Key facts
- Tesco is migrating 40,000 server workloads from VMware.
- Tesco is suing Broadcom and VMware for damages, citing "manifestly unfair and excessive" price hikes.
- One offer from Broadcom for VMware Cloud Foundation and support was 175% more expensive than Tesco's perceived fair value.
- Tesco is experiencing data security migration challenges due to software incompatibility with Veeam and Zerto.
- The legal case is scheduled for court between November 2027 and February 2028.
Tesco, a major retail conglomerate, is undertaking a significant migration of 40,000 server workloads away from VMware products following a contentious pricing dispute with Broadcom, which recently acquired VMware. The company has accused Broadcom of imposing "manifestly unfair and excessive" price hikes for VMware and mainframe software and support services.
Tesco initially sought at least £100 million (approximately $133.6 million) in damages from Broadcom, VMware, and reseller Computacenter. In its filings, Tesco revealed it rejected at least four offers from Broadcom, with one proposal for a year of VMware Cloud Foundation 9.0 and support services costing $23.5 million (about £17.6 million). Tesco stated this represented a price increase of around 175% for VMware products and 350% for mainframe offerings compared to what it considered fair value.
Broadcom has denied the allegations of unfair pricing in its defense. The company argued that it should not be liable for damages related to Tesco's difficulties in finding alternative solutions before its support expired, especially since Tesco has since secured replacement products. The legal battle is anticipated to reach court between November 1, 2027, and February 25, 2028.
This dispute mirrors broader dissatisfaction among VMware customers globally since Broadcom's acquisition. Many users, heavily reliant on VMware, have faced challenges migrating workloads due to cost, time constraints, support issues, and compatibility problems with new software. Rival virtualization providers like Hewlett Packard Enterprise and Nutanix are actively seeking to attract these disgruntled customers. Meanwhile, Broadcom has reported financial success with its VMware strategy, particularly among large enterprises, and has navigated other legal disputes, including a settled case with AT&T and an ongoing one with Siemens.