the court ruled VMware must continue to provide it with support while it manages a migration to an alternative platform after it rejected the new subscription licensing scheme and its increased costs.

Hosting firm Rackspace also decided to move some of its back-office workloads off VMware and onto a platform called Private Cloud Director earlier this year after it too balked at the effect Broadcom's licensing changes had on its bills.

Some days ago we asked Broadcom for its reaction to Telefónica's decision, but have yet to receive a response. ®