Microsoft's European cloud-competition settlement won't help most customers

Mary Jo Foley is the Editor in Chief at Directions on Microsoft. Before joining Directions, Mary Jo has worked as... more

Last week’s settlement between Microsoft and the Cloud Infrastructure Services Providers in Europe (CISPE) won’t do anything to cut the higher prices Microsoft is charging organizations to run its software on its biggest rival’s clouds. The settlement — which allegedly involved Microsoft paying CISPE $22 million — blocks CISPE and its member companies from lodging new or supporting similar antitrust cases in this matter against Microsoft. The settlement also excludes AWS, Google and Alibaba cloud platforms.

“At the end of the day, the settlement is nothing. It won’t affect so-called listed providers and just promises to give a few Azure exclusives to the smaller ‘authorized outsourcers,’” said Directions on Microsoft analyst Wes Miller. “It’s unclear what this settlement actually resolves other than a legal threat.”

Microsoft introduced outsourcing restrictions in 2019, resulting in customers paying more to run Microsoft software in non-Microsoft cloud environments. Customers who had been using AWS and Google Cloud as dedicated hosts for running Windows Server and clients were affected directly, but some of them didn’t realize the extent of the impact until years later when their licensing contracts with Microsoft were up for renewal.

CISPE launched its competition complaint against Microsoft with the European Commission in November 2022. Microsoft responded with a set of “European Cloud Principles”, which officials said would level the playing field for partners and customers who wanted to run Microsoft software on certain non-Microsoft cloud infrastructures.

What those principles didn’t include was what many customers cared most about: The ability to run Microsoft software on Amazon Web Services, Google and Alibaba. They focused on customers who wanted to move their software licenses to other clouds outside of those “Listed Providers.”

Azure Stack HCI for Hosters is Born

In addition to agreeing to cover CISPE’s three years of legal costs in this matter, Microsoft also said it would release within the next nine months “an enhanced version” of its Azure Stack HCI platform for European cloud providers, known as Azure HCI Stack for Hosters, that will provide features that Microsoft customers using regular Azure Stack HCI have today. Those enhanced features include multi-session virtual desktop infrastructure based on Windows 11; free Extended Security Updates (ESUs); and Pay-as-you-go licensing for SQL Server.

Microsoft and CISPE also agreed to the establishment by CISPE of a European Cloud Observatory to monitor development and evaluation of the coming product, with members of the observatory including cloud infrastructure vendors in Europe, European customer associations and Microsoft.

It’s unclear if there are other hidden terms in the agreement, given a report this week indicating CISPE could have gotten a bigger payday by going a different route.

This week Bloomberg reported that Google, which is not a member of CISPE, tried to get CISPE to refrain from taking the Microsoft deal by offering a reported $500 million for more than five years of software licenses and another $15 million in cash. But CISPE didn’t take Google’s offer, which Bloomberg claimed was made just days before the Microsoft settlement was announced last week. And Google officials said they will continue to explore “other options to continue to fight against Microsoft’s anti-competitive licensing.”