Dell kills sweetheart distribution deal with Broadcom's VMware

No longer willing to be a friend with benefits – perhaps thanks to Big B killing OEM licenses?

Updated Dell has terminated its distribution deal for VMware products.

A regulatory filing in the US today reveals Dell has written to Broadcom terminating a "commercial framework agreement" forged in November 2021 between Dell and VMware, which is now owned by Broadcom.

That agreement was struck on the same day Dell and VMware parted ways – back when Big Mike's Bespoke Computer Barn decided to pay down some debt by making Virtzilla a standalone company.

In those far-off days, Dell was still all-in on VMware, which is why their agreement sought to "formalize the commercial relationship between the parties in order to maintain the mutual strategic advantage between Dell and VMware [and] to affirm the parties' interest in continuing to collaborate on solutions and a go-to-market (GTM) strategy."

The Reg understands the deal meant Dell enjoyed a uniquely close collaboration with VMware on products like the VxRail hyperconverged appliance, and perhaps also enjoyed a price advantage compared to other resellers of Virtzilla’s wares.

The agreement added: "With respect to certain technologies and GTM activities, the parties' respective products and services work better together to create advantages and value for customers."

Nothing has changed that would make such collaboration less beneficial for customers. Nothing, that is, other than Broadcom's decision to stop allowing manufacturers like Dell to resell licenses for VMware's products – a consequence of the chip giant's plan to stop selling perpetual VMware licenses and instead insist on software subscriptions that bundle many products.

That decision has not been well-received – neither by OEMs, who lose a line of revenue, nor by customers who quite liked buying bundled licenses with hardware because doing so is often more efficient than buying them separately.

Dell's filing cites the original agreement's allowance for its VMware distribution deal to be dissolved after a "change of control" at either party. Broadcom's acquisition of VMware certainly represents such an event.

Whether this also represents Dell losing interest in VMware is harder to say. Despite Broadcom's swingeing changes at VMware in its first few weeks as the virtualization giant's owner, the vStack remains very competitive. It would be a huge call for Dell to throw its support behind a rival.

The Register's virtualization desk fancies this filing is therefore a legal nicety that terminates an agreement that is no longer appropriate seeing it was struck to meet the needs of a particular moment in 2021 – but was perhaps timed to make a point about Broadcom's change to OEM licenses.

We've asked Dell to explain its decision and will update this story if we receive a substantive reply. ®

Update at 0015 UTC, January 31

A Dell spokesperson sent the following statement: "Broadcom is an important and valued partner for Dell Technologies. We will continue to evolve our relationship with Broadcom to deliver value to our business and our customers and partners."