HomeWinBuzzer NewsUK Authority Probes Microsoft's Cloud Licensing Practices

UK Authority Probes Microsoft’s Cloud Licensing Practices

The CMA is making its investigation into Microsoft Cloud in the UK more formal following recommendations from Ofcom.

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The UK's Competition and Markets Authority (CMA) is scrutinizing 's cloud activities due to its commanding presence in essential software suites. The investigation takes root in a recommendation from Ofcom, which identified inefficiencies within the nation's .

Microsoft's Market Influence

Microsoft's substantial footprint in the cloud segment stems from its extensive software products, such as Windows Server, various versions of Windows, SQL Server, and Visual Studio, alongside its productivity software. This influence, coupled with the 30-40% share of the UK cloud market held by its Azure platform, impacts customer choices regarding cloud providers. Several submissions to the CMA have flagged Microsoft's licensing methods as potential deterrents for customers seeking alternative cloud services.

The investigation seeks to discover if Microsoft's licensing strategies are inhibiting customers from migrating to other cloud vendors. Specific concerns include price disparities and non-price elements. For instance, the Azure Hybrid Benefit allows lower costs for on-premises and SQL Server licenses when used with Azure, a benefit not available for other cloud services like AWS, Google, and Alibaba. Moreover, Microsoft allegedly restricts security updates and features for products when utilized on non-Azure clouds.

Potential Remedies and Industry Reactions

Should the CMA conclude that there is a negative effect on competition in the UK cloud market, it may consider implementing remedies such as fair pricing for Microsoft software across different clouds. This could involve allowing customers to transfer previously bought Microsoft software to any cloud without extra costs and promoting price transparency. Addressing non-price factors might necessitate ensuring uniform software features and functionalities across Azure and other cloud platforms.

Industry entities like AWS, the Coalition for Fair Software Licensing (CFSL), and Euro cloud body CISPE have supported principle-based remedies, which include equal software licensing fees across all clouds and the freedom to use previously purchased licenses on any cloud. On the contrary, Microsoft defends its restrictions on bring-your-own-license (BYOL) for listed providers, arguing they are essential for fair intellectual property compensation and to prevent unlicensed product use.

Microsoft's Response and Broader Market Context

A representative from Microsoft has claimed their licensing terms permit customers and other cloud providers to operate Microsoft software on various clouds, mentioning that AWS and Cloud continue to grow their cloud revenues and maintain competitive positions. In contrast, a CISPE official welcomed the CMA's analysis, emphasizing concerns that software market dominance can limit customer choices in cloud services.

The British competition authority is unlikely to demand that dominant cloud providers like Microsoft and AWS divest parts of their businesses. However, it has several market remedies at its disposal. The CMA has outlined possible remedies to help equalize the market. It prefers behavioral remedies to structural and operational separations, focusing on reducing barriers to switching providers or adopting a multi-cloud strategy. The regulator is also considering ways to standardize and enhance the interoperability of cloud services, as well as potential price control and transparency measures to address high egress fees levied by major cloud providers.

SourceCMA
Luke Jones
Luke Jones
Luke has been writing about all things tech for more than five years. He is following Microsoft closely to bring you the latest news about Windows, Office, Azure, Skype, HoloLens and all the rest of their products.

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