Analyst(s): Steven Dickens
Publication Date: September 30, 2024
Microsoft’s licensing practices are under scrutiny again, with accusations from Google and European businesses of anticompetitive behavior. These claims could reshape cloud competitiveness in the region.
What is Covered in this Article:
- Microsoft’s cloud licensing practices and antitrust challenges
- Impact on European cloud providers and businesses
- Comparative analysis of Microsoft versus competitors such as Google and AWS
- Potential regulatory interventions by the European Commission
- Future outlook for cloud competition in Europe
The News: Google has formally filed a complaint with the European Commission, accusing Microsoft of leveraging its dominant position in the European market to lock customers into its Azure cloud services through restrictive and anticompetitive licensing terms. These practices include alleged price hikes for running Windows Server on competing cloud platforms such as AWS and Google Cloud, which Google claims harms European innovation and competitiveness.
Microsoft’s Cloud Licensing: The End of European Cloud Competitiveness?
Analyst Take: Microsoft’s bundling tactics, especially with products such as Teams, have long been a strategic way to dominate the productivity software market. By embedding Teams into its larger ecosystem, Microsoft has created an almost unavoidable platform for users, even when alternatives such as Zoom or Slack might be a better fit for certain organizations. While this approach isn’t necessarily illegal, it clearly squeezes out competitors, particularly in regions such as Europe where regulatory scrutiny is more intense.
The irony in Google filing this complaint against Microsoft isn’t lost on anyone familiar with Google’s own history of antitrust challenges. Google’s tight grip on Android, its dominance in the video content space with YouTube, and the way Workspace is bundled into the broader Google ecosystem raise similar concerns. To claim the moral high ground here feels somewhat hypocritical. However, the strategic move is less about fairness and more about the ongoing power struggle between tech giants over AI and cloud services.
Europe is a battleground for these tech behemoths, and Microsoft’s cloud licensing practices have already attracted attention. The European Commission’s history of going after Microsoft for its anti-competitive behavior, such as the browser bundling issue years ago, suggests this could be another pivotal moment. A ruling in favor of Google might force Microsoft to rethink how it licenses cloud products and could lead to structural changes in its business practices across the continent.
This isn’t just about software bundling anymore. As AI becomes integral to cloud offerings, the dominance of giants such as Microsoft, Google, and Amazon in both AI and cloud infrastructure is increasingly coming under the microscope. What’s unfolding with this complaint may only be the beginning. If the EU acts decisively, it could shape how AI and cloud markets are regulated in the future, opening the door to broader scrutiny over how these services are being bundled and monopolized.
Isn’t the Windows Server Point Mute Anyways?
According to a talk given earlier this year at the Linux Foundation Open Source Summit given by two Microsoft Azure Linux Platforms Group program managers, Jack Aboutboul and Krum Kashan, “Linux is the #1 operating system in Azure today,” Aboutoul said. I have heard Microsoft tout this datapoint for the last few years.
My point – As Windows Server’s status starts to dwindle, especially for new workloads, won’t Linux just replace it and the pricing disparity issue will just go away, or worse hasten the decline of Windows Server in the enterprise. Put another way – If you make something 400% more expensive on AWS and Google Cloud, won’t people just choose Linux?
Open Competition Good for All
Google is positioning itself as an advocate for open competition. The reality is more complex. Google’s own practices with Android, Workspace, and YouTube reflect the very behaviors it now criticizes Microsoft for. This complaint can easily be seen as a calculated move in a larger war for dominance in AI and cloud markets rather than a genuine push for fairness. Given Google’s tendency to close off its own ecosystems in key markets, it’s hard to see this as anything but a power play.
The impact of this dispute extends beyond Microsoft’s practices alone. European businesses face the challenge of higher costs and fewer options when navigating cloud services. With Microsoft’s restrictive policies allegedly inflating the cost of using its software on competing cloud platforms such as Google Cloud or AWS, the cost of diversifying cloud strategies is becoming prohibitively high. In an era when cloud sovereignty and data security are increasingly vital, these practices are not just stifling competition but risking Europe’s digital future.
This complaint is about more than the market share; it’s about the very infrastructure that powers the cloud and, increasingly, AI. Europe’s regulatory response will be crucial in determining whether the continent can foster a competitive cloud market or if it will continue to be dominated by a few tech giants.
What surprised me the most was that this whole move is out of character for Google, well perhaps times they are changing…
What to Watch:
- The cloud market in Europe is at a crossroads. Several factors will determine whether Microsoft’s dominance can be curtailed.
- Regulatory action by the European Commission: Will they impose penalties or force structural changes on Microsoft’s cloud licensing practices?
- Market response from European businesses: Will enterprises voice their concerns more openly, or will fear of audits keep them compliant with Microsoft’s policies?
- Competitor strategies: Google and AWS must continue to advocate for open, multi-cloud solutions and potentially offer European businesses more incentives to switch.
See the complete press release on Google’s formal complaint against Microsoft’s cloud licensing practice here.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Author Information
Regarded as a luminary at the intersection of technology and business transformation, Steven Dickens is the Vice President and Practice Leader for Hybrid Cloud, Infrastructure, and Operations at The Futurum Group. With a distinguished track record as a Forbes contributor and a ranking among the Top 10 Analysts by ARInsights, Steven's unique vantage point enables him to chart the nexus between emergent technologies and disruptive innovation, offering unparalleled insights for global enterprises.
Steven's expertise spans a broad spectrum of technologies that drive modern enterprises. Notable among these are open source, hybrid cloud, mission-critical infrastructure, cryptocurrencies, blockchain, and FinTech innovation. His work is foundational in aligning the strategic imperatives of C-suite executives with the practical needs of end users and technology practitioners, serving as a catalyst for optimizing the return on technology investments.
Over the years, Steven has been an integral part of industry behemoths including Broadcom, Hewlett Packard Enterprise (HPE), and IBM. His exceptional ability to pioneer multi-hundred-million-dollar products and to lead global sales teams with revenues in the same echelon has consistently demonstrated his capability for high-impact leadership.
Steven serves as a thought leader in various technology consortiums. He was a founding board member and former Chairperson of the Open Mainframe Project, under the aegis of the Linux Foundation. His role as a Board Advisor continues to shape the advocacy for open source implementations of mainframe technologies.
