When enterprises with heavy investments in Microsoft infrastructure consider moving to the cloud, their choice often boils down to a challenging and costly dilemma: sticking with Microsoft Azure or facing significant financial penalties when running Microsoft software on rival clouds like Amazon Web Services (AWS) or Google Cloud Platform (GCP). This issue arises mainly due to Microsoft's cloud licensing practices introduced around 2019, which have created a complex and arguably anti-competitive landscape in the UK cloud market and beyond.
Historically, companies could use their existing Microsoft software licenses to run the likes of Windows Server and SQL Server on outsourced hardware, including third-party cloud providers. However, that changed when Microsoft began requiring separate, specific licenses—often at much higher costs—for running its server software on virtualized infrastructure hosted by what Microsoft calls "listed providers." These include major cloud players like AWS, Google, and Alibaba.
The practical upshot for enterprises is that hosting Windows Server virtual machines (VMs) on Google Cloud or AWS can cost up to four times more than running them on Azure, Microsoft's own cloud offering. Thus, customers with significant Windows Server and SQL Server workloads face the stark reality: either stay locked into Azure or pay a hefty premium to run these systems on other clouds. Google and AWS have both highlighted this issue in their submissions to the UK's Competition and Markets Authority (CMA), emphasizing how this practice stifles competition and constrains customer choice.
Google's CMA submission explicitly points out that this migration path is impractical for most businesses, many of whom "have built a dependency on Microsoft Windows." Some firms that have successfully completed such migrations faced years of work, costly transitions, and delayed returns on investment. For many enterprises, starting the cloud journey involves lifting and shifting existing Windows-based workloads rather than rewriting them wholesale — a reality that reinforces Microsoft's locking power.
AWS echoes this sentiment, noting that while moving some workloads to Linux is possible, the scale and cost of such re-architecting efforts are prohibitive for most customers, especially as many applications are Windows-specific and cannot trivially be ported. This preservation of Microsoft dependency means many organizations remain tethered to Azure, or pay premium prices elsewhere, hampering cloud ecosystem fluidity and innovation.
AWS adds that if the licensing price discrepancy between Azure and rival clouds were addressed, about half of its customers might consider migrating workloads away from Azure, indicating a considerable pent-up demand for more competitive offerings.
This dynamic has led the CMA to preliminarily assert that Microsoft’s licensing practices may indeed harm competition, a significant accusation with wide-reaching implications. It points to a cloud market where customers are effectively deprived of meaningful choice or innovative alternatives, especially within the traditional business infrastructure sector.
Microsoft's stance is clear: leveraging its installed base to keep customers within its orbit is not anti-competitive but a natural outcome of providing integrated and mission-critical software products. The company contends that its pricing is carefully calibrated to reflect the value of its technologies without unfairly pushing customers away.
Further, there are technical interoperability barriers complicating multi-cloud strategies. Enterprises aiming for the flexibility to distribute workloads across cloud providers encounter integration obstacles, workflow disruptions, and inconsistent tooling, which compound the financial disincentives from licensing and egress fees.
Linux, while growing increasingly popular in server and development contexts—and widely praised for cost savings, security, and customization—requires enterprises to contend with a steep learning curve, potential incompatibility issues for specialized software, and retraining of IT staff and users alike.
Many community voices and IT professionals acknowledge Linux’s merits, including stability, open-source security benefits, and the absence of expensive licensing fees. However, the transition effort is seldom trivial, often requiring organizations to rewrite or replace sizeable parts of their software estate. The process demands a mature in-house IT team capable of handling new system administration paradigms and anticipated edge cases—resources not available to many organizations.
Moreover, the lack of one-to-one compatibility with Windows applications and the reliance on emulation or alternative software further complicate migrations. In practice, this means enterprises face a significant risk of operational disruption and increased IT support burdens during and after the transition.
Among speculated measures are:
Microsoft’s licensing policies, while defended as prudent business practices, clearly raise barriers to switching and entrench Azure’s market dominance. For large customers tied to Windows Server and SQL Server, migrating to Linux, though appealing on paper, poses a daunting challenge with few practical workarounds short of expensive and lengthy redevelopment cycles.
The CMA’s ongoing investigation unveils the tension between fostering competition in the cloud market and respecting the intrinsic value of longstanding enterprise relationships and software investments. How regulators, Microsoft, and cloud providers navigate this will shape the future of cloud computing—potentially unlocking a more level playing field or reinforcing the dominance of hyperscale incumbents.
For now, enterprises should brace for a continuation of this status quo while watching closely for regulatory changes that could finally lower the barriers to multi-cloud flexibility and true competitive choice.
This analysis integrates insights from public reports on the CMA’s investigation, market analyses, and community discussions about the intricacies of Windows to Linux migration, enterprise cloud economics, and software licensing complexities .
Source: Google and AWS: Linux too hard, so customers move to Azure
Historically, companies could use their existing Microsoft software licenses to run the likes of Windows Server and SQL Server on outsourced hardware, including third-party cloud providers. However, that changed when Microsoft began requiring separate, specific licenses—often at much higher costs—for running its server software on virtualized infrastructure hosted by what Microsoft calls "listed providers." These include major cloud players like AWS, Google, and Alibaba.The practical upshot for enterprises is that hosting Windows Server virtual machines (VMs) on Google Cloud or AWS can cost up to four times more than running them on Azure, Microsoft's own cloud offering. Thus, customers with significant Windows Server and SQL Server workloads face the stark reality: either stay locked into Azure or pay a hefty premium to run these systems on other clouds. Google and AWS have both highlighted this issue in their submissions to the UK's Competition and Markets Authority (CMA), emphasizing how this practice stifles competition and constrains customer choice.
Why Switching to Linux Is Not the Easy Escape
One might imagine that the natural response to such licensing cost disparities would be for firms to migrate their workloads from Microsoft Windows to Linux, sidestepping the licensing fees altogether. But the situation is far more complicated. Enterprises typically have extensive investments in applications developed specifically for the Windows ecosystem, including custom software and legacy systems. Rewriting or re-architecting these applications to run on Linux is often a multi-year, resource-intensive project that not only requires significant expense but also considerable in-house software engineering capacity.Google's CMA submission explicitly points out that this migration path is impractical for most businesses, many of whom "have built a dependency on Microsoft Windows." Some firms that have successfully completed such migrations faced years of work, costly transitions, and delayed returns on investment. For many enterprises, starting the cloud journey involves lifting and shifting existing Windows-based workloads rather than rewriting them wholesale — a reality that reinforces Microsoft's locking power.
AWS echoes this sentiment, noting that while moving some workloads to Linux is possible, the scale and cost of such re-architecting efforts are prohibitive for most customers, especially as many applications are Windows-specific and cannot trivially be ported. This preservation of Microsoft dependency means many organizations remain tethered to Azure, or pay premium prices elsewhere, hampering cloud ecosystem fluidity and innovation.
Impact on Cloud Market Competition
This licensing-induced switching cost problem exacerbates the dominant market position of Microsoft Azure, particularly because a significant portion of Azure’s cloud revenue comes directly from these entrenched Windows Server and SQL Server users. Google estimates 70-80% of Azure’s revenue flows from these Microsoft server products, highlighting their critical role in maintaining Azure's competitive posture.AWS adds that if the licensing price discrepancy between Azure and rival clouds were addressed, about half of its customers might consider migrating workloads away from Azure, indicating a considerable pent-up demand for more competitive offerings.
This dynamic has led the CMA to preliminarily assert that Microsoft’s licensing practices may indeed harm competition, a significant accusation with wide-reaching implications. It points to a cloud market where customers are effectively deprived of meaningful choice or innovative alternatives, especially within the traditional business infrastructure sector.
Microsoft's Position: Walking a Pricing Tightrope
From Microsoft's perspective, this licensing strategy is a delicate balancing act. The company argues that its Service Provider License Agreement (SPLA) pricing deliberately avoids being too low, which could encourage cloud providers to move away from Windows products altogether, potentially fragmenting the ecosystem. Conversely, Microsoft wants to avoid pricing so high as to discourage use outright.Microsoft's stance is clear: leveraging its installed base to keep customers within its orbit is not anti-competitive but a natural outcome of providing integrated and mission-critical software products. The company contends that its pricing is carefully calibrated to reflect the value of its technologies without unfairly pushing customers away.
Broader Cloud Market Concerns: Beyond Licensing
While the spotlight is on licensing, the CMA’s investigation covers other critical issues shaping cloud competition. Among them, egress fees—charges customers pay for transferring data out of a cloud platform—pose substantial switching costs. Though the CMA, which benefits from committed spend discounts, does not see these fees as problematic, smaller cloud providers argue that they create lock-in disadvantages favoring the hyperscalers.Further, there are technical interoperability barriers complicating multi-cloud strategies. Enterprises aiming for the flexibility to distribute workloads across cloud providers encounter integration obstacles, workflow disruptions, and inconsistent tooling, which compound the financial disincentives from licensing and egress fees.
The Technical and Organizational Challenges of Migrating from Windows to Linux
It is important to understand why migrating from Windows-based enterprise infrastructure to Linux is so challenging and lengthy. Windows environments have extensive ecosystems, involving, for example, proprietary business applications, internal databases, and user workflows tightly integrated with Microsoft’s software stack.Linux, while growing increasingly popular in server and development contexts—and widely praised for cost savings, security, and customization—requires enterprises to contend with a steep learning curve, potential incompatibility issues for specialized software, and retraining of IT staff and users alike.
Many community voices and IT professionals acknowledge Linux’s merits, including stability, open-source security benefits, and the absence of expensive licensing fees. However, the transition effort is seldom trivial, often requiring organizations to rewrite or replace sizeable parts of their software estate. The process demands a mature in-house IT team capable of handling new system administration paradigms and anticipated edge cases—resources not available to many organizations.
Moreover, the lack of one-to-one compatibility with Windows applications and the reliance on emulation or alternative software further complicate migrations. In practice, this means enterprises face a significant risk of operational disruption and increased IT support burdens during and after the transition.
Potential Remedies and the CMA's Role
The CMA’s final report, expected by July 2025, will be a critical moment for the UK cloud market. It is anticipated to propose behavioral remedies rather than structural ones—meaning it may seek changes in pricing transparency, licensing terms, fee caps, and interoperability requirements rather than dismantling companies or forcing divestitures.Among speculated measures are:
- Enforcing uniform pricing models for Microsoft software, regardless of the cloud host.
- Capping or regulating egress fees to ease data mobility.
- Mandating improvements in cross-cloud interoperability to reduce technical lock-in.
- Limiting volume discount schemes that incentivize vendor lock-in.
Conclusion: The Challenge of Balancing Competition, Customer Needs, and Corporate Strategy
The complex realities of cloud migration for enterprises entangled in Microsoft’s software ecosystem reveal why moving to the cloud is not merely a technical undertaking but a strategic business decision fraught with financial and operational risks.Microsoft’s licensing policies, while defended as prudent business practices, clearly raise barriers to switching and entrench Azure’s market dominance. For large customers tied to Windows Server and SQL Server, migrating to Linux, though appealing on paper, poses a daunting challenge with few practical workarounds short of expensive and lengthy redevelopment cycles.
The CMA’s ongoing investigation unveils the tension between fostering competition in the cloud market and respecting the intrinsic value of longstanding enterprise relationships and software investments. How regulators, Microsoft, and cloud providers navigate this will shape the future of cloud computing—potentially unlocking a more level playing field or reinforcing the dominance of hyperscale incumbents.
For now, enterprises should brace for a continuation of this status quo while watching closely for regulatory changes that could finally lower the barriers to multi-cloud flexibility and true competitive choice.
This analysis integrates insights from public reports on the CMA’s investigation, market analyses, and community discussions about the intricacies of Windows to Linux migration, enterprise cloud economics, and software licensing complexities .
Source: Google and AWS: Linux too hard, so customers move to Azure