The current landscape of cloud computing reveals an intense battleground dominated by the biggest three players: Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP). This triad controls the majority of cloud infrastructure, shaping patterns of customer choice, pricing, and innovation. A recent investigation by the UK's Competition and Markets Authority (CMA) has brought to light a significant challenge faced by enterprises leveraging Microsoft server software in the cloud: the predicament created by Microsoft’s licensing policies that effectively discourage migrating Windows Server and SQL Server workloads away from Azure.
Traditionally, enterprises could use existing Microsoft software licenses to host server software on outsourced hardware or competing clouds. However, since 2019, Microsoft altered this approach by disallowing the use of standard licenses for virtualized versions of their server software hosted on clouds other than Azure. Microsoft labels competitors AWS, Google, and Alibaba as "listed providers." Under this policy, enterprises hosting Windows Server or SQL Server on these competing clouds must obtain separate licenses, paying significantly more—up to four times the standard cost.
Google, in its submission to the CMA, highlighted how this pricing disparity makes GCP a less competitive choice for organizations with a Windows footprint. This pricing structure essentially creates a "devil's choice" for enterprises: either migrate to Azure to avoid exorbitant licensing costs or bear significantly higher expenses running Windows workloads on AWS or GCP.
Google noted to the CMA that typical enterprises have accumulated a significant investment in Windows Server and SQL Server applications over years. Porting these applications to Linux entails extensive rewriting and modernization efforts—projects that are time-consuming, costly, and often beyond the resourcing capability of many organizations. Google cited examples of customers whose migrations "took several years, came at significant expense," and were not feasible without substantial in-house engineering.
AWS reinforced this view by stating that while non-Windows re-platforming is possible, it is "relatively rare" given the economic and logistical hurdles. Many applications are tied to Windows Server exclusivity, further impeding the move to open-source alternatives. The collective viewpoint from these major cloud players portrays Microsoft’s licensing regime as a significant barrier to fair competition, especially for traditional enterprises heavily reliant on Microsoft software.
AWS estimates that up to half its customers would consider migrating workloads elsewhere if licensing costs were more aligned, illustrating the potential market shift held back by current Microsoft practices. Moreover, Google underlined that a majority of Azure revenue—between 70% and 80%—comes from Windows Server and SQL Server usage, underscoring how central Microsoft’s server software is within the cloud ecosystem and, by extension, the critical role this licensing strategy plays.
However, the CMA’s preliminary findings lean toward viewing Microsoft’s licensing as potentially harming competition. Besides software licensing, the CMA is also scrutinizing egress fees and technical barriers to moving cloud services. While the regulator considers egress fees less problematic—especially given commitments to discounts—smaller cloud providers contest that such practices still favor hyperscale incumbents, further entrenching market dominance.
The CMA’s final decision is anticipated in July, with remedies that could redefine pricing and technical interoperability rules in the UK cloud market. Whatever its conclusions, the investigation underscores increasing regulatory attention on cloud market fairness and the balance between license protections and consumer choice.
On the other hand, adherence to Microsoft licensing may constrain budgets and cloud architecture choices, sometimes forcing compromises on cloud innovation and multi-cloud deployments.
For organizations embracing digital transformation, these issues stress the importance of:
Enterprises face a difficult decision matrix: invest years and significant budgets rewriting legacy applications for Linux platforms or remain bound by Azure’s ecosystem due to cost and operational realities. The CMA investigation in the UK highlights how impactful and intricate this issue has become in the evolving cloud market.
For the Windows and cloud communities, keeping a close eye on regulatory outcomes and preparing for multi-year migration investments are imperative. Achieving a more open and competitive cloud environment hinges on addressing such deeply embedded economic and technical challenges, promising long-term benefits for the digital economy and IT innovation.
This feature has drawn on detailed thematic submissions by Google and AWS to the CMA, as well as the regulator's preliminary analysis of Microsoft’s cloud practices and the broader industry context documented in WindowsForum community discussions and industry reports .
Source: Google and AWS: Linux too hard, so customers move to Azure
Traditionally, enterprises could use existing Microsoft software licenses to host server software on outsourced hardware or competing clouds. However, since 2019, Microsoft altered this approach by disallowing the use of standard licenses for virtualized versions of their server software hosted on clouds other than Azure. Microsoft labels competitors AWS, Google, and Alibaba as "listed providers." Under this policy, enterprises hosting Windows Server or SQL Server on these competing clouds must obtain separate licenses, paying significantly more—up to four times the standard cost.Google, in its submission to the CMA, highlighted how this pricing disparity makes GCP a less competitive choice for organizations with a Windows footprint. This pricing structure essentially creates a "devil's choice" for enterprises: either migrate to Azure to avoid exorbitant licensing costs or bear significantly higher expenses running Windows workloads on AWS or GCP.
The Complications of Switching to Linux
One might assume the resolution lies in migrating workloads from Windows Server to Linux-based platforms to escape Microsoft’s licensing fees. However, the reality is far more complex. Both Google and AWS emphasize the deep-rooted dependency many enterprises have on Microsoft environments.Google noted to the CMA that typical enterprises have accumulated a significant investment in Windows Server and SQL Server applications over years. Porting these applications to Linux entails extensive rewriting and modernization efforts—projects that are time-consuming, costly, and often beyond the resourcing capability of many organizations. Google cited examples of customers whose migrations "took several years, came at significant expense," and were not feasible without substantial in-house engineering.
AWS reinforced this view by stating that while non-Windows re-platforming is possible, it is "relatively rare" given the economic and logistical hurdles. Many applications are tied to Windows Server exclusivity, further impeding the move to open-source alternatives. The collective viewpoint from these major cloud players portrays Microsoft’s licensing regime as a significant barrier to fair competition, especially for traditional enterprises heavily reliant on Microsoft software.
Strategic Consequences for the Cloud Market
This tangled licensing architecture restricts customer choice and innovation. Enterprises that have fully invested in Microsoft on-premises technology face "effective denial" of competitive alternatives when transitioning to cloud infrastructure. Reducing switching costs is a pillar of healthy competition in cloud services; by making diverse cloud adoption economically punishing, Microsoft’s policy favors Azure adoption and potentially stifles dynamism across the cloud market.AWS estimates that up to half its customers would consider migrating workloads elsewhere if licensing costs were more aligned, illustrating the potential market shift held back by current Microsoft practices. Moreover, Google underlined that a majority of Azure revenue—between 70% and 80%—comes from Windows Server and SQL Server usage, underscoring how central Microsoft’s server software is within the cloud ecosystem and, by extension, the critical role this licensing strategy plays.
Microsoft’s Position and the Regulatory Outlook
Microsoft defends its licensing policies as a balanced approach to pricing software usage in cloud environments. It argues that pricing structures avoid undercharging, which would incentivize cloud providers to shift customers away from Microsoft platforms, threatening the viability of its software ecosystem. The company claims to walk a tightrope to maintain fair value for its intellectual property without discouraging legitimate customer use.However, the CMA’s preliminary findings lean toward viewing Microsoft’s licensing as potentially harming competition. Besides software licensing, the CMA is also scrutinizing egress fees and technical barriers to moving cloud services. While the regulator considers egress fees less problematic—especially given commitments to discounts—smaller cloud providers contest that such practices still favor hyperscale incumbents, further entrenching market dominance.
The CMA’s final decision is anticipated in July, with remedies that could redefine pricing and technical interoperability rules in the UK cloud market. Whatever its conclusions, the investigation underscores increasing regulatory attention on cloud market fairness and the balance between license protections and consumer choice.
Why This Matters to IT Decision Makers
For IT leaders, this issue raises critical questions around cloud strategy and long-term cost management. Migrating existing Windows Server and SQL Server applications remains an immense challenge due to:- High costs and extended timelines for rewriting applications for Linux environments.
- The dependence of many business-critical applications on Windows-only features or integrations.
- Ongoing locking into Azure hardware and software ecosystems due to economic incentives and licensing constraints.
On the other hand, adherence to Microsoft licensing may constrain budgets and cloud architecture choices, sometimes forcing compromises on cloud innovation and multi-cloud deployments.
Broader Context: Cloud Competition and Customer Agency
This licensing debate ties into broader themes about cloud market concentration, vendor lock-in, and the health of multi-cloud strategies. The public discourse around egress fees, volume discounts, and interoperability mirrors concerns raised by Microsoft’s licensing practices.For organizations embracing digital transformation, these issues stress the importance of:
- Strategic cloud vendor evaluation including cost implications over time;
- Assessing the total cost of ownership with regard to software licenses;
- Considering architectural modernization early to mitigate long-term risks associated with cloud lock-in;
- Advocating for transparent, fair pricing and interoperability standards to regulators and vendors alike.
In Conclusion
Microsoft's cloud licensing policies, especially regarding Windows Server and SQL Server on third-party clouds, pose a formidable barrier to enterprise cloud strategies that seek freedom of choice and cost efficiency. The licensing fees imposed on AWS and Google clouds sharply differentiate Azure, reinforcing Microsoft’s dominance but raising competition and innovation concerns.Enterprises face a difficult decision matrix: invest years and significant budgets rewriting legacy applications for Linux platforms or remain bound by Azure’s ecosystem due to cost and operational realities. The CMA investigation in the UK highlights how impactful and intricate this issue has become in the evolving cloud market.
For the Windows and cloud communities, keeping a close eye on regulatory outcomes and preparing for multi-year migration investments are imperative. Achieving a more open and competitive cloud environment hinges on addressing such deeply embedded economic and technical challenges, promising long-term benefits for the digital economy and IT innovation.
This feature has drawn on detailed thematic submissions by Google and AWS to the CMA, as well as the regulator's preliminary analysis of Microsoft’s cloud practices and the broader industry context documented in WindowsForum community discussions and industry reports .
Source: Google and AWS: Linux too hard, so customers move to Azure