Google’s decision to keep the pressure on Microsoft over cloud licensing turned into a public reminder this week that the fight over how Windows and SQL Server licenses move into the cloud is far from settled—and that regulators, competitors and customers are still picking through the consequences.
Background
Microsoft’s licensing for server and database software has long been a business-as-usual part of enterprise IT procurement: companies buy Windows Server and SQL Server licenses under volume agreements, buy Software Assurance or subscription equivalents, then run those workloads on-premises or in cloud environments according to contractual product terms. Starting in 2019 and evolving since, Microsoft introduced and refined mechanisms such as Azure Hybrid Benefit and License Mobility that give customers ways to use on-premises licenses in the cloud—but with important exceptions and asymmetric economics depending on whether the cloud provider is Azure or a rival.That asymmetry is at the root of the complaints. Google and some European cloud providers say Microsoft’s rules and pricing make it dramatically more expensive or operationally awkward to run Microsoft workloads on AWS, Google Cloud, or other third-party clouds, effectively giving Azure an advantage in IaaS workloads. Microsoft insists it has negotiated fixes with trade bodies and that its licensing remains lawful and commercially justified. The political and regulatory reaction—spanning the European Commission, the UK Competition and Markets Authority (CMA), and the U.S. Federal Trade Commission (FTC)—has turned what was a technical licensing dispute into a global competition story.
How Microsoft’s licensing works in practice
Azure Hybrid Benefit and License Mobility: the mechanics
- Azure Hybrid Benefit (AHB) lets qualifying customers apply existing Windows Server and SQL Server licenses with active Software Assurance or qualifying subscriptions to Azure VMs, often reducing the VM cost to the Linux-equivalent base compute rate or enabling pay-as-you-go license models. Azure documentation and Microsoft licensing rules explicitly describe the benefits, limitations and eligibility requirements. AHB is real and documented; it materially lowers cost for customers who move to Azure.
- License Mobility through Software Assurance allows some Microsoft server products to be deployed on shared infrastructure operated by partners, but certain use rights and partner qualifications apply. Product Terms and licensing FAQs make clear that reassignments to shared hosts or third-party providers must meet program conditions and sometimes exclude short-term reassignment windows or require a qualified mobility partner. In other words, running the same license on another hyperscaler isn’t always an equal swap.
The practical asymmetry
In plain terms: Microsoft’s own mechanisms typically let customers bring existing licenses into Azure cheaply (or without paying an extra pay-as-you-go license), whereas moving those same on-prem licences to a competing cloud can trigger different policies, additional fees, or partner eligibility hurdles. That asymmetry is the central commercial grievance driving outsider complaints and regulator interest. Multiple industry sources and Microsoft’s own product documentation describe the mechanism and constraints.The complaints: who’s saying what
Google’s formal complaint to the European Commission
In September 2024 Google filed a formal complaint with the European Commission arguing that Microsoft’s licensing practices penalize customers who choose rival clouds, raising costs and entrenching Azure. Google’s public statements highlighted both the price differential (calling out a “striking 400% markup” in some cases) and the broader economic harm—citing a CISPE estimate of up to €1 billion in extra licensing costs borne by European customers. Google urged regulators to require parity and portability for customers’ existing licenses.CISPE, AWS and other cloud providers
The Cloud Infrastructure Service Providers in Europe (CISPE), a trade group of European cloud operators, originally filed a complaint in 2022. Microsoft struck a deal with CISPE in mid-2024 that led CISPE to withdraw its complaint after Microsoft committed to delivering technical and licensing changes for qualifying European hosters and offered a lump-sum contribution to CISPE to cover campaign costs. That deal excluded major hyperscalers such as AWS and Google, however, and those providers criticized the settlement as partial and insufficient. Reuters and CISPE statements documented the settlement and its terms and conditions.UK and U.S. regulators
The UK’s Competition and Markets Authority (CMA) has found that certain Microsoft licensing practices have restricted cloud choice and raised switching costs; in 2025 it provisionally recommended further investigations into dominant providers and highlighted egress fees and unfavorable licensing as lock-in mechanisms. Meanwhile in the U.S., the FTC opened a broad inquiry into Microsoft’s cloud and licensing practices—including allegations that Microsoft’s terms penalize customers for moving off Azure—collecting documents and engaging in an evidence-gathering phase. These public regulatory steps have increased the stakes and the attention on the licensing dispute beyond the industry press.What the disputes actually allege — and what’s been independently verified
Several concrete claims have been central to the controversy. Each is confirmed in public filings and reporting, but with varied degrees of quantification and dispute around origins and methodology:- Price differentials: Google and others quote a 400% markup (i.e., 4x) for some licensing scenarios outside Azure, while CISPE members and trade reporting have used language like “up to five times more” in describing extra costs for rival clouds. These figures come from industry analyses and vendor statements; they reflect pricing differentials in some scenarios and licensing programs, but the exact multiplier varies by product, contract, and customer eligibility. Treat headline multipliers as illustrative of a large delta rather than an immutable rule.
- Technical and operational constraints: Regulators and rivals have flagged conditions such as use-right limitations, partner qualification clauses, and differences in security-update support for non-Azure hosts. Microsoft has responded by describing program options and by negotiating remediation for CISPE members. Product documentation and the CISPE settlement confirm that Microsoft retains product-level controls that can be applied differently across hosting contexts.
- Economic harm and scale: Google referenced a CISPE figure of roughly €1 billion per year of additional licensing costs to European customers. That estimate has circulated in regulatory and press reporting; it is an industry estimate that depends on assumptions about customer mixes and workloads. It’s a plausible, attention-grabbing aggregate that regulators will seek to validate or challenge during formal inquiry.
- Deal dynamics and capture risk: Critics noted that Microsoft negotiated a settlement with CISPE that led to withdrawal of that complaint, and later became a member of the trade group—moves that rivals claim mute industry opposition and leave unresolved issues for customers who aren’t CISPE beneficiaries. Reporting and CISPE statements document the deal and Microsoft’s admittance to CISPE; the optics and implications have driven claims that the settlement was partial.
Strengths of the challengers’ case — why regulators are listening
- Clear economic motive to prefer Azure. The pricing asymmetry, combined with Azure-specific benefits like unlimited virtualization rights in some licensing contexts, gives Microsoft a practical incentive to structure licenses in ways that favor its cloud. When competition law tests whether conduct likely leads to foreclosure, differential pricing tied to platform choice is a straightforward red flag.
- Regulatory pattern and precedent. European and UK authorities have repeatedly scrutinized Microsoft for bundling or tying practices (e.g., past Teams investigations) and have new competition tools available that can impose behavioral or structural remedies. The CMA’s provisional findings about cloud lock-in and the European Commission’s active engagement show regulators view cloud market structure as a live competition problem.
- Documented market harm narratives. Customers and smaller cloud providers have practical switching costs—migrations are expensive and risky, and licensing surprises compound that. Regulators weigh customer harm heavily; industry complaints and trade group actions that show consistent customer pain are persuasive.
Weaknesses and legal risks for challengers
- Complexity of enterprise licensing. Microsoft licensing is notoriously intricate. Differing product terms, entitlement windows, and support rules mean a single, one-size-fits-all legal theory can be hard to prove. Regulators will need to tie contractual provisions to demonstrable market foreclosure, not merely show they exist. That burden favors methodical, document-backed enforcement rather than rhetorical claims about “taxes.”
- Microsoft’s commercial remedies and settlements. The CISPE settlement and Microsoft’s public offers to concession packages complicate enforcement. If Microsoft can show it has remedied concrete harms through products and pricing for many affected customers, regulators may decide the situation is fixed or that remedies short of formal fines are adequate. Critics will argue the settlement is limited, but regulators weigh whether commitments sufficiently restore competition in practice.
- Global policy fragmentation. Different jurisdictions take different approaches to remedies. The EU’s Digital Markets Act (DMA) and member-state enforcement tools differ from U.S. antitrust practice. Divergent regulatory outcomes across geographies could blunt the effect of any single enforcement action.
Microsoft’s position and counter-arguments
Microsoft frames the row as a competitive commercial dispute, not an antitrust violation. The company points to its settlement with CISPE, its public product terms and the availability of licensing programs, stressing that it has worked with European cloud providers to produce hoster-oriented offers. Microsoft also argues that rivals like Google want the ability to build cloud services on top of Microsoft intellectual property without paying fair value for that IP—an argument familiar in software licensing disputes. Microsoft has said it expects Google’s complaint to fail, highlighting the CISPE deal as evidence that negotiated remedies can work.Risks and implications for enterprise customers
- Procurement uncertainty. Until regulators definitively rule or Microsoft changes global product terms, customers face uncertainty over long-term cost predictions when choosing cloud hosts for Microsoft-heavy workloads.
- Vendor lock-in trade-offs. Many organizations must weigh the immediate operational advantages of Azure (cost, integration, support) against strategic desires for multi-cloud portability. The current licensing environment makes that calculus asymmetric—Azure often looks cheaper on paper for Windows-centric stacks.
- Security and patching concerns. Some complaints argued Microsoft offered different update or ESU (Extended Security Update) terms depending on hoster; customers who prioritize long-term security assurances must verify update eligibility and SLA parity when placing Microsoft workloads on non-Azure clouds. Regulators and customers will probe any differential in security update parity.
What regulators could reasonably do
Regulators have a range of tools—both proactive and remedial—that could reshape the market:- Behavioral remedies (e.g., requiring licensing parity or prohibiting discriminatory pricing tied to cloud choice).
- Structural remedies (rare and severe; splitting businesses or forcing divestitures).
- Transparency and monitoring requirements (forcing clear, accessible licensing terms and external auditing).
- Targeted conduct prohibitions such as banning short-notice reassignment restrictions or explicit “exit charges” that penalize migration.
What’s likely to happen next — practical scenarios
- Regulatory settlement/modification: The EU or CMA could extract binding commitments from Microsoft that extend the CISPE remedies more broadly (e.g., to include major non-CISPE clouds) and create enforcement mechanisms such as a monitoring body.
- Formal infringement finding: Regulators could conclude Microsoft abused dominance, leading to enforceable orders or fines; this would be the most disruptive outcome and take the longest to litigate.
- Status quo with incremental changes: Microsoft may respond to pressure by offering broader commercial programs for non-Azure hosts—partial fixes that reduce headline differentials but leave structural issues intact.
- Protracted litigation across markets: Expect multi-jurisdictional proceedings (EU, UK, U.S.) to proceed in parallel; outcomes may diverge, creating localized remedies and continued uncertainty.
Practical advice for IT leaders and procurement teams
- Inventory licensing entitlements now. Map where Windows Server, SQL Server and server-based Microsoft entitlements exist and how they’re covered (Software Assurance, subscription, SPLA, CSP-Hoster, etc.).
- Model total cost of ownership (TCO) for each cloud scenario. Don’t assume license parity—include potential pay-as-you-go charges, partner fees and migration windows in estimates.
- Consider multi-cloud decoupling strategies. Where feasible, containerize or refactor workloads to reduce per-instance licensing exposure; alternatively, evaluate open-source or cloud-native equivalents for non-essential components.
- Document contractual exit rights. When negotiating cloud contracts, add explicit language on licensing portability, audit rights and remedial pricing adjustments should regulator rulings change the legal landscape.
- Watch for regulatory commitments. If Microsoft makes binding commitments under EU or UK oversight, those may change procurement calculus quickly; procurement teams should plan to re-open negotiations if meaningful remedies arrive.
Critical analysis: strengths, gaps, and systemic risk
- Strength of the challengers: The case has traction because it combines clear economic incentives (pricing asymmetry), industry support (CISPE and public complaints), and regulatory appetite (CMA and FTC engagement). Those are classic ingredients for successful competition scrutiny.
- Gaps in the challengers’ narrative: Headlines like “400% markup” and “five times more” are useful soundbites but depend heavily on contract specifics. Proving a market-wide foreclosure or quantifying damages to a legal standard is considerably harder than demonstrating anecdotal or even multi-customer price differentials.
- Systemic risks if left unresolved: If enforcement doesn’t produce clear, enforceable rules on license portability and parity, the cloud market risks entrenched platform dominance around proprietary stacks, higher costs for customers, and reduced innovation among smaller cloud providers.
- Microsoft’s legitimate defence: Microsoft’s intellectual property rights and legitimate commercial pricing choices are valid defenses. The company’s challenge for regulators is to demonstrate that its IP-based pricing is both reasonable and non-discriminatory across equivalent contexts—or else adjust its models.
Conclusion
The publicity around Google’s anniversary reminder and industry reporting shows that cloud licensing is now a front-line competition issue. The substance of the dispute—the real-world cost and portability differences between running Windows and SQL Server on Azure versus other clouds—is demonstrable, documented, and already shaping procurement decisions. Regulators in the EU, UK and U.S. have the evidence and the political will to press for remedies, but the complexity of enterprise licensing and the patchwork of commercial settlements make simple cures unlikely.For enterprises, the takeaway is pragmatic: prepare for continued uncertainty, inventory entitlements, and negotiate contractual protections that account for licensing asymmetries. For policy makers, the choice narrows to three paths—negotiate enforceable parity and portability commitments, litigate for structural relief, or accept a market where proprietary licensing continues to shape cloud competition. The outcome will matter for costs, innovation and resilience across the cloud ecosystem for years to come.
Source: theregister.com Google points out Microsoft's cloudy licensing still stinks