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AWS and Google Cloud claim Microsoft’s licensing practices restrict customer choice and make switching difficult, while Microsoft claims it is the key challenger to prevent AWS dominance in the cloud market.
An investigation into the UK’s cloud market has led to the biggest players criticising each other for their practices and alleged dominance.
The UK’s Competition and Markets Authority (CMA) is currently investigating the country’s cloud services market to see if there are any potential factors impacting competition.
This market was referred to the CMA earlier this year after a study by UK comms regulator Ofcom raised concerns that competition in this market could deteriorate if left unchecked. The study found that Amazon Web Services (AWS) and Microsoft had a combined market share of 70pc to 80pc in 2022. Google was the next closest competitor with a share of 5pc to 10pc.
The CMA’s initial investigation will examine if factors such as technical barriers, fees to transfer data, volume discounts or software licensing practices are hindering competition in the cloud services sector. It announced this investigation in October and invited parties to submit comments about the market and any potential ways to improve competition.
A number of these responses have singled out Microsoft in particular, with AWS and Google Cloud both criticising the tech giant’s licensing practices.
Complaints against Microsoft
A number of Microsoft’s EU customers issued complaints in 2019 and said changes made to its licensing terms made it more expensive to run Microsoft software on the cloud platforms of competitors such as AWS, Google and Alibaba.
Microsoft issued changes to its software licensing terms last year and claimed these would help other cloud service providers to compete, but its competitors disagree with this claim. AWS claims both the 2019 and 2022 licensing changes made it more difficult for Microsoft customers to run its software offerings on the platforms of competitors.
“To use many of Microsoft’s software products with these other cloud services providers, a customer must purchase a separate licence even if they already own the software,” AWS said in its statement. “This often makes it financially unviable for a customer to choose a provider other than Microsoft.”
Google Cloud also called out Microsoft and said competition is functioning effectively in the UK market “aside from the problems arising from Microsoft’s licensing practices in particular”.
Microsoft’s response
In its own submission, Microsoft claimed that it has always been “incentivised” to make it as easy as possible for customers to switch to its own products or to “multicloud as customers focus on diversifying beyond AWS”. The company also claimed to be the “historic and current challenger to AWS” in the cloud services market.
Microsoft noted that licensing changes it made in 2019 “inadvertently disrupted” the business model of smaller cloud providers. The company said that the changes it made last year allowed Microsoft software purchased for on-premises use under a subscription to be run on the cloud platforms of “non-listed” providers.
These non-listed entities are any cloud provider other than Azure, AWS, Google Cloud Platform and AliCloud, according to Microsoft.
“These licensing changes amounted to granting customers like-for-like economics on Microsoft software whether used on Azure or through another non-hyperscaler cloud,” the company said.
Microsoft also claimed that both itself and AWS are not “insulated from competition” and said it does not have the same “incumbent market advantage as AWS”.
“There are numerous competitors able to offer cloud services across the stack and these companies are increasingly investing in cloud infrastructure to signal to investors their intention to be a player in the growing market,” Microsoft said.
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