New Report Finds Microsoft Licensing Continues to Inflict Broad Harm to European CSPs and Cloud Customers

Independent analysis by Dr Aleksandra Boutin and Dr Xavier Boutin identifies Microsoft’s tactics that foreclose competitors and harm innovation, despite recent settlements. Findings are a “call to action” for regulators to end deliberate suppression of competition and long-term harm to customers in the European cloud markets .

European regulators must take immediate action to promote open competition in the cloud markets or risk customers being irreversibly harmed, finds an independent report published today by two experts of global expert services and consulting firm BRG, produced with financial support from Google. 

Coauthors Dr Aleksandra Boutin and Dr Xavier Boutin found that Microsoft’s anticompetitive cloud licensing practices continue to harm European cloud service providers (CSPs) and customers, despite Microsoft’s settlements with individual providers and European cloud associations. 

The report also suggests that Microsoft leveraging its market power in enterprise software to protect and extend its position into new markets threatens the future development of cloud services. Businesses migrating to the cloud could have an opportunity to mix and match their cloud infrastructure and services if Microsoft’s traditional enterprise technology stack could be decoupled from its cloud offering. The authors argue that Microsoft has the ability and incentives to anticompetitively foreclose competitors in the cloud markets, thereby harming customers by reducing their choice, double taxing them and restricting innovation and cybersecurity.  

The report argues that open competition in the cloud is vital to the success of European digital markets. With this in mind, it proposes that: 

1. Competition on the merits in the Infrastructure-as-a-Service (IaaS) markets must be restored by enabling CSPs competing with Microsoft’s Azure to profitably host customers’ on-premise Microsoft software under perpetual license or a service provider license agreement (SPLA), including Windows Server, Exchange and SharePoint.
2. Promoting open cloud competition will in turn foster competition and innovation in markets adjacent to the cloud by enabling customers to freely select and utilize best-of-breed solutions. Solution providers should have the ability and incentives to actively compete with each other based on criteria such as price, flexibility and quality of service. This requires restoring consumer choice in important ways, such as being able to freely select their:
   1. IaaS provider for Microsoft’s legacy technology (Windows Server, Exchange, SharePoint) 
   2. Software-as-a-Service (SaaS) providers independently of their IaaS providers 

The authors highlight that the future of cloud technology should be multi-cloud and multi-vendor, with customers being able to mix and match solutions to best support their business. However, they find that Microsoft’s anticompetitive practices artificially incentivize customers to use its legacy on-premise technology stack on Azure, resulting in them being locked into Microsoft for all their IaaS and SaaS requirements.  

Dr Aleksandra Boutin said: “Cloud services are the key enabling technology of modern digital services. Competition in this space risks being permanently distorted by Microsoft deploying the same anticompetitive playbook that it has used repeatedly in the past. This could have a significant negative impact for other innovative digital markets”.  

Dr Xavier Boutin commented: “The cloud is still a young market, and the European authorities have a duty to protect it by ensuring that competition is maintained to the benefit of customers and to avoid knock-on effects for other innovative digital markets”.  

Download a full copy of the experts’ report.

Disclaimer: The opinions expressed in this publication and the facts and analyses presented are those of the individual authors and do not represent the opinions of BRG or its other employees and affiliates. The research and analyses performed in preparing this paper were funded by Google. The information provided in the publication is “for information only” and is not intended to and does not render legal, accounting, tax or other professional advice or services, and no client relationship is established with BRG by making any information available in this publication. None of the information contained herein should be used as a substitute for consultation with competent advisors. In no event shall any party be entitled to rely on this report for any purpose, nor will BRG assume, or be deemed to have assumed, any responsibility, obligation or liability to any party for any loss or damage.