European Cloud Computing Turns a Corner: Microsoft-CISPE Deal Promises Fair Competition & Sovereignty

European cloud computing has long battled for regulatory fairness in the face of US tech giants' commercial dominance, but a groundbreaking agreement between Microsoft and the Cloud Infrastructure Services Providers in Europe (CISPE) may signal a new chapter for regional sovereignty and customer choice. This significant breakthrough follows years of tension and lawsuits, with the latest concessions aiming to address some of the most contentious issues surrounding Microsoft's software licensing practices, especially as they pertain to European cloud providers.

The Battle for Cloud Fairness: Roots of the Microsoft-CISPE Dispute​

The roots of the Microsoft-CISPE conflict reach back to at least 2022, when CISPE lodged a formal complaint with the European Commission. The core of the grievance centered on what CISPE and other industry voices described as discriminatory licensing practices: Microsoft was accused of setting higher prices for customers wanting to run its software—such as Windows Server and SQL Server—on cloud infrastructures operated by rivals, rather than on Microsoft Azure itself. This effectively constrained the ability of non-Microsoft cloud providers to compete on equal terms, and raised broader questions about market fairness and vendor lock-in.
The complaint came at a time when European policymakers and cloud customers were placing greater emphasis on digital sovereignty and local control of data. The cloud market had been leaning ever more heavily toward hyperscalers, and Microsoft's tactics, CISPE argued, further tipped the scales away from smaller and regional providers.

What’s Changed: Key Concessions in the Microsoft-CISPE Agreement​

The June 2025 agreement marks a substantial shift in this dynamic. Under the terms of the new deal, CISPE members—along with eligible European cloud providers who sign up within the next few months—are permitted to offer Microsoft software on a true pay-as-you-go basis through the CSP-Hoster (CSP-H) program. This means that pricing for key Microsoft products, including Windows Server and SQL Server, will be more directly comparable across competing cloud platforms rather than favoring Azure.
Significantly, Microsoft 365 Local becomes available for deployment on regional cloud infrastructure. For European enterprises and public sector organizations, this offers a notable step toward digital sovereignty, as sensitive data can remain within the EU and subject to stricter local privacy standards.
According to Francisco Mingorance, CISPE's secretary general, "The agreement we reached with Microsoft marks a significant breakthrough in our long-standing efforts to ensure a level playing field.” He emphasized that enterprise customers will gain the ability to select from a much broader array of cloud solutions, matching their sovereignty, compliance, and economic needs.

The Mechanics: Who Benefits, and Who’s Left Out?​

While the agreement has been broadly welcomed by European mid-tier and niche cloud providers, it notably excludes what Microsoft terms “Listed Providers”—essentially hyperscale cloud competitors such as Amazon Web Services and Google Cloud. This carve-out is intended to bolster the competitive prospects of regional and smaller providers, in theory leading to a more level digital playing field within the EU.
Furthermore, Microsoft has announced that it will revisit and potentially expand access to the revised licensing programs following a one-year review. This conditionality underscores both the experimental nature of the current arrangement and Microsoft’s incremental approach toward broader reform.
CISPE describes this as a victory for competition and innovation in the European cloud ecosystem. By limiting certain benefits to European-owned or controlled infrastructure, the deal seeks to empower local players and address much-publicized concerns around foreign data jurisdiction and GDPR compliance.

Remaining Hurdles: What Hasn’t Changed?​

Not everyone is convinced that this agreement delivers lasting benefits or systemic reform.
Two major CISPE demands remain conspicuously unmet. First, the deal does not grant Windows 10 or 11 Virtual Desktop Infrastructure (VDI) multi-session rights on European-owned, multi-tenant infrastructure. This feature is highly attractive for scalable, shared desktop deployments, particularly in government and education but remains tightly bound to Microsoft’s own cloud.
Second, Microsoft has not fully relaxed requirements for using Entra ID (previously Azure Active Directory) when activating Azure AD and Microsoft 365. This stipulation, critics argue, continues to limit true interoperability and wholesale replacement options for customers wanting to migrate away from proprietary Microsoft identity management structures.
Ryan Triplette, executive director of the Coalition for Fair Software Licensing, is among those sounding a skeptical note: "Every stalling tactic has just bought Microsoft more time to lock in customers with restrictive and anti-competitive licensing practices," he said. “This is more smoke and mirrors from Microsoft: offer weak concessions in an attempt to avoid regulatory scrutiny and disingenuously pretend these actions promote European competition. Meanwhile, Microsoft continues to line its pockets at the expense of customer choice around the world.”

The Oversight Angle: Independent Evaluation and Continuing Concerns​

Monitoring and enforcement of the new licensing regime falls under the remit of the European Cloud Competition Observatory (ECCO). However, recent reports from ECCO suggest a lukewarm reception, with Microsoft’s efforts so far deemed “disappointing” and earning only an Amber rating on the watchdog’s scale. Key performance indicators include pricing fairness, technical interoperability, and compliance transparency.
The ongoing scrutiny reflects the high stakes at play—European authorities are keen to avoid a scenario in which superficial changes fail to uproot entrenched market power or simply serve to delay more robust regulatory intervention.

The Context: European Digital Sovereignty and the Future of Cloud​

Digital sovereignty has become a political and commercial rallying cry across the continent. Recent EU initiatives—from the Gaia-X project to digital market regulations—aim to reclaim local control over critical digital infrastructure, foster innovation, and secure citizens’ data under European laws.
The Microsoft-CISPE case is emblematic of these broader trends. As cloud computing’s importance for AI, cybersecurity, and digital transformation continues to grow, so too does the imperative for enforceable rules ensuring fair access and competition. This new licensing agreement, while limited in scope, sets an important precedent and may encourage further reforms by other tech giants facing similar scrutiny.

Practical Implications for Cloud Customers​

For European enterprises, governments, and institutions evaluating their cloud options, the new deal translates into several tangible benefits and new considerations:

• Greater Vendor Choice: The pay-as-you-go licensing option expands the universe of Microsoft software hosting partners beyond Azure, facilitating multi-cloud strategies and hybrid deployments.
• Improved Pricing Clarity: Aligning Microsoft software costs between Azure and independent clouds reduces one of the main barriers to migrating workloads, especially legacy or mission-critical systems.
• Strengthened Sovereignty Guarantees: Being able to deploy Microsoft 365 Local on European infrastructure offers more control over data residency and compliance with regional regulations.
• Caveats on Capabilities: Organizations reliant on advanced VDI use cases or seeking full independence from Microsoft identity management may still face limitations.

A summary table is presented below:

Risk Assessment: Is the Competitive Playing Field Truly Leveled?​

While CISPE celebrates the deal as a major victory, the competitive landscape remains complex:

• Hyperscaler Exclusion: By shielding AWS, Google, and other “Listed Providers” from the revised terms, the agreement arguably perpetuates the bifurcation of the market, where smaller and mid-sized players operate under one set of rules while the giants remain subject to another. Whether this stimulates genuine regional competition or merely fragments the market remains to be seen.
• Maturity of Enforcement: The efficacy of ECCO’s oversight, and the willingness of Microsoft to extend or deepen concessions after the initial review period, are still in question.
• Indirect Lock-In Effects: By restricting some of the most in-demand features (like VDI multi-session and identity management flexibility), Microsoft retains powerful levers to incentivize use of its own cloud and ancillary services.
• Regulatory Overhang: The European Commission, national authorities, and industry groups continue to scrutinize the terms of cloud competition. Further regulatory action—should Microsoft’s measures prove inadequate in practice—is far from out of the question.

Critical Analysis: Opportunity or Merely Optics?​

There is no denying that the Microsoft-CISPE accord marks an inflection point in the trajectory of European cloud governance, especially given the years spent at an adversarial impasse. The new licensing model does remove key roadblocks for a wide array of European cloud providers, many of which serve specialized sectors or national markets poorly addressed by the hyperscalers’ global scale.
From a customer perspective, immediate benefits include expanded partner options, reduced cost disparity, and more credible guarantees around local data residency—factors that are likely to play well with both enterprise CIOs and public sector procurement strategists.
Yet, the deal’s deficiencies are equally notable and demand caution. The exclusion of global-scale competitors, the retention of essential features solely for Microsoft’s cloud platform, and the continued entanglement of critical cloud services with proprietary directory services all serve to limit real choice and innovation. There is a risk, echoed by vocal critics such as the Coalition for Fair Software Licensing, that this agreement is less a transformation and more a tactical maneuver—a means for Microsoft to forestall deeper regulatory interventions while preserving effective control over critical aspects of the cloud stack.
Moreover, the mechanisms through which ECCO and other bodies review and enforce Microsoft’s commitments will be crucial. Transparency around pricing parity, service enablement, and technical interoperability must be more than nominal if genuine competition is to flourish.

Recommendations for European Cloud Customers and Providers​

For those in the market for cloud solutions, the evolving regulatory and commercial landscape underscores the importance of diligence and forward planning. Prospective buyers should:

• Scrutinize Vendor Contracts: Ensure that cloud providers—whether CISPE members or others—can deliver the flexibility, compliance, and cost predictability now theoretically available under the new Microsoft licensing conditions.
• Monitor Policy Shifts: Keep abreast of updates to eligibility, scope, and program structure following Microsoft’s one-year review period.
• Pressure for Transparency: Demand clear publication of pricing, SLAs, and technical integration specifications from providers, including disclosure of any remaining entanglements with proprietary Microsoft mechanisms.
• Leverage Community and Advocacy Groups: Engage with industry alliances and customer advocacy coalitions to help shape ongoing reforms and ensure that regional providers’ interests remain central to future policy adjustments.

Conclusion: A Step Forward, But the Journey Is Far from Over​

The detente between Microsoft and CISPE is widely hailed as a historic moment for European digital autonomy and cloud innovation—it breaks new ground in leveling the pricing field and opening up Microsoft’s lucrative ecosystem to broader competition across the EU. At the same time, with notable restrictions still in place and oversight bodies cautious in their praise, it is clear this deal is far from an endpoint.
Whether this breakthrough leads to a truly competitive, transparent, and sovereign European cloud sector, or serves primarily to manage regulatory risk for Microsoft's vast global empire, will depend on developments still to come. The eyes of policymakers, providers, and customers remain sharply focused on whether Microsoft’s concessions are a harbinger of genuine reform or simply a well-timed gambit in the ongoing chess match for cloud supremacy.
As the review process unfolds and further reforms are debated in Brussels and beyond, European cloud customers and providers alike must stay vigilant—taking advantage of newfound opportunities while continuing to push for a marketplace that is both genuinely fair and fully accountable.

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Source: IT Pro Microsoft and CISPE make ‘significant breakthrough’ with software licensing concessions – critics say it's all just 'smoke and mirrors'