Microsoft has sought to discredit claims that its two biggest public cloud rivals – Amazon and Google – are being competitively disadvantaged by its controversial licensing tactics, in a submission to the UK competition watchdog’s cloud market probe.
The Competition and Markets Authority (CMA) published summary details on 16 September 2024 from separate evidence-gathering sessions it conducted with Amazon Web Services (AWS), Google and Microsoft back in July to inform the findings of its anti-trust probe into the UK cloud infrastructure services market.
All three submissions respectively contain feedback from the public cloud giants about the areas the CMA has focused its investigation into the prevalence of anti-competitive behaviour in the UK cloud market.
These include looking into whether the offering of committed spend discounts, the charging of data egress fees and the presence of interoperability issues are having a dampening impact on the UK cloud infrastructure services market’s competitiveness.
In addition to this, the CMA has also been investigating complaints about the anti-competitive impact of Microsoft’s cloud licensing practices, following accusations that it charges customers more for running its software in its competitors’ clouds.
Microsoft has also been similarly accused of charging customers more for opting to run software made by other IT providers in its Microsoft Azure public cloud.
As previously reported by Computer Weekly, Microsoft maintains its licensing tactics are having no impact on how much business AWS or Google are winning in the public cloud market, which is a view it reiterated during its July 2024 summary hearing with the CMA.
‘Ample margin’ to compete
The company said in its summary hearing document that its licensing fees “do not materially raise costs for its competitors” and do not negatively impact on their business because AWS and Google have “ample margin” to compete with Azure.
Microsoft referred to AWS and Google as “listed providers” that provide an “important marketing channel” for the company, because of the ability for customers to run its software in their clouds.
The document went on to state that both firms’ financial results are proof that Microsoft’s actions are not harming their business.
“It is difficult for Amazon and Google to argue that they cannot afford to pay for its licenses, or that Microsoft is foreclosing them, when looking at their growth and profits,” the summary document stated. “Licensing fees are not material for Amazon and Google as they are a small cost relative to their total cloud revenues.”
As further proof that its licensing practices are not negatively impacting on either company in any way, Microsoft said neither firm has had their ability to “invest and remain competitive” affected by how it licenses its software for use within competing clouds.
“AWS has not slowed down its investments and its investments in [research and development] was the largest of the hyperscalers in previous years,” the document added.
Unsurprisingly, Amazon and Google have both disputed Microsoft’s take on the impact its licensing practices are having on their respective businesses, with AWS appearing to suggest that it is their joint customers who are suffering financially as a result – not the cloud providers themselves.
In its submission, AWS said Microsoft’s actions are the source of customer complaints, because its licensing practices are “artificially imposed” limits on where they can run software they own that could – in Amazon’s view – be easily remedied.
“Since 2019, there have been licensing restrictions imposed by Microsoft preventing customers from using previously purchased Microsoft licenses on AWS … [and] this has had huge financial consequences for customers,” the AWS submission stated. “Customers buying Microsoft products should have access to them forever and should be able to use it on the IT provider of their choice.
“AWS … receives complaints from customers regarding Microsoft’s licensing restrictions and their inability to run the software on their cloud of choice.”
Losing business
In its submission, Google said abiding by the terms of Microsoft’s Services Provider License Agreement (SPLA) had resulted in it losing business, separate to the fact its contents means it’s more expensive to run Microsoft workloads on its cloud compared with Azure.
“There a a number of non-price restrictions in the SPLA … that mean [Google] cannot compete with Azure,” the Google document stated. “[Google] is not able to provide certain security updates to customers, which has resulted in lost business.”
The company also shared details of the difficulties customers face, from a legacy software point of view, when trying to leave Microsoft and how this situation could be contributing to instances of customers becoming locked-in to its systems.
“It is not simple for customers to rewrite legacy applications to move away from Microsoft and part of the reason why there are so many legacy systems that have been running on Microsoft’s software for many years is because they are very complex and cost prohibitive to rewrite,” said Google.
“When customers ‘lift and shift’ legacy Microsoft workloads to Azure, many smaller companies cannot afford to rewrite those workloads and it becomes difficult to migrate them away from Azure – so they are locked in.”
CMA is far from the first organisation to investigate Microsoft over its cloud licensing tactics, as the matter has been the focus of studies and other anti-competitive investigations, conducted by regulators and watchdogs in other parts of the world too.