Microsoft’s licensing practices for running its software on public cloud platforms, especially non-Microsoft clouds such as Amazon Web Services (AWS), Google Cloud, and others, have come under intense scrutiny due to complaints that these licensing terms unfairly protect Microsoft’s own Azure cloud and stifle competition. In the latest chapter of this ongoing dispute, AWS has submitted evidence to the UK's Competition and Markets Authority (CMA), estimating that up to half of the workloads currently running Microsoft's software on Azure would migrate away to competing clouds if licensing costs were not prohibitively high. This sharp claim underscores broader competitive concerns in the cloud infrastructure market and shines a spotlight on software licensing as a pivotal battleground among technology giants.
The crux of AWS’s argument to the CMA is that Microsoft’s licensing changes introduced in 2019 have dramatically inflated the cost of running Windows Server and other Microsoft software on non-Azure clouds. AWS highlights that licensing costs can be up to four times higher outside Azure, making it economically unfeasible for enterprise customers to move workloads to other clouds, effectively locking them into Azure. This pricing disparity, the complainants argue, artificially raises prices and reduces competitive pressure on Microsoft to lower prices or innovate.
According to data cited by the CMA, between 70% and 80% of enterprise Windows Server workloads remain on-premises, which suggests substantial potential for cloud migration or multi-cloud deployment. However, AWS and Google contend that Microsoft’s licensing schema acts as a strong disincentive because customers are forced to repurchase software licenses they already own, solely to use them on alternative clouds. This practice not only drives up costs but also tilts customer decisions heavily towards Azure, limiting genuine choice.
AWS states that these licensing terms do not have a credible technical justification and act as a non-price restraint on competition, effectively foreclosing rival cloud platforms. The CMA has provisionally found that such Microsoft practices harm competition by restricting rivals like AWS and Google in a way that benefits Microsoft's market dominance in productivity software and its Azure cloud platform.
Both AWS and Google argue that because of the inflated licensing costs, they struggle to make positive margins on hosting Microsoft workloads. Consequently, customers on Azure may pay more because Microsoft does not face competitive pressure to offer better licensing deals. Google additionally shared a real-world example of a customer with a large Windows Server estate who chose Azure primarily due to licensing and commercial considerations, despite being satisfied with Google’s cloud performance.
Google has proposed several interim interventions for the CMA, including preventing Microsoft from imposing degraded licensing terms on competitors, stopping other lock-in tactics, and curbing restrictions on third-party vendors that sell Microsoft software on alternative clouds.
The CMA’s investigation thus touches on critical issues: licensing cost parity, restrictions on “Bring Your Own License” (BYOL) practices, and broader forms of vendor lock-in such as volume discounts that require high spending commitments to secure favorable pricing. These concerns resonate widely among Windows users, enterprises, and cloud providers who increasingly demand flexibility and multi-cloud options.
The company also contends that evaluating competition requires considering the full cost of workloads beyond just software licenses, including storage, network, and other cloud infrastructure services. By this reasoning, AWS and Google do have sufficient profit margins to compete effectively for Microsoft workloads. Microsoft warns against regulatory overreach that might undermine intellectual property protections and notes that no other software provider faces similar scrutiny, emphasizing that its practices are necessary to safeguard its proprietary assets.
Microsoft further critiques the CMA’s provisional findings as vague about which workloads are truly foreclosed and why competitors’ margins are too low. The company stresses the importance of factoring in the full stack and argues that the Windows IP is not the sole determinant of customer cloud decisions—broader service needs are equally essential.
One key issue under CMA’s examination is the complexity and opacity of software licensing in the cloud and how this affects customer switching costs. The regulator sees Microsoft’s behavior as inflating prices and implying customers pay twice for licenses, undermining fair competition.
The CMA appears inclined toward behavioral remedies—measures aimed at adjusting practices rather than breaking up companies—which might include mandating price parity or curtailing restrictive licensing clauses. These remedies aim to foster a level playing field that could benefit businesses by reducing costs and increasing cloud provider choice.
The investigation also intertwines with other behavioral concerns like “egress fees” charged for moving data out of a cloud provider, which act as financial barriers to switching. Reducing such fees and licensing restrictions could collectively unlock multi-cloud strategies, a highly desired but difficult goal for enterprise IT architectures today.
Moreover, the ongoing CMA scrutiny reflects a global trend toward regulating dominant technology platforms to prevent anti-competitive lock-in and preserve customer freedom. Should Microsoft be forced to alter licensing practices, it could lead to more transparent, competitive pricing models, better multi-cloud interoperability, and increased pressure on Microsoft to innovate without leveraging software dominance.
However, the dispute also highlights intrinsic tensions between intellectual property protection, innovation incentives, and competitive fairness. Balancing these interests in the cloud era, where software and infrastructure are deeply intertwined, is a complex regulatory challenge.
AWS, Google, and enterprise customers eagerly await the results, hoping for relief from licensing practices they view as restrictive and costly. Meanwhile, Microsoft braces for potential changes that might require adjusting its software licensing framework.
This high-stakes regulatory battle illustrates the evolving nature of competition in technology markets where software giants extend their influence into cloud infrastructure. For enterprises and end users, the ideal scenario would be increased transparency, competitive pricing, eased vendor lock-in, and the freedom to pursue optimal cloud strategies without prohibitive costs.
While Microsoft emphasizes IP rights and broader ecosystem considerations, the CMA’s probe underscores the need for regulatory vigilance in markets where dominant players blend software licensing and cloud service provision. The outcome could herald a new era in cloud computing where licensing is fairer, pricing more consistent, and customers empowered to harness multi-cloud flexibility.
For the global Windows and cloud community, this dispute is more than a corporate skirmish; it is a defining moment shaping the future of cloud competition, market openness, and technology innovation.
Details and discussion are also chronicled in the original article from The Register: AWS: Customers would flee Azure if licensing costs were fair
Source: AWS: Customers would flee Azure if licensing costs were fair
Licensing Costs and Lock-In: A Market Barrier?
The crux of AWS’s argument to the CMA is that Microsoft’s licensing changes introduced in 2019 have dramatically inflated the cost of running Windows Server and other Microsoft software on non-Azure clouds. AWS highlights that licensing costs can be up to four times higher outside Azure, making it economically unfeasible for enterprise customers to move workloads to other clouds, effectively locking them into Azure. This pricing disparity, the complainants argue, artificially raises prices and reduces competitive pressure on Microsoft to lower prices or innovate.According to data cited by the CMA, between 70% and 80% of enterprise Windows Server workloads remain on-premises, which suggests substantial potential for cloud migration or multi-cloud deployment. However, AWS and Google contend that Microsoft’s licensing schema acts as a strong disincentive because customers are forced to repurchase software licenses they already own, solely to use them on alternative clouds. This practice not only drives up costs but also tilts customer decisions heavily towards Azure, limiting genuine choice.
AWS states that these licensing terms do not have a credible technical justification and act as a non-price restraint on competition, effectively foreclosing rival cloud platforms. The CMA has provisionally found that such Microsoft practices harm competition by restricting rivals like AWS and Google in a way that benefits Microsoft's market dominance in productivity software and its Azure cloud platform.
Impact on Cloud Competition and Customer Choice
This dispute highlights the inherent tension in markets where dominant software vendors also operate cloud infrastructure. Microsoft’s dual role as software licensor and cloud provider creates incentives to bundle and price discriminate in a way that may secure Azure’s competitiveness at the expense of rivals and customers. AWS’s submission estimates that possibly 50% of Microsoft software workloads could move from Azure to other platforms if economic barriers were lifted. This figure is striking and indicates lost opportunities for competition and innovation in the cloud market.Both AWS and Google argue that because of the inflated licensing costs, they struggle to make positive margins on hosting Microsoft workloads. Consequently, customers on Azure may pay more because Microsoft does not face competitive pressure to offer better licensing deals. Google additionally shared a real-world example of a customer with a large Windows Server estate who chose Azure primarily due to licensing and commercial considerations, despite being satisfied with Google’s cloud performance.
Google has proposed several interim interventions for the CMA, including preventing Microsoft from imposing degraded licensing terms on competitors, stopping other lock-in tactics, and curbing restrictions on third-party vendors that sell Microsoft software on alternative clouds.
The CMA’s investigation thus touches on critical issues: licensing cost parity, restrictions on “Bring Your Own License” (BYOL) practices, and broader forms of vendor lock-in such as volume discounts that require high spending commitments to secure favorable pricing. These concerns resonate widely among Windows users, enterprises, and cloud providers who increasingly demand flexibility and multi-cloud options.
Microsoft’s Defense and Market Context
Unsurprisingly, Microsoft vehemently disputes the claims. It frames its licensing strategy as balanced and aligned with intellectual property rights and innovation incentives. Microsoft argues that its licensing costs contribute significantly to its profits and that excessive pricing would only drive customers away to alternative platforms, counter to Microsoft’s goals.The company also contends that evaluating competition requires considering the full cost of workloads beyond just software licenses, including storage, network, and other cloud infrastructure services. By this reasoning, AWS and Google do have sufficient profit margins to compete effectively for Microsoft workloads. Microsoft warns against regulatory overreach that might undermine intellectual property protections and notes that no other software provider faces similar scrutiny, emphasizing that its practices are necessary to safeguard its proprietary assets.
Microsoft further critiques the CMA’s provisional findings as vague about which workloads are truly foreclosed and why competitors’ margins are too low. The company stresses the importance of factoring in the full stack and argues that the Windows IP is not the sole determinant of customer cloud decisions—broader service needs are equally essential.
The CMA’s Perspective and the Broader Cloud Market Investigation
The CMA’s cloud market investigation, opened in 2023, probes how dominant cloud providers may be restricting competition through pricing and non-price tactics. It has already provisionally ruled that Microsoft’s licensing approach partially forecloses competition and harms market health.One key issue under CMA’s examination is the complexity and opacity of software licensing in the cloud and how this affects customer switching costs. The regulator sees Microsoft’s behavior as inflating prices and implying customers pay twice for licenses, undermining fair competition.
The CMA appears inclined toward behavioral remedies—measures aimed at adjusting practices rather than breaking up companies—which might include mandating price parity or curtailing restrictive licensing clauses. These remedies aim to foster a level playing field that could benefit businesses by reducing costs and increasing cloud provider choice.
The investigation also intertwines with other behavioral concerns like “egress fees” charged for moving data out of a cloud provider, which act as financial barriers to switching. Reducing such fees and licensing restrictions could collectively unlock multi-cloud strategies, a highly desired but difficult goal for enterprise IT architectures today.
Implications for Windows Users and the Cloud Ecosystem
For Windows users, the licensing battle has tangible effects. Many enterprise applications run on Windows Server and SQL Server — software whose licensing costs impact overall cloud spend. Pricing restrictions on software licenses hamper flexibility in choosing or switching cloud providers, potentially leading to higher costs and reduced innovation.Moreover, the ongoing CMA scrutiny reflects a global trend toward regulating dominant technology platforms to prevent anti-competitive lock-in and preserve customer freedom. Should Microsoft be forced to alter licensing practices, it could lead to more transparent, competitive pricing models, better multi-cloud interoperability, and increased pressure on Microsoft to innovate without leveraging software dominance.
However, the dispute also highlights intrinsic tensions between intellectual property protection, innovation incentives, and competitive fairness. Balancing these interests in the cloud era, where software and infrastructure are deeply intertwined, is a complex regulatory challenge.
Outlook and the Legal-Commercial Tug of War
The CMA is expected to deliver its final decision by July 2025. The outcomes of the investigation could reshape cloud licensing norms, influencing not only Microsoft but also how competition authorities worldwide approach cloud market dominance.AWS, Google, and enterprise customers eagerly await the results, hoping for relief from licensing practices they view as restrictive and costly. Meanwhile, Microsoft braces for potential changes that might require adjusting its software licensing framework.
This high-stakes regulatory battle illustrates the evolving nature of competition in technology markets where software giants extend their influence into cloud infrastructure. For enterprises and end users, the ideal scenario would be increased transparency, competitive pricing, eased vendor lock-in, and the freedom to pursue optimal cloud strategies without prohibitive costs.
Conclusion: A Crucial Moment in Cloud Competition
The allegation that Microsoft imposes inflated, anti-competitive licensing costs on rivals’ clouds taps into fundamental questions about market power, innovation, and customer choice. AWS’s claim that half of Azure’s workloads would shift to competitors if not for these costs signals significant competitive distortion.While Microsoft emphasizes IP rights and broader ecosystem considerations, the CMA’s probe underscores the need for regulatory vigilance in markets where dominant players blend software licensing and cloud service provision. The outcome could herald a new era in cloud computing where licensing is fairer, pricing more consistent, and customers empowered to harness multi-cloud flexibility.
For the global Windows and cloud community, this dispute is more than a corporate skirmish; it is a defining moment shaping the future of cloud competition, market openness, and technology innovation.
Details and discussion are also chronicled in the original article from The Register: AWS: Customers would flee Azure if licensing costs were fair
Source: AWS: Customers would flee Azure if licensing costs were fair
