In a fast-moving episode that reshapes the European cloud competition narrative, the Cloud Infrastructure Services Providers in Europe (CISPE) — through its European Cloud Competition Observatory (ECCO) — has signalled a turning point: Microsoft has been moved out of the amber category after delivering a set of commercially equivalent licensing concessions to CISPE members, while Broadcom has been flagged again with a critical red assessment and is facing a formal legal challenge seeking the annulment of the European Commission’s approval of its VMware acquisition. The twin developments tighten the focus on software licensing as a frontline battleground for European cloud providers, pin together issues of digital sovereignty and competitive fairness, and raise the stakes for regulators, hyperscalers, and independent hosters alike.
Background
How ECCO, CISPE and the July 2024 agreement came to be
CISPE, a trade association formed to represent European cloud infrastructure providers, launched the European Cloud Competition Observatory (ECCO) as the independent guardian created after CISPE and Microsoft reached a Memorandum of Understanding in July 2024. That MoU followed a formal competition complaint by CISPE that argued Microsoft’s licensing and contract practices were disadvantaging non-Microsoft cloud vendors and reducing customer choice in Europe.
ECCO’s mission is to monitor the implementation of the commitments Microsoft made to CISPE members and to call out unfair licensing behaviour by any software vendor that could harm cloud competition in the European market. ECCO publishes periodic, public assessments that use a simple traffic-light framework — green, amber, red — to indicate the health of vendors’ practices with respect to European cloud competition.
Why this matters to Europe’s cloud market
Europe’s cloud ecosystem is distinct in its emphasis on data sovereignty, privacy regulation, and a diverse vendor landscape that includes national and regional cloud providers. When major software suppliers bundle products or set licensing terms that favour their own hyperscale clouds, independent European providers claim they cannot compete on an equal footing. This affects public sector organizations, regulated industries, and private-sector customers that prefer or are required to host data and workloads on local or regional platforms.
The ECCO reports and CISPE’s actions intersect with broader regulatory frameworks, notably EU competition law and the Digital Markets Act (DMA). The practical outcome of these technical, contractual and legal fights will influence where European organizations run Windows Server, SQL Server, Microsoft 365 workloads, and the degree of choice they will have when migrating to or operating in the cloud.
What ECCO’s latest assessment actually says
Microsoft moves to “green” — what changed
After two consecutive amber assessments that documented shortfalls in Microsoft’s delivery of the originally promised “Azure Local” hoster product, Microsoft and CISPE negotiated a second-phase agreement that ECCO says contains a set of commercially equivalent licensing changes. In practical terms, these changes include:
- Pay-as-you-go licensing for Windows Server and SQL Server at rates comparable to Azure’s consumption pricing, enabling independent providers to offer on-demand Microsoft workloads without the previous punitive pricing delta.
- The ability for CISPE members to deploy Microsoft 365 on local cloud infrastructure for sovereignty and compliance reasons, rather than being forced into Azure-only models.
- Expanded hoster pay-as-you-go capabilities allowing eligible CISPE members to host Microsoft workloads on independent European infrastructure with additional privacy guardrails.
ECCO’s latest report characterises the July agreement between Microsoft and CISPE as resolving
many of the issues that originally prompted the competition complaint — contingent on Microsoft delivering the promised contractual mechanisms, pricing and technical support. ECCO also emphasises that this settlement
does not address certain product-bundling strategies or the integration of AI features with productivity software or cloud services — areas it leaves explicitly out of scope.
Caveats and limits: who benefits and who doesn’t
The concessions are targeted: they apply to CISPE members (which have fluctuated around the high-30s in membership counts) and exclude hyperscalers and non-European cloud vendors above a certain revenue threshold. Microsoft has also committed to assess the effectiveness of the measures and may look to extend them to a wider set of European cloud providers if the trial proves successful.
Crucially, the agreement does not remove every obstacle or remove Microsoft from the competitive landscape: bundling, AI-enabled feature packages, and certain integration constraints remain unaddressed. ECCO makes clear that while the risk profile for Microsoft has improved, monitoring will continue.
Broadcom: red flag and legal escalation
ECCO’s continued red assessment
While Microsoft has been effectively nudged into a more cooperative posture by CISPE’s negotiation and ECCO oversight, Broadcom’s situation has worsened. ECCO’s assessment repeats language of “deterioration,” documenting new licensing behaviours imposed on European cloud providers and their customers that are judged to be unfair or exclusionary. The picture ECCO paints includes sharp price increases, tighter contractual conditions, reductions in partner program access for smaller cloud operators, and aggressive transitions from perpetual to mandatory subscription licensing.
CISPE’s annulment filing against the Broadcom–VMware deal
Responding to these developments, CISPE has filed a legal action before the EU General Court seeking the annulment of the European Commission’s 2023 approval of Broadcom’s acquisition of VMware. The complaint alleges that the Commission failed to properly assess the merger’s impact on competition in server virtualisation and related software markets and that it erred by not imposing conditions to prevent bundling or abuse of dominance.
The challenge argues that, post-acquisition, Broadcom has exercised control over VMware licensing and channel rules in ways that harm European cloud providers — including allegations of large, abrupt price hikes and contractual changes that effectively lock customers into restrictive models. CISPE’s legal move is a significant escalation that could, if successful, unravel regulatory clearance and force remedial action or divestitures.
Technical and commercial analysis: what these changes mean in practice
Pay-as-you-go for Windows Server and SQL Server
The technical and operational value of true pay-as-you-go (PAYG) licensing for Windows Server and SQL Server on independent clouds is twofold. First, it alleviates upfront licensing friction for customers migrating to ex-Azure providers by matching Azure’s on-demand cost model. Second, it enables hosters to offer managed services that are truly consumption-based without being penalised by heavier per-core or minimums-based licensing.
From an engineering standpoint, enabling PAYG outside Microsoft’s own cloud requires robust metering, auditing, and integration with Microsoft’s licensing back-end — plus contractual clarity on support boundaries. Microsoft’s willingness to permit PAYG access at Azure-comparable rates represents a major commercial concession, assuming the mechanics work as intended.
Microsoft 365 Local and sovereignty
Allowing Microsoft 365 deployments on local European clouds addresses sovereignty concerns for public bodies and regulated firms. However, the devil is in the details: the portability of policy enforcement, updates, security telemetry, identity integration (for example with Entra ID), and the handling of AI-enabled features are not fully resolved in the ECCO-covered changes. Local hosting of productivity software is a step forward, but it does not automatically solve identity, data residency, or cross-border access patterns unless those integrations are comprehensively specified.
Remaining friction points: bundling, AI, and platform lock-in
ECCO explicitly excluded bundling strategies and AI integrations from the scope of the Microsoft-CISPE changes. That matters because the next phase of competition will centre on whether vendors can tie premium AI features to their own clouds or to bundled packages in a way that recreates economic lock-in. If AI functionality becomes the decisive element in productivity and platform selection — and it already is a major differentiator — then differential access to those features will quickly become a new battleground.
Strengths of the outcome — and the opportunities it creates
- Practical, immediate relief for regional hosters. PAYG licensing and local Microsoft 365 deployments give European providers concrete tools to build competitive offers for customers with sovereignty needs.
- A replicable model for negotiated remediation. The Microsoft-CISPE pathway shows that industry dialogue, coupled with independent oversight, can deliver measured changes without resorting solely to long legal battles.
- Policy leverage for regulators. ECCO’s public assessments and CISPE’s legal pressure sharpen the regulatory conversation, making it easier for competition authorities to identify concrete remedies and to hold vendors accountable.
- Market dynamism. The Broadcom shockwaves have already motivated competitors and open-source alternatives to beef up migration and interoperability offerings, creating more choices for customers.
Risks and unintended consequences
- Partial fixes can entrench new divides. The Microsoft concessions are limited to CISPE members and exclude hyperscalers; that patchwork could create new two-tier markets where customers on smaller clouds receive certain rights but still face comparative disadvantages on AI-enabled capabilities.
- Regulatory whiplash and legal risk. CISPE’s annulment filing against Broadcom could take years to resolve. While that plays out, customers face price shocks and contract uncertainty, and providers must make strategic decisions without clarity.
- Vendor responses and escalation. Red flags for Broadcom are likely to harden industry stances and could trigger counter-litigation, partner programme rewrites, or further changes that destabilise long-standing ecosystems like VMware’s channel.
- Technical integration hazards. Implementing PAYG and local-hosted productivity at scale requires precise engineering and audit compliance; small providers may struggle to absorb the operational burden, undermining the intended competitive benefit.
Industry and regulator reactions (what the market is saying)
The reaction across Europe’s cloud ecosystem has been mixed. CISPE and many regional hosters have welcomed the Microsoft concessions as a pragmatic gain that preserves choice. Conversely, several advocacy groups and critics warn that the agreement falls short on long-term structural issues: AI-feature locking, identity dependencies, and product bundling remain high-risk vectors for re-entrenchment.
Broadcom’s red assessment has drawn especially strong criticism. Many independent providers allege that Broadcom’s move to aggressively convert perpetual licenses to subscription models, raise price thresholds, and tighten partner requirements has fuelled migration interest toward alternative platforms and spurred formal legal action. The financial effect is visible: some enterprises are exploring migrations and contingency plans as a hedge against renewal-time price shocks.
Regulators are watching closely. Competition authorities have already been involved in prior assessments of these market behaviours, and the ECCO reports increase the granularity of evidence that watchdogs can use when deciding whether to open investigations or require remedies under competition law.
Timeline and what to watch next
- Microsoft’s implementation and audit period: ECCO will continue to monitor Microsoft’s delivery of the contractual and technical mechanisms required to make PAYG and local-hosted Microsoft 365 workable for CISPE members.
- Broadcom legal proceedings: CISPE’s annulment claim will proceed before the EU General Court; hearings and procedural milestones over the next 18–36 months will determine whether the Commission’s 2023 decision is upheld or annulled.
- Vendor behaviour and channel impacts: Watch for partner programme revisions, resale restrictions, or minimum licensing thresholds from VMware/Broadcom and others; these changes will directly affect small and mid-sized cloud providers.
- Regulatory follow-up: National and EU-level competition agencies may open probes or require corrective actions depending on the outcomes of ECCO monitoring and the evolution of vendor policies.
- Customer migrations: Expect a steady uptick in migration consulting, third-party migration tool adoption, and alternative cloud offerings that position themselves as “Broadcom-free” or “Microsoft-equivalent” for legacy workloads.
Practical guidance for cloud providers and enterprise customers
- For independent European cloud providers:
- Prioritise technical readiness for PAYG metering and compliance auditing if you plan to offer Microsoft PAYG services.
- Engage legal counsel early to interpret manufacturer contracts and to prepare for partner programme shifts.
- Explore differentiated propositions that combine sovereignty guarantees, transparent pricing, and migration support to capture customers unsettled by vendor changes.
- For enterprise customers and public-sector bodies:
- Reassess renewal windows and contract end dates. Early dialogue with vendors can create negotiating leverage if renewals fall during periods of licence upheaval.
- Consider multi-vendor or hybrid strategies that limit exposure to single-vendor pricing changes and provide contingency migration pathways.
- Evaluate the technical and legal implications of hosting productivity suites locally versus relying on hyperscale-managed services, weighing sovereignty and total cost of ownership.
Final assessment: a step forward, but not the end of the story
The ECCO green light for Microsoft — arrived via a targeted agreement with CISPE — is an important pragmatic outcome that calibrates competition pressures in Europe’s cloud market. It demonstrates that negotiated remedies, under independent observation, can produce commercially meaningful concessions.
At the same time, the persistent red flag on Broadcom and CISPE’s legal action underscore the deeper structural tensions at play. The software licensing models, partner programme rules, and bundling strategies that these vendors adopt have real economic and strategic impacts on independent cloud providers, customers seeking digital sovereignty, and the competitive landscape at large.
This is not a binary victory or defeat for any single party. Instead, the developments mark a critical inflection point where negotiation, oversight, litigation and regulatory scrutiny will interplay to shape the next chapter of cloud competition in Europe. The outcome will hinge on implementation details, the evolution of AI-linked product strategies, and the willingness of competition authorities to act decisively when structural harms persist.
European cloud choice has been preserved in part — but the watchword for the coming months is vigilance. The market has been nudged toward greater parity, yet durability will depend on careful delivery, transparent auditing, and continued public oversight to ensure that the promise of a more open, sovereign, and competitive cloud ecosystem becomes a lasting reality.
Source: Data Center Dynamics
CISPE observation board gives Microsoft the green light; builds pressure on critique of Broadcom