The ongoing clash between Amazon Web Services (AWS) and Microsoft regarding licensing costs underlines a critical competitive dynamic shaping the cloud computing landscape, especially concerning the use of Microsoft software on cloud platforms not owned by Microsoft. AWS’s recent submission to the UK’s Competition and Markets Authority (CMA) paints a compelling picture: half of the enterprise workloads running on Microsoft’s Azure cloud might migrate to competing clouds like AWS or Google Cloud if it were economically feasible to do so, hamstrung currently by Microsoft’s licensing practices.
Microsoft’s 2019 changes to its licensing model are at the heart of the controversy. These revisions have reportedly quadrupled the cost for running Windows Server outside the Azure ecosystem, making costs on AWS, Google, or Alibaba’s infrastructure prohibitively high in many cases. AWS alleges this amounts to anti-competitive behavior that artificially inflates prices, restricts customers’ freedom, and prevents rivals from competing on a level playing field. Google filed a similar complaint with the European Union’s antitrust authorities, highlighting a broader industry concern over Microsoft’s preferred treatment within its licensing schemes.
The CMA's investigation, initiated in 2023 and ongoing with a provisional ruling already made, reveals the severity of the issue facing enterprise cloud users. It estimates that about 70 to 80 percent of enterprise customers still operate Windows Server on-premises, yet those aiming to move workloads to public clouds face a licensing cost barrier that disproportionately benefits Microsoft’s own Azure platform. AWS and Google warn that these inflated costs act as a “lock-in,” tying consumers economically and limiting multi-cloud strategies that are essential for flexibility and risk mitigation.
AWS argues that Microsoft's licensing restrictions—specifically “Bring Your Own License” (BYOL) policies—impose conditions that force customers to repurchase licenses they already hold when shifting to rival clouds. This scheme raises the total cost of ownership for customers wishing to operate their Windows Server workloads outside Azure and effectively reduces competition by giving Microsoft a built-in advantage. The CMA concurs that this strategy harms consumer choice, inflates prices, and dampens competitive incentives for Microsoft to offer better deals on Azure, as rivals like AWS have to absorb these additional licensing costs before they can profitably compete.
Financially, the stakes are high. While AWS’s operating income surged to nearly $40 billion in 2024, Microsoft’s Intelligent Cloud division reported an operating income of almost $50 billion in the same year. However, Microsoft contends that its licensing costs are carefully calibrated to avoid driving customers away from its products. It stresses that Microsoft benefits from allowing its software on competitors’ clouds and that pricing decisions balance IP protection with encouraging broad use.
The CMA’s report highlights an essential nuance—the actual workloads or customer segments deterred by these costs are hard to quantify precisely, but AWS estimates that about 50 percent of Microsoft enterprise workloads currently on Azure might migrate if cost barriers were removed. This potential customer churn underscores just how much the licensing cost hurdle influences cloud market dynamics.
Google amplifies this viewpoint with a real-world example where a customer chose Azure over Google Cloud solely due to more favorable Microsoft licensing terms, despite being satisfied with Google's services otherwise. Google proposes regulatory interventions to prevent further degradation of its licensing terms, guard against new customer lock-in tactics by Microsoft, and ensure third parties aren’t unfairly restricted from selling Microsoft software to run on Google Cloud.
Microsoft rebuffs these allegations, describing CMA’s findings as vague and arguing that Microsoft’s licensing pricing is designed to strike a balance between making the software viable for large cloud providers while safeguarding intellectual property. Microsoft insists that Windows Server and SQL Server form only part of overall workloads, which also require data storage, bandwidth, and other cloud services where AWS and Google compete vigorously and profitably. Microsoft suggests that if there is foreclosure, the margins for AWS and Google are sufficiently robust to prevent significant competitive harm.
From the AWS and Google perspective, by inflating license fees and maintaining restrictive terms, Microsoft restrains its cloud rivals from offering competitive pricing, thereby limiting customer choice and inflating overall market prices. AWS points out that it has no profitable path to offset the costs imposed by Microsoft licensing rules, meaning it cannot fully compete on these workloads. This is a critical allegation in a market dominated by a few players where cloud workloads’ migration flexibility is vital for fostering competition and innovation.
These developments must be viewed within a broader regulatory arena where the CMA, among other regulators, is actively scrutinizing cloud infrastructure markets for anti-competitive behavior. The CMA favors behavioral remedies that would enforce pricing transparency, fairness in licensing policies, and lower switching costs such as data egress fees—common in cloud markets as customers move workloads among providers. Such remedies aim to reduce vendor lock-in, increase interoperability, and prevent dominant players from using their software portfolios to indirectly stifle competition in cloud infrastructure services.
The implications for enterprise customers are profound. Currently, companies running Windows Server workloads face a complex licensing environment. The financial and strategic cost of being tied to Azure limits their ability to adopt multi-cloud deployments or to take advantage of the best pricing and technology innovations from different cloud providers. Should the CMA enforce remedies compelling Microsoft to equalize licensing costs across clouds, the market could shift toward much greater customer choice and competition.
From a strategic technology perspective, enterprises benefit hugely from the flexibility to place Windows Server workloads wherever they see fit—balancing performance, compliance, security, and cost concerns. The current licensing restrictions disrupt this agility. Additionally, with multi-cloud becoming standard for many enterprises, ensuring software licensing does not impose artificial constraints is key.
The dispute also highlights the inherent tension within the cloud industry: leading software vendors like Microsoft wield significant power through indispensable software platforms. Pricing decisions around these platforms can have outsized effects on cloud competition. While Microsoft argues for protecting intellectual property and a balanced pricing approach, competitors and regulators see excesses in licensing strategy that need correction.
Looking ahead, the CMA's final report expected in July 2025 will be closely watched. Stakeholders across the ecosystem—cloud providers, software vendors, enterprise customers, and regulators—await guidance that could reshape the market landscape. For enterprises, the hope is for more transparent, equitable licensing and easier alternatives to vendor lock-in when managing their cloud architectures.
In conclusion, the ongoing debate over Microsoft’s licensing costs for running Windows Server workloads on competing cloud providers underlines an urgent shift required in cloud market dynamics. Addressing these licensing barriers would unlock significant workload mobility, reduce costs, and foster competition, thereby benefiting enterprises and the broader cloud ecosystem. Conversely, failure to reform these licensing practices risks entrenching dominant players and limiting innovation in a market that is foundational to modern IT infrastructure.
Additional context clarifies that these licensing and cost concerns are part of wider competition issues in cloud markets, including fees for data transfer (egress), vendor discounts causing lock-in, and interoperability challenges. The CMA is considering behavioral remedies targeting these issues to stimulate competition and innovation, with a focus on protecting UK economic growth without stifling investment.
For businesses heavily reliant on Microsoft technologies, such as Windows Server and Azure, understanding and navigating these licensing complexities is critical. Strategies to optimize licensing costs and cloud consumption are increasingly relevant, as highlighted in a broader context of cost management webinars and best practices shared in the industry. The combination of regulatory oversight and adoption of smarter cost optimization can help enterprises strike a better balance between leveraging Microsoft’s ecosystem and achieving cost-effective cloud infrastructure management .
Source: AWS: Customers would flee Azure if licensing costs were fair
