Microsoft's licensing policies regarding Windows Server software have ignited significant controversy in the cloud computing market, drawing attention from major cloud providers and regulators alike. Recent statements and filings reveal the extent to which these licensing changes have become a critical competitive and regulatory battleground, especially in the UK cloud services market.
Amazon Web Services (AWS) has asserted that approximately 50% of workloads currently hosted by Microsoft enterprise customers on Azure would migrate away to AWS, Google Cloud, or other cloud services if not for the disproportionately high licensing costs imposed by Microsoft. This assertion is part of AWS’s submission to the UK's Competition and Markets Authority (CMA) investigation into the cloud services market, underscoring the pivotal role licensing plays in shaping cloud adoption and customer choice. These licensing restrictions, AWS claims, artificially inflate migration costs and serve as a deterrent to multi-cloud strategies and cloud competition.
The licensing changes in question were primarily introduced in 2019 when Microsoft revised its Windows Server licensing terms. Under these revisions, the cost of running Windows Server workloads outside Azure—on platforms such as AWS, Google Cloud, or Alibaba Cloud—could be as much as four times higher than running the same workloads on Azure. This translates to customers facing incremental license fees or having to repurchase licenses they already hold under Bring Your Own License (BYOL) schemes just to leverage Microsoft’s software on non-Microsoft clouds. The outcome is a significant cost penalty with direct commercial harm to cloud service competitors and customers alike.
The CMA reports that Microsoft’s strategy has the effect of reducing competitive pressure on Azure, allowing Microsoft to maintain higher prices for Azure customers versus what might be expected in a truly competitive market. This is because competitors face higher costs that impair their ability to offer price-competitive cloud infrastructure and services when running Microsoft’s key server software. These dynamics effectively restrict customer choice and reduce the incentive for Microsoft to offer better pricing. As a result, customers are "commercially tied" to Microsoft Azure for workloads involving Windows Server or SQL Server.
Google has provided anecdotal examples of customers with large Windows Server estates who would prefer to run on Google Cloud but migrated to Azure due to licensing constraints and associated costs. Google has recommended several interventions to the CMA, including preventing Microsoft from degrading Google’s licensing terms, limiting lock-in tactics for new customers, and stopping Microsoft from restricting independent software vendors and managed service providers from selling Microsoft software for Google Cloud.
Microsoft also highlights that purchasing Windows Server Virtual Machines (VMs) on Azure involves more than just license costs. Additional services such as networking, storage, and backup are factored into the total cost structure, and when considering these, Microsoft asserts that AWS and Google have room to profit and can compete effectively. The company argues that margins for AWS and Google on workloads involving Windows IP are sufficiently high and thus contest the claim of foreclosure on competitive grounds.
This regulatory focus highlights a fundamental tension in the cloud era: software licensing models conceived in the pre-cloud world now have substantial influence on the vibrancy and fairness of cloud infrastructure markets. As enterprises increasingly adopt multi-cloud and hybrid-cloud strategies, resolving these licensing frictions will shape the agility and cost-efficiency of corporate IT infrastructures.
If the CMA enforces licensing equality, it could compel Microsoft to price its Windows Server and SQL Server licenses comparably regardless of whether workloads run on Azure or rival clouds. This would represent a significant regulatory intervention into how intellectual property rules interact with competitive cloud markets and could become a global precedent for other regulators facing similar issues.
Enterprises stand to benefit from greater flexibility to optimize their cloud footprint across providers without facing punitive licensing costs. The growing shift toward hybrid and multi-cloud architectures is central to digital transformation initiatives, workload resilience, and innovation programs.
The aftermath of this probe may bring critical changes to licensing models and boost competitive dynamics, making cloud adoption more cost-effective and flexible for Windows-centric enterprise customers. However, the resolution will require balancing intellectual property rights with competitive fairness in an increasingly cloud-driven IT ecosystem. Industry watchers and WindowsForum readers alike should closely monitor the CMA’s upcoming verdict, as it will influence the cost and accessibility of Windows workloads in the cloud for years to come.
This report draws from detailed summaries and analysis of the CMA investigation, AWS and Google’s complaints, Microsoft’s defense, and industry commentary around cloud licensing disputes and market developments .
Source: AWS: Customers would flee Azure if licensing costs were fair
Amazon Web Services (AWS) has asserted that approximately 50% of workloads currently hosted by Microsoft enterprise customers on Azure would migrate away to AWS, Google Cloud, or other cloud services if not for the disproportionately high licensing costs imposed by Microsoft. This assertion is part of AWS’s submission to the UK's Competition and Markets Authority (CMA) investigation into the cloud services market, underscoring the pivotal role licensing plays in shaping cloud adoption and customer choice. These licensing restrictions, AWS claims, artificially inflate migration costs and serve as a deterrent to multi-cloud strategies and cloud competition.The licensing changes in question were primarily introduced in 2019 when Microsoft revised its Windows Server licensing terms. Under these revisions, the cost of running Windows Server workloads outside Azure—on platforms such as AWS, Google Cloud, or Alibaba Cloud—could be as much as four times higher than running the same workloads on Azure. This translates to customers facing incremental license fees or having to repurchase licenses they already hold under Bring Your Own License (BYOL) schemes just to leverage Microsoft’s software on non-Microsoft clouds. The outcome is a significant cost penalty with direct commercial harm to cloud service competitors and customers alike.
Regulatory Scrutiny and Market Impact
The CMA's ongoing investigation into the UK cloud market, initiated in 2023, has focused heavily on these licensing practices. AWS and Google have both flagged Microsoft's licensing policies as a lever of anti-competitive behavior designed to protect and extend Microsoft’s dominance in productivity software into the cloud infrastructure domain. The CMA's provisional findings echo some of these concerns by highlighting Microsoft's ability and incentive to partially "foreclose" competitors like AWS and Google by exploiting its position in essential software products like Windows Server.The CMA reports that Microsoft’s strategy has the effect of reducing competitive pressure on Azure, allowing Microsoft to maintain higher prices for Azure customers versus what might be expected in a truly competitive market. This is because competitors face higher costs that impair their ability to offer price-competitive cloud infrastructure and services when running Microsoft’s key server software. These dynamics effectively restrict customer choice and reduce the incentive for Microsoft to offer better pricing. As a result, customers are "commercially tied" to Microsoft Azure for workloads involving Windows Server or SQL Server.
AWS and Google’s Position: Cost and Competition Barriers
AWS emphasizes that Microsoft’s licensing restrictions force customers to repurchase licenses or pay inflated prices, creating a commercial lock-in on Azure. AWS claims it struggles to absorb these extra costs profitably or to effectively discount cloud services to offset licensing fees. In its submission, AWS estimated that if licensing costs were equitable, potentially up to half of Windows Server workloads running on Azure would migrate to AWS or other clouds.Google has provided anecdotal examples of customers with large Windows Server estates who would prefer to run on Google Cloud but migrated to Azure due to licensing constraints and associated costs. Google has recommended several interventions to the CMA, including preventing Microsoft from degrading Google’s licensing terms, limiting lock-in tactics for new customers, and stopping Microsoft from restricting independent software vendors and managed service providers from selling Microsoft software for Google Cloud.
Microsoft's Defense: Intellectual Property and Market Competition
Unsurprisingly, Microsoft has rejected many of the CMA's provisional criticisms. It argues that the CMA’s conclusions are vague and insufficiently grounded in evidence regarding the extent to which workloads are foreclosed and competition stifled. Microsoft emphasizes its commitment to intellectual property rights and points out that pricing decisions are carefully calibrated: charging license fees that are too low would encourage providers to move away from Microsoft software entirely, which would be detrimental to Microsoft’s business and customers reliant on its software.Microsoft also highlights that purchasing Windows Server Virtual Machines (VMs) on Azure involves more than just license costs. Additional services such as networking, storage, and backup are factored into the total cost structure, and when considering these, Microsoft asserts that AWS and Google have room to profit and can compete effectively. The company argues that margins for AWS and Google on workloads involving Windows IP are sufficiently high and thus contest the claim of foreclosure on competitive grounds.
Market and Financial Context
The cloud infrastructure market is vast and rapidly growing, with AWS and Microsoft’s Intelligent Cloud generating tens of billions of dollars in operating income globally. AWS reported approximately $39.8 billion operating income in 2024, while Microsoft’s Intelligent Cloud unit recorded about $49.6 billion in operating income for its fiscal 2024. These financial scales underscore the high stakes involved in licensing policies and competitive positioning.Potential Outcomes and Industry Implications
The CMA is expected to finalize its decision on the cloud services market investigation by July 2025. The regulator’s verdict could have far-reaching consequences not only for Microsoft’s licensing practices but also for competitive dynamics between cloud providers. A ruling requiring Microsoft to adjust licensing fees or provide equal pricing across clouds could unlock multi-cloud flexibility, leading to significant shifts in enterprise cloud deployment strategies and potentially lowering costs for customers.This regulatory focus highlights a fundamental tension in the cloud era: software licensing models conceived in the pre-cloud world now have substantial influence on the vibrancy and fairness of cloud infrastructure markets. As enterprises increasingly adopt multi-cloud and hybrid-cloud strategies, resolving these licensing frictions will shape the agility and cost-efficiency of corporate IT infrastructures.
Broader UK Regulatory Climate and Remedies
The CMA’s approach favors "behavioral" remedies such as limiting egress fees (charges to transfer data out of a cloud), enforcing fair licensing models, and mitigating lock-in tactics rather than radical structural remedies like forcing divestitures or breaking up cloud providers. These measures aim to foster interoperability, reduce vendor lock-in, and improve market competitiveness, benefiting SMEs and enterprise customers alike.If the CMA enforces licensing equality, it could compel Microsoft to price its Windows Server and SQL Server licenses comparably regardless of whether workloads run on Azure or rival clouds. This would represent a significant regulatory intervention into how intellectual property rules interact with competitive cloud markets and could become a global precedent for other regulators facing similar issues.
What This Means for Windows Users and Enterprises
For Windows users, whether IT administrators, developers, or enterprise clients, the ongoing licensing debate and its regulatory outcomes matter considerably. Cloud is often the platform of choice for deploying, scaling, and securing Windows environments and applications. Licensing cost uncertainty creates extra budgeting challenges and influences platform decisions. More balanced licensing could promote better cloud choice, enhanced competition, and potentially lower total cost of ownership for Windows-based workloads.Enterprises stand to benefit from greater flexibility to optimize their cloud footprint across providers without facing punitive licensing costs. The growing shift toward hybrid and multi-cloud architectures is central to digital transformation initiatives, workload resilience, and innovation programs.
Conclusion
Microsoft’s licensing practices for Windows Server and SQL Server software are at the heart of an intensifying battle over cloud competition and customer freedom. AWS and Google contend these practices raise costs and block competition, while Microsoft defends its intellectual property and pricing strategies as necessary. The UK’s CMA investigation is a bellwether for how regulators might shape cloud market rules globally.The aftermath of this probe may bring critical changes to licensing models and boost competitive dynamics, making cloud adoption more cost-effective and flexible for Windows-centric enterprise customers. However, the resolution will require balancing intellectual property rights with competitive fairness in an increasingly cloud-driven IT ecosystem. Industry watchers and WindowsForum readers alike should closely monitor the CMA’s upcoming verdict, as it will influence the cost and accessibility of Windows workloads in the cloud for years to come.
This report draws from detailed summaries and analysis of the CMA investigation, AWS and Google’s complaints, Microsoft’s defense, and industry commentary around cloud licensing disputes and market developments .
Source: AWS: Customers would flee Azure if licensing costs were fair