The call by Google and AWS to “step in and cap the price” Microsoft charges them to license its software on their clouds is both “extraordinary and unprecedented,” Microsoft said in response to the publication of preliminary findings from the UK Competition and Markets Authority (CMA) investigation into competition in the country’s cloud market, The Register reported. The CMA said competition could be better, but Microsoft’s actions are not helping.
Microsoft classifies AWS and Google as so-called registered providers, meaning that customers who want to run, say, Windows Server outside of Azure have to pay four times the licence fee. Both providers complained to the CMA that this puts them and their customers at a disadvantage. The CMA backed them up, noting that “Microsoft has the ability and willingness to discourage AWS and Google from using its software” and that “this behaviour is detrimental to competition in the cloud services space.”
The Redmond corporation regarded Amazon and Google’s request to the CMA to limit the cost of using Microsoft software to create and sell cloud services to their customers and to regulate software prices for Azure customers as “an unprecedented interference that grossly violates its intellectual property rights.” “No other software provider in the industry would be subject to such restrictions,” Microsoft said, noting that “the only beneficiaries of this remedy are Amazon and Google.” However, customers who for whatever reason do not want to run Microsoft products in the Azure cloud may disagree, The Register notes.
Image source: Microsoft
According to Microsoft, customers with legacy software are ready to move their workloads to the cloud. Microsoft prefers that they choose Azure, but its software is still in AWS, Google Cloud and other clouds. “We compete to attract their business in a number of ways, including competitive pricing. One way is by providing ongoing discounts on Azure and offsetting a portion of the cost of Windows Server and SQL Server when customers deploy workloads in Azure that partially rely on that software,” Microsoft said, stressing that this is the essence of competition, which only benefits UK customers.
Microsoft asked CMA to compare its strategy with AWS S3, Aurora, DynamoDB and Google BigQuery, Looker, Google Analytics and others, asking the question: “Do AWS and Google license their proprietary software to their competitors, at any price?” And immediately answered: “No.” In this regard, Microsoft said that it felt unfairly singled out among others. However, for some reason, the corporation kept silent about the fact that it itself has services that work exclusively within Azure.
Microsoft reiterated that its main rivals’ protests were unfounded because AWS was the largest cloud provider in the UK, accounting for up to half of the £9bn spent by customers in 2023. Microsoft’s share was between 30% and 40%. Google Cloud was only third, but its global operations had grown to $36bn as of the fourth quarter of last year.
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Microsoft claims that Google has “spent thousands, if not millions, of dollars defending ‘trade associations’ that, unsurprisingly, echo its claims to antitrust regulators and government officials.” Meanwhile, UK companies have filed a class action lawsuit against Microsoft, alleging that customers of AWS, Google Cloud Platform and Alibaba Cloud are being forced to pay more for Windows Server licenses than they would for Azure. The suit seeks £1 billion in damages.
The existence of customer exit fees, high levels of market concentration and significant barriers to migration were identified by the CMA as issues affecting the UK cloud market as a whole. AWS was also heavily criticised, while Google Cloud was given a pass due to its smaller market share. The CMA is currently considering whether to prosecute Microsoft over its licensing practices and exit fees. The regulator will announce its decision later this year.