Ofcom stated it acquired proof displaying Microsoft makes it much less enticing for patrons to run its Workplace productiveness apps on cloud infrastructure aside from Microsoft Azure.
Igor Golovniov | Sopa Photos | Lightrocket by way of Getty Photos
Microsoft was accused Friday of abusing the dominance of its Azure cloud computing unit to squeeze a — and, in some instances, evaporate — the revenue margins of rival cloud platforms in Europe.
The declare got here in a grievance from CISPE, a commerce physique for “infrastructure as a service” cloud corporations in Europe. It additionally comes because the Redmond, Washington-based expertise big is going through intense scrutiny over its cloud computing and software program licensing practices within the European Union, in addition to the U.Okay. and U.S.
The allegations stem from tweaks Microsoft made to its licensing phrases in 2019. Underneath these guidelines, Microsoft required corporations to buy a Software program Assurance license and “mobility rights” in the event that they needed to deploy their Microsoft software program on hosted cloud providers supplied by rival suppliers.
Clients additionally could not depend on perpetual licenses that they had already bought to run Microsoft purposes on so-called “listed suppliers” like Alibaba, Amazon, Google, and Microsoft itself. They’d have to purchase new licenses, as an alternative. In the meantime, some software program, together with Workplace 365 Home windows Apps, was forbidden from working on rival clouds.
The phrases are the supply of intense anger from competing cloud corporations in Europe, like France’s OVHCloud and Italy’s Aruba, in addition to Massive Tech competitor Amazon. It additionally fashioned the premise of an investigation from the European Fee looking for to find out whether or not Microsoft’s cloud practices are anti-competitive.
Microsoft declined to remark when contacted by CNBC. In 2022, Microsoft President Brad Smith wrote a blogpost saying it was revising its licensing offers and making it simpler for cloud suppliers to compete.
In its grievance Friday, CISPE — which is closely funded by Amazon — confirmed an instance in its analysis the place one member cloud agency, the identify of which was not disclosed, noticed revenues from promoting Microsoft merchandise together with Home windows Server, and SQL Server providers climb over 300% since 2018, contributing to Microsoft’s personal development.
However the development of the unnamed cloud vendor’s revenue margins did not match Microsoft’s, and actually the competing cloud vendor noticed their margins fall from a constructive mid-twenties share in 2018 to double-digit damaging revenue margins in 2023.
The largest decline in revenue margins for this cloud agency occurred in 2019, the identical 12 months Microsoft modified its licensing phrases to favor licensing software program on Azure, the CISPE stated. From 2019 to 2020, the CISPE member involved noticed their margin collapse from over 20% to zero.
CISPE additionally stated that members shared proof that the value they have been charged for Microsoft’s SQL Server was a lot larger than the value quoted by Microsoft for patrons utilizing Azure.
For instance, an organization licensing Microsoft’s software program for internet hosting and delivering their purposes must pay 612.27 euros ($670) per 2-core SQL Server Enterprise product, 92.01 euros greater than what Microsoft prices prospects utilizing Azure on common (520.26 euros), in line with the CISPE’s knowledge.
The grievance and the findings add to earlier analysis from Frederic Jenny, a professor of economics at ESSEC Enterprise College in Paris who makes a speciality of competitors regulation, for CISPE. Jenny discovered that Microsoft successfully prices companies a 28% “tax” to run its software program merchandise on competing cloud providers.
The European Fee informed CNBC: “The Fee has acquired a number of complaints relating to Microsoft, together with in relation to its product Azure, which we’re assessing based mostly on our commonplace procedures. Now we have no additional remark to make at this stage.”
The U.Okay.’s Competitors and Markets Authority, which took cost from media and telecommunications regulator Ofcom for a probe into competitors within the U.Okay. cloud computing market final 12 months, was not instantly out there for remark when contacted by CNBC.
