- Broadcom said it’s in the right in its dispute with AT&T.
- The public safety threat could be real, but may not materialize, according to consultants.
- Case could have implications for other SaaS providers.
Broadcom has a big, blue problem on its hands. Plenty of VMware customers are unhappy with the changes Broadcom has made since acquiring the company last year, but AT&T has taken its beef to court.
AT&T’s contract with VMware ended September 8, but earlier this year the carrier exercised an option to renew the contract. In a lawsuit filed in the Supreme Court of New York, though, AT&T claimed Broadcom is refusing to honor AT&T’s renewal.
And that, the operator claimed, is a huge problem given its large cohort of government and public safety customers.
“They have a strong point,” Nadine Manjaro, a senior account director specializing in telecom at consultant Virtusa, told Fierce. “There is an inherent security risk in that if a security issue comes up, then Broadcom would need to develop and deploy a patch or a fix. If AT&T is no longer under contract, then they would not get the fix as a part of continuing software updates. Therefore, they would be at risk for security breaches.”
Playing defense
AT&T claimed in the lawsuit that Broadcom is “threatening to withhold essential support services for previously purchased VMware perpetually licensed software unless AT&T capitulates to Broadcom’s demands that AT&T purchase hundreds of millions of dollars’ worth of bundled subscription software and services, which AT&T does not want.”
But a Broadcom spokesperson told Fierce the changes made to VMware pricing are part of a years-long shift to a software subscription model that was initiated even before its acquisition of the company. The chip giant predicted AT&T will not be successful in its claim against the company.
"Broadcom strongly disagrees with the allegations and is confident we will prevail in the legal process,” the spokesperson said. “Our focus will continue to be providing our customers choice and flexibility while helping them address their most complex technology challenges.”
However, the operator contended Broadcom’s refusal to support its software could negatively impact AT&T’s customers, including those in government and public safety. AT&T said VMware currently supports “tens of thousands of virtual operating systems managed by AT&T that are dedicated to various national security and public safety agencies within the federal government as well as the Office of the President.”
Fallout
Patrick Lopez, founder and CEO of Core Analysis, predicted that Broadcom would step up to support AT&T if the situation required it.
“I doubt that, irrespective of the commercial situation, VMware would refuse support to AT&T in case of outage of a critical component,” he said.
Lopez added AT&T and VMware may part ways if Broadcom does not back down. “In my opinion, AT&T will probably not enter into a new agreement unless Broadcom walks back the new obligations to honor a pre-approved contract with VMware,” he said.
But if AT&T does not continue to work with VMware, the operator may need to find a new way to support many virtualized parts of its network.
Indeed, in its lawsuit, AT&T called out customer service as an area in which VMware has been an important partner, noting that the latter’s solutions support “tens of thousands of agents at various AT&T customer contact centers.”.
Customer support is paramount for AT&T as the carrier works to maximize the value of its converged fiber and 5G offer. This week at the Goldman Sachs Communacopia and Technology Conference, AT&T CEO John Stankey noted the role customer service plays in convergence.
“When we do it right, the customer has an easier experience for their support, all the things that they have to do: payment, their perceived value when they have both products," Stankey said. "We’re just getting into the early innings of how the products work together."
So, it's not exactly a good time for customer contact centers to go down, but AT&T said that’s exactly what could happen if Broadcom stops supporting the VMware software.
“Without the support services, it is not a question of if but when the software will crash due to a software error, security issue, or lack of upgrades and maintenance," AT&T’s lawyers argued. "When that happens, these 1,000,000 daily customers will find it significantly more difficult to resolve issues with their accounts because thousands of fewer customer contact agents will be available to assist them."
Unhappy campers
AT&T is one of many VMware customers bristling at the price hikes Broadcom has introduced since taking over the hypervisor pioneer. A number of hardware, software and public cloud vendors are courting disaffected VMware customers, and a number of channel partners have lost the rights to sell VMware.
“Software companies are moving to as-a-service models, but they can’t use it to force companies to purchase services or solutions that they do not need, which is also part of AT&T’s argument,” Manjaro concluded, though she acknowledged lumping things into an as-a-service offering is common practice these days. "The implications will also impact other SaaS companies who traditionally had a hardware model and now switched to an as-a-service model.”