40,000 server workloads are leaving VMware. Tesco blames Broadcom's 'abusive' licensing.

Tesco is ripping 40,000 server workloads off VMware. In a late-May court filing, the UK’s biggest grocer says Broadcom’s post-acquisition licensing was “abusive” and is suing for more than £100 million. It’s the loudest signal yet that the slow-motion VMware breakup is turning into a stampede.

This matters well beyond one supermarket’s data centers. Virtualization is the invisible floor under almost every app you use, and for two decades VMware owned that floor. When the largest retailer in Britain decides it would rather absorb a multi-year migration than keep paying Broadcom, the entire market for hypervisors, backup tools, and private-cloud software shifts under everyone’s feet. The open-source alternatives that VMware used to wave away are suddenly the safe choice.

What happened?

Tesco bought perpetual VMware licenses in January 2021: vSphere Foundation, Cloud Foundation, and a Tanzu subscription, with support running through 2026 and an option to extend four more years. A perpetual license is supposed to be yours forever. That was the deal.

Broadcom closed its $69 billion VMware acquisition in November 2023 and rewrote the rules. Tesco’s filing says Broadcom refused to honor the agreement and instead pushed “excessive and inflated prices for virtualization software for which Tesco has already paid,” while blocking it from buying support without also purchasing “duplicative subscription-based licenses for those same Software products,” according to The Register’s reporting on the filing. Broadcom stopped supporting Tesco’s VMware estate in January 2026, forcing the company onto third-party support mid-migration.

Tesco’s own words are blunt. “Faced with Broadcom’s abusive conduct, and given the criticality of virtualization and mainframe software and services to its business, Tesco has been forced to incur material costs to procure alternative solutions with reduced functionality, and to migrate to that software in a manner, and on a timeframe, that creates very significant risks to its business,” the filing reads, per The Register. The retailer is suing Broadcom, VMware, and reseller Computacenter for at least £100 million each. A UK High Court hearing is set for somewhere between November 2027 and February 2028.

Why Broadcom’s licensing broke trust

The Tesco numbers aren’t an outlier. They’re the high end of a pattern that’s been building since the acquisition closed.

Broadcom scrapped VMware’s perpetual licenses and its 168-product catalog, folding everything into a handful of subscription bundles priced per core with steep minimums. The bills that followed shocked customers. One UK university saw a renewal jump from £40,000 to £500,000, and AT&T reportedly faced an increase from $30 million to over $100 million, The Register noted. Surveyed price hikes have run anywhere from 800% to 1,500% against the old perpetual-plus-support model.

The money is only half of it. The deeper wound is the broken promise. Tesco paid once for licenses it was told it would keep, then watched the new owner treat that contract as a starting point for a renegotiation it never asked for. A Rimini Street survey found 98% of VMware customers are now actively exploring other options. That’s not a pricing complaint. That’s a trust collapse.

Broadcom’s strategy was never really a secret. CEO Hock Tan runs a well-known playbook: buy a company with sticky enterprise software, cut everything that isn’t the most profitable few thousand accounts, and raise prices on the customers who can’t easily leave. It works on a spreadsheet. It also assumes the locked-in customers stay locked in. Tesco’s lawsuit is the test of that assumption, and it’s an expensive one to lose in public, because every other large VMware shop is now watching to see whether a £100 million claim sticks.

Where the migrants go: KVM, Proxmox, OpenStack, Nutanix

So where does 40,000 workloads’ worth of compute land? Tesco hasn’t named its target platform, and its filing flags a real snag: the new platform doesn’t work with its existing Veeam and Zerto backup tools, which is a documented risk in the migration. But the industry’s escape routes are well worn by now.

Most of them lead back to open source. KVM, the hypervisor baked into the Linux kernel, sits under three of the four most popular destinations. The catch is what you build on top of it.

The evaluation data tells the story. Gartner reported that Proxmox VE evaluations rose 340% year over year, while the Xen-based XCP-ng grew 180%, according to migration trackers. Gartner expects 35% of VMware workloads to move to other platforms by 2028. For a story about a single grocer’s lawsuit, that’s the real headline: the alternatives stopped being hobby projects.

Each route has a personality. Proxmox is the one that surprised people, a Debian-based hypervisor bundle that used to live in homelabs and now runs production fleets, with a clustering and live-migration feature set that covers most of what mid-size shops actually used in vSphere. OpenStack is the heavyweight, the choice for telcos and service providers that want a full private cloud, at the cost of needing a team that genuinely knows how to operate it. Nutanix AHV is the path for shops that want a polished, VMware-like console and will pay a commercial vendor to get it, trading one license bill for a smaller one. The honest truth is that none of them is a drop-in replacement. The work isn’t swapping the hypervisor. It’s everything around it: backup, networking, monitoring, and the dozens of scripts your team wrote against VMware’s APIs over a decade.

HPE’s free-year play

Hewlett Packard Enterprise saw the refugees coming and set out a welcome mat. At HPE Discover in Las Vegas this month, the company offered new customers up to a free year of its HPE Morpheus VM Essentials hypervisor, plus HPE Zerto disaster-recovery licenses for $1 to cover the migration window, The Register reported.

The pitch targets the single biggest reason companies stall. “What this does is it helps mitigate the double-bubble cost problem that customers see as they are looking to migrate from one platform to another,” said HPE EVP and CTO Fidelma Russo. Running two platforms at once, the old one you can’t quit yet and the new one you’re building, is exactly the cost trap that keeps firms paying Broadcom. HPE is also handing 600 partners free VM Essentials licenses for three years if they hit a Private Cloud competency by year-end. It’s the same poaching logic VMware itself used in the 2000s, run in reverse.

What this means for you

You don’t run a data center? You still feel this. The companies behind your bank, your grocery delivery, and your favorite app are quietly re-platforming their entire backend, and that reshapes which infrastructure tools get funded, hardened, and hired for. KVM, Proxmox, and OpenStack are about to get a decade of enterprise investment they were never going to see while VMware owned the floor. That’s good for open infrastructure the same way Cloudflare’s acquisition of the VoidZero team was good for open web tooling, and the same way Microsoft shipping Rust-based core commands signals open projects winning real production trust.

A word of caution, though. The exodus is real but it isn’t a rout. Survey data shows only 4% of VMware shops have fully replaced their infrastructure, even as 86% are actively cutting their VMware footprint, heise reported. NSX networking and Tanzu lock-in make a clean break brutally hard, which is why migration projects, like Tesco’s plan to be out by the end of 2027 “at exceptional pace,” carry such risk. If you’re weighing your own exit, pilot KVM or Proxmox on a non-critical cluster first and watch how your backup stack behaves. Tesco’s biggest headache wasn’t choosing a hypervisor. It was everything bolted to the old one.