Microsoft’s licensing practices for Windows Server in the cloud have become a significant point of contention in the competitive cloud computing market, especially regarding how these practices impact major cloud rivals like Amazon Web Services (AWS) and Google Cloud. Since Microsoft’s 2019 changes, the cost of running Windows Server on non-Microsoft clouds such as AWS or Google has surged—up to four times higher than running the same workloads on Microsoft’s own Azure platform. This shift has raised strong complaints from AWS and Google, arguing that Microsoft’s licensing strategy artificially inflates costs and restricts competition, affecting both cloud service providers and enterprise customers.
AWS estimates that if more economically viable licensing options were available, up to half of the workloads that enterprise customers currently run on Azure would migrate to AWS or other clouds. According to its submission to the UK Competition and Markets Authority (CMA) during its Cloud Services Market Investigation, AWS claims that Microsoft's licensing practices effectively force customers to repurchase licenses they already own to run Microsoft software on rival clouds—a practice AWS describes as anti-competitive. This not only increases customer costs but discourages switching, curbing customer freedom and skewing market competition in Microsoft’s favor.
The CMA’s provisional findings support AWS’s assertions, highlighting how Microsoft's licensing restrictions act as non-price barriers that foreclose competitors, harming the cloud services market's competitiveness. It was noted that Microsoft dominates productivity software and that cloud customers often depend on that software ecosystem, which Microsoft leverages to influence customer cloud choices unfairly.
AWS highlighted that these licensing costs raise the threshold to compete seriously on price or margins, forcing AWS to offset these costs before offering discounts or competitive pricing on workloads running Microsoft software. It also means Azure customers often pay more than they might have to if pricing competition were allowed to function properly. Google echoed this view with examples of customers who preferred Google Cloud services but felt compelled to move Windows Server workloads to Azure because of licensing and commercial reasons.
Microsoft contends that the significance of Windows Server in workloads is just one factor among many and that customers typically purchase multiple cloud services around their software. It also highlights that licensing fees are just one component of total cloud costs and warns that overly prescriptive regulatory measures could harm market dynamics.
The CMA indicates that behavioral remedies, such as mandating uniform licensing terms across cloud platforms and capping unfair fees, may be necessary to restore market balance. Such measures could also entail improving interoperability to lessen the vendor lock-in effect.
For the broader cloud ecosystem, these practices entrench Microsoft’s dominance, possibly stifling competition and innovation by smaller cloud providers who struggle to compete on price or feature set due to such artificial cost barriers.
Meanwhile, Amazon and Google have voiced their hopes the CMA investigation will force Microsoft to change its licensing policies so that customers have real, economically feasible choices beyond Azure, promoting competition and better pricing.
As this legal and market drama unfolds, the cloud industry is watching closely. Should the CMA and other regulators enforce uniform licensing and reduce contractual barriers, the cloud ecosystem could open up considerably, delivering more choice, lower costs, and enhanced innovation. Conversely, Microsoft’s defense underscores the tension between protecting intellectual property rights and fostering an open, competitive cloud environment.
For Windows users, cloud architects, and enterprises alike, the outcome will shape how and where Microsoft workloads are run, potentially redefining the balance of power in a rapidly growing market segment essential to the future of digital business infrastructure .
Source: AWS: Customers would flee Azure if licensing costs were fair
The Core of the Dispute: Licensing Costs and Market Impact
AWS estimates that if more economically viable licensing options were available, up to half of the workloads that enterprise customers currently run on Azure would migrate to AWS or other clouds. According to its submission to the UK Competition and Markets Authority (CMA) during its Cloud Services Market Investigation, AWS claims that Microsoft's licensing practices effectively force customers to repurchase licenses they already own to run Microsoft software on rival clouds—a practice AWS describes as anti-competitive. This not only increases customer costs but discourages switching, curbing customer freedom and skewing market competition in Microsoft’s favor.The CMA’s provisional findings support AWS’s assertions, highlighting how Microsoft's licensing restrictions act as non-price barriers that foreclose competitors, harming the cloud services market's competitiveness. It was noted that Microsoft dominates productivity software and that cloud customers often depend on that software ecosystem, which Microsoft leverages to influence customer cloud choices unfairly.
The Licensing Restrictions in Detail
Microsoft’s approach involves complex licensing terms, particularly for Windows Server and SQL Server. The 2019 policy changes led to license mobility constraints and elevated costs for bringing existing licenses to non-Azure environments. Customers can no longer simply transfer their licenses to AWS, Google Cloud, or Alibaba without incurring additional fees or needing to buy new licenses, driving the total cost much higher. This limits the ability of customers to freely choose or diversify their cloud providers while increasing their operational expenses.AWS highlighted that these licensing costs raise the threshold to compete seriously on price or margins, forcing AWS to offset these costs before offering discounts or competitive pricing on workloads running Microsoft software. It also means Azure customers often pay more than they might have to if pricing competition were allowed to function properly. Google echoed this view with examples of customers who preferred Google Cloud services but felt compelled to move Windows Server workloads to Azure because of licensing and commercial reasons.
Microsoft’s Defense and Arguments
Microsoft defends its licensing model by emphasizing intellectual property rights and remaining cautious not to underprice its software, which it says could incent customers to abandon its platform entirely. It insists it is competitive and that the cloud market remains robust, pointing to additional services like storage and networking where AWS and Google maintain profitable margins. Microsoft also argues that the CMA's early findings are too vague and that it does not wish to block migration but balances pricing to prevent loss of revenue that supports continued innovation.Microsoft contends that the significance of Windows Server in workloads is just one factor among many and that customers typically purchase multiple cloud services around their software. It also highlights that licensing fees are just one component of total cloud costs and warns that overly prescriptive regulatory measures could harm market dynamics.
The Ongoing Regulatory Investigation: The CMA’s Role
The UK Competition and Markets Authority launched a thorough investigation of the cloud services market in 2023, targeting dominant players to ensure a competitive ecosystem. The CMA’s provisional report agrees with the concerns raised by AWS and Google, highlighting Microsoft’s licensing strategies as a substantial barrier to competition. The investigation covers pricing models, non-price restrictions, volume discounts that reinforce vendor lock-in, and data egress fees, all seen as mechanisms that raise switching costs and reduce consumer choice.The CMA indicates that behavioral remedies, such as mandating uniform licensing terms across cloud platforms and capping unfair fees, may be necessary to restore market balance. Such measures could also entail improving interoperability to lessen the vendor lock-in effect.
Broader Market and User Implications
From a user perspective, these licensing practices and associated cloud dynamics affect enterprises' ability to adopt hybrid or multi-cloud strategies flexibly. For businesses heavily reliant on Windows Server and Microsoft productivity suites, higher costs on non-Azure platforms limit options, potentially inflating IT budgets and narrowing innovation routes.For the broader cloud ecosystem, these practices entrench Microsoft’s dominance, possibly stifling competition and innovation by smaller cloud providers who struggle to compete on price or feature set due to such artificial cost barriers.
Parallel Developments and Industry Responses
Microsoft recently joined the Cloud Infrastructure Services Providers of Europe (CISPE), an industry group that had previously challenged these licensing practices. This move, following a settlement agreement to improve Azure Stack HCI offerings tailored to European compliance, is part of broader regulatory and market pressures the company faces in Europe and beyond. While Microsoft seeks to present a compliance and cooperation front, AWS and Google remain critical observers, concerned about genuine market fairness.Meanwhile, Amazon and Google have voiced their hopes the CMA investigation will force Microsoft to change its licensing policies so that customers have real, economically feasible choices beyond Azure, promoting competition and better pricing.
Conclusion: A Critical Juncture for Cloud Competition and Licensing
Microsoft’s licensing strategy for Windows Server workloads outside Azure represents a pivotal factor in the cloud market's competitive landscape. By raising costs substantially on rival clouds, Microsoft is accused of restricting cloud workload mobility, thereby distorting competition to its own advantage. The CMA’s investigation is the latest regulatory scrutiny aiming to address these issues, with significant implications for enterprises, cloud providers, and the evolution of multi-cloud strategies.As this legal and market drama unfolds, the cloud industry is watching closely. Should the CMA and other regulators enforce uniform licensing and reduce contractual barriers, the cloud ecosystem could open up considerably, delivering more choice, lower costs, and enhanced innovation. Conversely, Microsoft’s defense underscores the tension between protecting intellectual property rights and fostering an open, competitive cloud environment.
For Windows users, cloud architects, and enterprises alike, the outcome will shape how and where Microsoft workloads are run, potentially redefining the balance of power in a rapidly growing market segment essential to the future of digital business infrastructure .
Source: AWS: Customers would flee Azure if licensing costs were fair
