Switching to the cloud represents a major shift for enterprises entrenched in Microsoft infrastructure, yet the pathway is fraught with complex licensing and technical challenges that make departing from Redmond’s ecosystem far from straightforward. Recent submissions by Amazon and Google to the UK Competition and Markets Authority (CMA) highlight a critical market dynamic: enterprises heavily invested in Windows Server and SQL Server face prohibitive costs and arduous migrations if they attempt to host their Microsoft-dependent workloads on Amazon Web Services (AWS) or Google Cloud Platform (GCP). The upshot is a market distorted by Microsoft’s licensing policies, pushing customers either to migrate to Microsoft Azure or endure steep markups for running Microsoft server software on competing clouds.
Historically, organizations could use their existing Microsoft licenses to run Windows Server and related software on outsourced, virtualized infrastructure with minimal additional licensing fees. However, in 2019, Microsoft implemented a licensing model that requires separate, cloud-specific licenses—termed by Microsoft as a mandate for "listed providers" including AWS, Google, and Alibaba—to run virtualized Windows Server and SQL Server workloads on clouds other than Azure. This change effectively quadruples the cost of those licenses when deployed outside Azure, severely undermining competition and inflating expenses for enterprises wishing to utilize AWS or Google’s cloud infrastructure.
Google’s CMA submission starkly notes this pricing disparity: running Windows Server virtual machines on GCP incurs costs that make the platform "less competitive than on Azure." AWS echoes this perspective, indicating that about half of its customers would consider migrating workloads to other clouds if Microsoft’s licensing fees were more equitable. But, crucially, the option to simply abandon Windows and SQL Server to migrate applications and workloads to Linux is often not viable for many enterprises.
Google’s testimony to the CMA detailed anecdotal evidence of customers taking multiple years and paying significant costs to undertake such migrations, efforts largely impractical for most businesses due to resource constraints. AWS highlighted scenarios where applications run exclusively on Windows Server, making Linux migration impossible without losing critical functionality. This lock-in effect means enterprises are economically and operationally constrained to stay within Microsoft’s ecosystem if they want to maintain their workloads in the cloud.
The consequence is clear: customers who have bet heavily on Windows Server are effectively denied true competitive choice or cost-effective alternatives in the cloud. They face a corrupting trade-off—stay with Microsoft Azure or pay punitive markups on AWS and GCP, reinforcing the incumbency advantage that Microsoft wields in the cloud server market.
Microsoft contends that its pricing strikes a careful balance: setting licensing fees low enough to avoid incentivizing wholesale migrations to alternative platforms, yet high enough to protect its intellectual property value. The company argues that this balancing act is necessary and claims that its prices reflect value rather than unfair exclusionary conduct.
Yet, critics argue Microsoft’s entrenched software dominance confers an unfair advantage in the cloud market, reinforced through licensing models that deter competition and innovation. The CMA’s forthcoming July ruling may propose remedies ranging from structural reforms to behavioral commitments to restore competitive dynamics and lower barriers for customers seeking multi-cloud flexibility.
Enterprises must also grapple with compatibility issues such as file system differences, integration with proprietary Microsoft services, and managing hybrid environments during phased migrations. Large-scale migrations can risk operational downtime and introduce unforeseen bugs or security gaps. Consequently, for many, the pragmatic solution is to stay on Azure, where Microsoft’s licensing terms are more favorable and operational continuity supported.
Microsoft also continuously evolves Azure to optimize for Windows and Linux containers, GPU-accelerated workloads, and Kubernetes orchestration, appealing to enterprises modernizing infrastructure while maintaining legacy dependencies. Recent updates to Azure Linux distributions show Microsoft’s investment in supporting hybrid Windows-Linux environments with strong security, container management, and enhanced hardware support—efforts to ease migration pain points but without fully displacing Windows workloads.
For enterprises, the key takeaway remains cautious navigation of the cloud migration labyrinth. Organizations must weigh licensing costs, technical feasibility, operational risks, and strategic vendor relationships when designing migration roadmaps. Hybrid cloud or multi-cloud architectures addressing Windows dependencies with Linux modernization strategies—but paced to business realities—offer practical ways forward.
As regulators in the UK and beyond scrutinize these practices, enterprises must remain vigilant, informed, and strategic. The cost of switching clouds is not just a matter of licensing fees but foundational architectural and operational challenges. Those who manage this complexity stand to benefit from cloud’s transformative potential; those who do not risk becoming captive to legacy costs and vendor lock-in.
Cloud customers and industry stakeholders will watch closely as the CMA’s decision unfolds in July, marking a critical juncture for cloud market fairness, innovation, and the future of enterprise infrastructure choices.
This in-depth look at the cloud migration challenges shaped by Microsoft licensing draws from the recent detailed analysis and regulatory submissions reported by The Register and is enriched by industry perspectives reflecting broader cloud market trends from WindowsForum postings and expert commentary.
Source: Google and AWS: Linux too hard, so customers move to Azure
Commercial Cloud Migration and Microsoft's Licensing Barrier
Historically, organizations could use their existing Microsoft licenses to run Windows Server and related software on outsourced, virtualized infrastructure with minimal additional licensing fees. However, in 2019, Microsoft implemented a licensing model that requires separate, cloud-specific licenses—termed by Microsoft as a mandate for "listed providers" including AWS, Google, and Alibaba—to run virtualized Windows Server and SQL Server workloads on clouds other than Azure. This change effectively quadruples the cost of those licenses when deployed outside Azure, severely undermining competition and inflating expenses for enterprises wishing to utilize AWS or Google’s cloud infrastructure.Google’s CMA submission starkly notes this pricing disparity: running Windows Server virtual machines on GCP incurs costs that make the platform "less competitive than on Azure." AWS echoes this perspective, indicating that about half of its customers would consider migrating workloads to other clouds if Microsoft’s licensing fees were more equitable. But, crucially, the option to simply abandon Windows and SQL Server to migrate applications and workloads to Linux is often not viable for many enterprises.
The Challenge of Migrating Windows-Dependent Applications
Why not just switch to Linux? Google and AWS warn this choice is seldom straightforward. Enterprises with long histories of Windows Server and SQL Server usage have accumulated vast portfolios of bespoke, tightly coupled applications. Porting these applications to Linux typically necessitates a full rewrite or extensive re-architecture, consuming years and substantial engineering resources.Google’s testimony to the CMA detailed anecdotal evidence of customers taking multiple years and paying significant costs to undertake such migrations, efforts largely impractical for most businesses due to resource constraints. AWS highlighted scenarios where applications run exclusively on Windows Server, making Linux migration impossible without losing critical functionality. This lock-in effect means enterprises are economically and operationally constrained to stay within Microsoft’s ecosystem if they want to maintain their workloads in the cloud.
The consequence is clear: customers who have bet heavily on Windows Server are effectively denied true competitive choice or cost-effective alternatives in the cloud. They face a corrupting trade-off—stay with Microsoft Azure or pay punitive markups on AWS and GCP, reinforcing the incumbency advantage that Microsoft wields in the cloud server market.
Broader Market Implications and the UK CMA Investigation
This cloud licensing scenario is a key issue driving the CMA’s investigation into the UK cloud infrastructure market. The regulator has flagged concerns about anti-competitive practices, including licensing restrictions and egress fees that inhibit portability and multi-cloud strategies. Although the CMA has expressed skepticism about the impact of egress fees, it is seriously scrutinizing Microsoft’s licensing practices as a potential source of market harm.Microsoft contends that its pricing strikes a careful balance: setting licensing fees low enough to avoid incentivizing wholesale migrations to alternative platforms, yet high enough to protect its intellectual property value. The company argues that this balancing act is necessary and claims that its prices reflect value rather than unfair exclusionary conduct.
Yet, critics argue Microsoft’s entrenched software dominance confers an unfair advantage in the cloud market, reinforced through licensing models that deter competition and innovation. The CMA’s forthcoming July ruling may propose remedies ranging from structural reforms to behavioral commitments to restore competitive dynamics and lower barriers for customers seeking multi-cloud flexibility.
Technical and Operational Complexity Beyond Licensing
Licensing costs are just one barrier in switching away from Microsoft. The technical complexity of migrating entrenched Microsoft workloads, porting applications, and training staff to operate Linux-based systems represents a massive organizational challenge. Especially for enterprises with limited in-house Linux engineering expertise, the prospect of rewriting legacy applications or retraining personnel is daunting.Enterprises must also grapple with compatibility issues such as file system differences, integration with proprietary Microsoft services, and managing hybrid environments during phased migrations. Large-scale migrations can risk operational downtime and introduce unforeseen bugs or security gaps. Consequently, for many, the pragmatic solution is to stay on Azure, where Microsoft’s licensing terms are more favorable and operational continuity supported.
Microsoft Azure’s Strategic Advantage
The ubiquity of Windows Server and SQL Server workloads within Azure’s customer base underpins the cloud giant’s competitive moat. Google disclosed that 70-80% of Azure’s revenue derives from customers running these Microsoft workloads, underlining how central Windows-dependent applications remain in the enterprise cloud market. Moving these workloads out of Azure carries not only cost penalties but operational disruption risks.Microsoft also continuously evolves Azure to optimize for Windows and Linux containers, GPU-accelerated workloads, and Kubernetes orchestration, appealing to enterprises modernizing infrastructure while maintaining legacy dependencies. Recent updates to Azure Linux distributions show Microsoft’s investment in supporting hybrid Windows-Linux environments with strong security, container management, and enhanced hardware support—efforts to ease migration pain points but without fully displacing Windows workloads.
Future Outlook and Industry Implications
The CMA’s findings and any regulatory actions are poised to reverberate throughout the cloud industry. If regulators impose price caps or require more equitable licensing terms, this could level the playing field and stimulate innovation from cloud competitors. Conversely, stringent rules on licensing could prompt Microsoft to adjust cloud offerings, impacting its revenue and licensing models.For enterprises, the key takeaway remains cautious navigation of the cloud migration labyrinth. Organizations must weigh licensing costs, technical feasibility, operational risks, and strategic vendor relationships when designing migration roadmaps. Hybrid cloud or multi-cloud architectures addressing Windows dependencies with Linux modernization strategies—but paced to business realities—offer practical ways forward.
Conclusion
The debate over Microsoft’s cloud licensing and its impact on competition illuminates broader tensions at the intersection of legacy software ecosystems and cloud computing’s promise of flexibility and cost efficiency. While Linux offers a theoretically cheaper alternative, the complexity and expense of migrating entrenched Windows Server workloads limit its accessibility for many enterprises. Microsoft’s licensing practices further entrench Azure’s position, distorting competitive dynamics in service pricing and customer choice.As regulators in the UK and beyond scrutinize these practices, enterprises must remain vigilant, informed, and strategic. The cost of switching clouds is not just a matter of licensing fees but foundational architectural and operational challenges. Those who manage this complexity stand to benefit from cloud’s transformative potential; those who do not risk becoming captive to legacy costs and vendor lock-in.
Cloud customers and industry stakeholders will watch closely as the CMA’s decision unfolds in July, marking a critical juncture for cloud market fairness, innovation, and the future of enterprise infrastructure choices.
This in-depth look at the cloud migration challenges shaped by Microsoft licensing draws from the recent detailed analysis and regulatory submissions reported by The Register and is enriched by industry perspectives reflecting broader cloud market trends from WindowsForum postings and expert commentary.
Source: Google and AWS: Linux too hard, so customers move to Azure
