When enterprises contemplate moving their IT workloads to the cloud, those with significant investments in Microsoft infrastructure typically confront a challenging dilemma. For organizations deeply reliant on Windows Server and SQL Server, the prospect of rewriting applications or migrating them entirely to Linux-based environments is daunting, costly, and in many cases, practically unfeasible. This entrenched dependence on Microsoft technologies forms a barrier that clouds competitive dynamics in the UK—and globally—cloud market, as revealed in recent investigations by the UK's Competition and Markets Authority (CMA).
The crux of the matter lies in Microsoft's cloud licensing strategy implemented starting in 2019. Historically, enterprises could utilize their existing licenses for Microsoft server software on outsourced hardware, including cloud platforms run by third parties. However, Microsoft shifted its approach by introducing separate licensing requirements for virtualized Microsoft server products hosted on certain third-party cloud providers like Amazon AWS, Google Cloud Platform (GCP), and Alibaba Cloud—referred to in licensing terms as "listed providers."
This licensing change resulted in substantial price markups for enterprises deploying Windows Server or SQL Server on these non-Microsoft clouds. Companies reported paying up to four times more for Windows Server virtual machines running on AWS and GCP compared to equivalent deployments on Azure. As Google explicitly stated in their CMA submission, these inflated costs make third-party clouds “less competitive than on Azure.” This creates a coercive dynamic, effectively pushing customers toward Azure or forcing them to absorb steep premiums if they choose AWS or Google Cloud.
The proof is in the experiences companies have shared, anonymized in Google’s report: even when organizations attempted this arduous modernization journey, the process was protracted, very expensive, and not broadly feasible. This dependency tightens the grip on Microsoft’s stack and limits customers’ realistic cloud vendor choices.
AWS echoed Google’s point, emphasizing that while technical migration might be possible for certain types of workloads, it is economically impractical for many customers due to the critical nature of some Windows-only applications. For these enterprises, “it is simply not economically feasible to move away from Microsoft’s productivity software,” effectively locking them into Azure or disproportionately expensive licensing fees on other clouds.
AWS estimates that if Microsoft were to reduce its license pricing disparities, up to half of its customers might consider moving workloads away from Azure. The current pricing structure, however, acts as a substantial barrier to such migration.
The CMA’s preliminary findings suggest Microsoft’s practices may have materially harmed competition, setting the stage for potential regulatory remedies aimed at leveling the cloud playing field. These could include mandating fair, non-discriminatory licensing terms or price caps that would make Windows and SQL Server workloads more cost-competitive on other clouds.
This tightrope walk presents a fundamental tension. Microsoft’s dominant installed base of Windows Server and SQL Server customers supports its cloud revenue but simultaneously creates a market leverage that can limit competition in cloud hosting choices. The company’s pricing playbook essentially recaptures value from third-party clouds while encouraging loyalty to Azure.
The CMA’s investigation also examined interoperability between clouds and the technical hurdles customers face when attempting to migrate workloads or manage multi-cloud environments. Large cloud providers offer volume discounts and features that smaller competitors struggle to match, skewing competition further in favor of hyperscalers.
Microsoft benefits from deep integration with its software ecosystem, which extends into Azure cloud services and Windows operating system features, making the user experience smoother for customers choosing Microsoft clouds. Smaller cloud rivals argue this integrated advantage, reinforced by licensing turmoil and pricing asymmetries, entrenches Microsoft’s market position.
Many organizations have committed years and considerable budgets building applications around Windows-specific frameworks and databases, making it nearly impossible to “rip and replace” these systems overnight or without significant repeated investment.
Consequently, enterprises often have no practical choice but to migrate existing Windows workloads to Azure to avoid prohibitive licensing costs on competing clouds. This limits multi-cloud strategies and vendor diversification options, potentially exposing businesses to higher lock-in risks and reducing bargaining power.
Recommendations might also target increased transparency in license pricing, interoperable solutions for software licensing, and incentives or enforcement to reduce egress fees and technical obstacles for workload mobility.
For IT professionals, system architects, and business leaders managing Windows environments, these regulatory moves offer hope for more competitive cloud pricing and greater freedom in choosing infrastructure providers.
Microsoft’s unique position as both a dominant software and influential cloud platform provider enables it to craft licensing terms that, while commercially justified from its perspective, raise barriers that inhibit effective competition. Customers caught in this web find themselves pressured to choose Azure or pay steep premiums elsewhere, even if they would prefer an alternative cloud provider.
Efforts to modernize applications by rewriting for Linux or alternative platforms remain exceptionally costly and slow, rendering Microsoft’s licensing strategy a powerful tool to maintain its installed base.
The cloud market’s future competitiveness depends on the success of regulatory interventions like those being considered by the CMA, alongside broader industry innovations that reduce lock-in and improve workload portability.
For Windows enthusiasts and enterprise IT communities, this means staying abreast of licensing developments, advocating for transparent pricing, and carefully evaluating multi-cloud strategies amid evolving market dynamics.
Ultimately, navigating the journey to the cloud requires weighing Microsoft’s ecosystem advantages against the operational and financial constraints imposed by current licensing models—a balancing act that will define cloud adoption for many years to come.
Source: Google and AWS: Linux too hard, so customers move to Azure
Microsoft’s Cloud Licensing Practices: Shaping Market Dynamics
The crux of the matter lies in Microsoft's cloud licensing strategy implemented starting in 2019. Historically, enterprises could utilize their existing licenses for Microsoft server software on outsourced hardware, including cloud platforms run by third parties. However, Microsoft shifted its approach by introducing separate licensing requirements for virtualized Microsoft server products hosted on certain third-party cloud providers like Amazon AWS, Google Cloud Platform (GCP), and Alibaba Cloud—referred to in licensing terms as "listed providers."This licensing change resulted in substantial price markups for enterprises deploying Windows Server or SQL Server on these non-Microsoft clouds. Companies reported paying up to four times more for Windows Server virtual machines running on AWS and GCP compared to equivalent deployments on Azure. As Google explicitly stated in their CMA submission, these inflated costs make third-party clouds “less competitive than on Azure.” This creates a coercive dynamic, effectively pushing customers toward Azure or forcing them to absorb steep premiums if they choose AWS or Google Cloud.
Why Not Just Switch to Linux?
At first glance, switching these workloads to Linux might seem like an obvious solution to escape Microsoft’s licensing markup. Yet this is far more complicated in practice. As Google’s submission to the CMA highlighted, many traditional enterprise customers are “highly dependent” on Windows Server and SQL Server environments that have been built up over many years. Moving to Linux and modernizing these applications would require a complete rewrite—a process that not only takes years but demands significant financial investment and in-house software engineering resources that most organizations lack.The proof is in the experiences companies have shared, anonymized in Google’s report: even when organizations attempted this arduous modernization journey, the process was protracted, very expensive, and not broadly feasible. This dependency tightens the grip on Microsoft’s stack and limits customers’ realistic cloud vendor choices.
AWS echoed Google’s point, emphasizing that while technical migration might be possible for certain types of workloads, it is economically impractical for many customers due to the critical nature of some Windows-only applications. For these enterprises, “it is simply not economically feasible to move away from Microsoft’s productivity software,” effectively locking them into Azure or disproportionately expensive licensing fees on other clouds.
Market Implications and Anti-Competitive Concerns
The combined effect of these licensing policies and the difficulty of migration has drawn scrutiny from regulators concerned about competition in the cloud infrastructure market. The CMA's investigation highlights how Microsoft’s licensing model diminishes effective competitive choice, especially for enterprise customers entrenched in Windows technology. This “devil’s choice” scenario results in limited ability to shop around for cloud providers or seek innovative, cost-effective alternatives.AWS estimates that if Microsoft were to reduce its license pricing disparities, up to half of its customers might consider moving workloads away from Azure. The current pricing structure, however, acts as a substantial barrier to such migration.
The CMA’s preliminary findings suggest Microsoft’s practices may have materially harmed competition, setting the stage for potential regulatory remedies aimed at leveling the cloud playing field. These could include mandating fair, non-discriminatory licensing terms or price caps that would make Windows and SQL Server workloads more cost-competitive on other clouds.
Microsoft's Perspective: Balancing Pricing and Competition
Unsurprisingly, Microsoft defends its licensing strategy as carefully calibrated. According to its comments to the CMA, Microsoft aims to price its Service Provider License Agreement (SPLA) licenses to avoid undercharging while not making them so expensive as to drive customers away. Microsoft argues that overly cheap licensing would incentivize cloud providers to switch customers to alternate software platforms, which presumably could undermine the Windows ecosystem.This tightrope walk presents a fundamental tension. Microsoft’s dominant installed base of Windows Server and SQL Server customers supports its cloud revenue but simultaneously creates a market leverage that can limit competition in cloud hosting choices. The company’s pricing playbook essentially recaptures value from third-party clouds while encouraging loyalty to Azure.
Broader Cloud Market Considerations: Egress Fees and Interoperability
While Microsoft’s licensing practices draw significant attention, other factors like egress fees and technical integration barriers also shape cloud market competition. Egress fees, which are charges imposed for transferring data out of cloud platforms, can act as additional lock-in mechanisms, discouraging customers from moving data or workloads to rival providers.The CMA’s investigation also examined interoperability between clouds and the technical hurdles customers face when attempting to migrate workloads or manage multi-cloud environments. Large cloud providers offer volume discounts and features that smaller competitors struggle to match, skewing competition further in favor of hyperscalers.
Microsoft benefits from deep integration with its software ecosystem, which extends into Azure cloud services and Windows operating system features, making the user experience smoother for customers choosing Microsoft clouds. Smaller cloud rivals argue this integrated advantage, reinforced by licensing turmoil and pricing asymmetries, entrenches Microsoft’s market position.
Impact on Windows Ecosystem Customers and IT Strategy
For enterprises reliant on Microsoft technologies—especially those running Windows Server or SQL Server—these market dynamics become critically important. Migrating to cloud environments is not solely a technical exercise but a strategic and financial decision heavily influenced by licensing and pricing regimes.Many organizations have committed years and considerable budgets building applications around Windows-specific frameworks and databases, making it nearly impossible to “rip and replace” these systems overnight or without significant repeated investment.
Consequently, enterprises often have no practical choice but to migrate existing Windows workloads to Azure to avoid prohibitive licensing costs on competing clouds. This limits multi-cloud strategies and vendor diversification options, potentially exposing businesses to higher lock-in risks and reducing bargaining power.
Potential CMA Remedies and Market Outlook
The CMA’s forthcoming final decision, expected in mid-2025, is widely anticipated to address these cloud market distortions. Locking customers into Azure through aggressive licensing and price disparities could be contested legally or addressed through regulatory mandates requiring Microsoft to harmonize licensing fees across cloud platforms.Recommendations might also target increased transparency in license pricing, interoperable solutions for software licensing, and incentives or enforcement to reduce egress fees and technical obstacles for workload mobility.
For IT professionals, system architects, and business leaders managing Windows environments, these regulatory moves offer hope for more competitive cloud pricing and greater freedom in choosing infrastructure providers.
Conclusion: The Cloud Migration Challenge for Windows-Centric Enterprises
The UK CMA investigation sheds light on a critical and nuanced challenge faced by enterprises transitioning to cloud computing: the intersection of legacy Windows dependencies with modern cloud pricing strategies.Microsoft’s unique position as both a dominant software and influential cloud platform provider enables it to craft licensing terms that, while commercially justified from its perspective, raise barriers that inhibit effective competition. Customers caught in this web find themselves pressured to choose Azure or pay steep premiums elsewhere, even if they would prefer an alternative cloud provider.
Efforts to modernize applications by rewriting for Linux or alternative platforms remain exceptionally costly and slow, rendering Microsoft’s licensing strategy a powerful tool to maintain its installed base.
The cloud market’s future competitiveness depends on the success of regulatory interventions like those being considered by the CMA, alongside broader industry innovations that reduce lock-in and improve workload portability.
For Windows enthusiasts and enterprise IT communities, this means staying abreast of licensing developments, advocating for transparent pricing, and carefully evaluating multi-cloud strategies amid evolving market dynamics.
Ultimately, navigating the journey to the cloud requires weighing Microsoft’s ecosystem advantages against the operational and financial constraints imposed by current licensing models—a balancing act that will define cloud adoption for many years to come.
Source: Google and AWS: Linux too hard, so customers move to Azure
