The recent investigation by the UK’s Competition and Markets Authority (CMA) into cloud market competitiveness has brought to light a critical challenge enterprises face when moving from traditional on-premises environments to cloud infrastructure: the complexity and expense of migrating Microsoft server workloads outside of Microsoft’s own Azure cloud. This issue is a perfect storm born from Microsoft’s licensing changes that have inadvertently locked many companies into the Azure ecosystem, forcing either acceptance of elevated costs on competing cloud platforms or a long, painful rewrite of legacy applications to transition away from Windows-based technology stacks.
Historically, many enterprises built their IT infrastructure heavily around Microsoft Windows Server and SQL Server. These systems power a wide array of business-critical applications developed and refined over decades. When the cloud revolution began, customers could use their existing software licenses to run Microsoft services on outsourced hardware, regardless of the cloud vendor. However, in 2019, Microsoft introduced new licensing rules for Microsoft server software virtualized on third-party clouds such as Amazon Web Services (AWS), Google Cloud Platform (GCP), and Alibaba Cloud. Microsoft designated these as “listed providers” requiring separate, more expensive licenses beyond the traditional software licenses.
This shift dramatically elevated the cost of running Windows Server and SQL Server workloads on non-Azure clouds. According to Google’s submission to the CMA, customers now face up to four times higher costs when running Windows Server virtual machines on Google Cloud compared to running on Azure. The economic imbalance essentially makes Azure the de facto and only cost-effective choice for enterprises reliant on Microsoft software, limiting actual competition in the Infrastructure as a Service (IaaS) market.
Google’s CMA report highlights that traditional enterprise customers do not start from a blank slate during cloud migration. They tend to have “highly dependent” Windows Server workloads that require substantial software engineering resources and extended timelines—often years—to modernize and rewrite applications for Linux. This modernization process commands “significant expense” and demands skills many organizations lack in-house. Moreover, certain core applications are explicitly dependent on Windows Server and cannot function on Linux, necessitating continued use of Microsoft operating systems.
Amazon corroborates this perspective, noting that while some workloads may be re-architected for Linux, such cases remain “relatively rare” due to prohibitive costs and the economic infeasibility for most customers to deviate from Microsoft’s productivity software-centric environments.
Statistics brought forth in the investigation reveal that around 70-80% of Azure’s revenue stems from customers running Windows Server and SQL Server. This dependency underscores Microsoft’s substantial influence on overall cloud market economics and raises questions about market power abuse through leverage of legacy software assets.
AWS estimates that approximately half their potential customer base would depart to non-Microsoft cloud options if Microsoft’s licensing discrepancies were removed. This figure illustrates a sizable pent-up demand for alternative cloud platforms if competition were enabled on an economically level playing field.
The CMA’s preliminary findings suggest that these licensing costs and the associated lock-in have harmed competition. Beyond Microsoft licensing, the investigation is also exploring other cloud market impediments such as “egress fees” — charges for moving data out of cloud environments — and interoperability barriers among cloud providers. While the CMA finds less concern around egress fees in the UK, smaller cloud competitors warn these financial frictions heavily favor the large hyperscalers and consolidate cloud market power.
This regulatory tussle embodies a classic clash between market power strategies by dominant incumbents and growing calls for intervention to preserve competitive cloud markets. The CMA is reportedly considering “behavioral remedies” — targeted regulatory actions to curb unfair licensing practices and enhance market openness — rather than aggressive structural measures like breaking up the company.
The final CMA decision, expected in July 2025, will be closely watched. Proposed remedies may include licensing reforms mandating uniform Microsoft software pricing irrespective of cloud provider, increased transparency, and rules reducing barriers to workload migration across clouds.
Realistically, many enterprises will continue to prefer hybrid or multi-cloud deployments anchored by Microsoft Azure for Microsoft stack workloads, supplemented by Linux-based services where open-source advantages apply. However, current licensing policies disincentivize true multi-cloud flexibility by imposing punitive costs on third-party providers.
Enterprises and Windows-focused IT pros should keep abreast of evolving regulatory outcomes as these decisions will affect cloud budgeting, vendor negotiations, and strategic cloud architecture for years. This regulatory scrutiny represents a pivotal inflection point in cloud computing history, potentially disrupting the entrenched dominance of hyperscalers leveraging proprietary software stacks to solidify market share.
Cloud market incumbents leverage their software product portfolios to create economic moats, particularly through differential licensing costs that disincentivize cloud competition. Regulatory bodies globally are reviewing these practices as cloud infrastructure increasingly underpins corporate and government IT strategies.
At the same time, open-source Linux ecosystems coupled with containerized, microservices architectures offer promising alternatives. However, a wholesale transition requires large upfront investments not easily absorbed by many enterprises dependent on mature Windows applications critical to business operations. Thus, a careful, incremental approach blending modernization, hybrid cloud, and improved regulatory frameworks emerges as the practical way forward.
For enterprises planning cloud strategies, the message is clear: licensing costs and legacy dependency matter enormously. The choice is often between absorbing elevated Microsoft licensing fees on competitive clouds or enduring expensive, year-long application rewrites to modernize workloads for Linux. This dynamic reinforces Azure’s market dominance but may limit innovation and competitive pricing for end users.
The forthcoming CMA ruling and any ensuing regulatory remedies will be critical to watch, as they have the potential to reshape cloud vendor competition, software licensing norms, and enterprise IT strategies across the global cloud computing landscape. In the meantime, IT professionals must navigate these entrenched challenges with a careful balance of technical, financial, and strategic considerations.
This feature has aimed to provide a comprehensive analysis of the Microsoft cloud licensing conundrum as reported by The Register and illuminated through CMA investigation filings, blending the factual contours with practical implications and market insights valuable to WindowsForum.com readers and cloud IT professionals. For detailed exploration and community discussions on cloud migrations, Microsoft licensing, and enterprise IT strategies, stay connected to our forum and ongoing expert commentary.
Source: Google and AWS: Linux too hard, so customers move to Azure
The Licensing Quagmire in Cloud Migration
Historically, many enterprises built their IT infrastructure heavily around Microsoft Windows Server and SQL Server. These systems power a wide array of business-critical applications developed and refined over decades. When the cloud revolution began, customers could use their existing software licenses to run Microsoft services on outsourced hardware, regardless of the cloud vendor. However, in 2019, Microsoft introduced new licensing rules for Microsoft server software virtualized on third-party clouds such as Amazon Web Services (AWS), Google Cloud Platform (GCP), and Alibaba Cloud. Microsoft designated these as “listed providers” requiring separate, more expensive licenses beyond the traditional software licenses.This shift dramatically elevated the cost of running Windows Server and SQL Server workloads on non-Azure clouds. According to Google’s submission to the CMA, customers now face up to four times higher costs when running Windows Server virtual machines on Google Cloud compared to running on Azure. The economic imbalance essentially makes Azure the de facto and only cost-effective choice for enterprises reliant on Microsoft software, limiting actual competition in the Infrastructure as a Service (IaaS) market.
Why Enterprises Can’t Simply Switch to Linux
A logical question arises: why do enterprises continue to pay the premium for Microsoft licensing rather than porting their workloads to Linux, which offers broad cloud support, no licensing fees, and a strong open-source ecosystem? The answer lies in the deep entrenchment of Microsoft technologies within enterprise applications and IT operations, combined with the complexity involved in migrating away from this environment.Google’s CMA report highlights that traditional enterprise customers do not start from a blank slate during cloud migration. They tend to have “highly dependent” Windows Server workloads that require substantial software engineering resources and extended timelines—often years—to modernize and rewrite applications for Linux. This modernization process commands “significant expense” and demands skills many organizations lack in-house. Moreover, certain core applications are explicitly dependent on Windows Server and cannot function on Linux, necessitating continued use of Microsoft operating systems.
Amazon corroborates this perspective, noting that while some workloads may be re-architected for Linux, such cases remain “relatively rare” due to prohibitive costs and the economic infeasibility for most customers to deviate from Microsoft’s productivity software-centric environments.
Economic and Competitive Implications
This licensing dynamic essentially forces enterprises into a “devil’s choice”: commit to migrating to Azure with a safety net on costs but reduced cloud provider choice, or incur markedly greater expenses by hosting their Microsoft stacks on AWS or Google Cloud. This lack of viable alternatives effectively stifles true competitive pressure in the UK cloud market and elsewhere.Statistics brought forth in the investigation reveal that around 70-80% of Azure’s revenue stems from customers running Windows Server and SQL Server. This dependency underscores Microsoft’s substantial influence on overall cloud market economics and raises questions about market power abuse through leverage of legacy software assets.
AWS estimates that approximately half their potential customer base would depart to non-Microsoft cloud options if Microsoft’s licensing discrepancies were removed. This figure illustrates a sizable pent-up demand for alternative cloud platforms if competition were enabled on an economically level playing field.
The CMA’s preliminary findings suggest that these licensing costs and the associated lock-in have harmed competition. Beyond Microsoft licensing, the investigation is also exploring other cloud market impediments such as “egress fees” — charges for moving data out of cloud environments — and interoperability barriers among cloud providers. While the CMA finds less concern around egress fees in the UK, smaller cloud competitors warn these financial frictions heavily favor the large hyperscalers and consolidate cloud market power.
Microsoft’s Defense and the CMA’s Regulatory Approach
Predictably, Microsoft defends its licensing policies by arguing it must carefully balance pricing to avoid driving customers away to alternative platforms while still fairly valuing its software. Microsoft claims its Service Provider License Agreement (SPLA) fees are set to neither undersell the software rights nor incentivize wholesale moves off Microsoft technology.This regulatory tussle embodies a classic clash between market power strategies by dominant incumbents and growing calls for intervention to preserve competitive cloud markets. The CMA is reportedly considering “behavioral remedies” — targeted regulatory actions to curb unfair licensing practices and enhance market openness — rather than aggressive structural measures like breaking up the company.
The final CMA decision, expected in July 2025, will be closely watched. Proposed remedies may include licensing reforms mandating uniform Microsoft software pricing irrespective of cloud provider, increased transparency, and rules reducing barriers to workload migration across clouds.
What This Means for IT Professionals and Organizations
For IT managers and architects, this ongoing saga underscores the complexity inherited from years of legacy software investments and vendor lock-in. Organizations planning cloud migration must carefully evaluate both technical feasibility and economic impact of migration paths from Windows Server environments. The cost of rewriting existing applications or risk accepting inflated cloud-hosting fees must be diligently balanced.Realistically, many enterprises will continue to prefer hybrid or multi-cloud deployments anchored by Microsoft Azure for Microsoft stack workloads, supplemented by Linux-based services where open-source advantages apply. However, current licensing policies disincentivize true multi-cloud flexibility by imposing punitive costs on third-party providers.
Enterprises and Windows-focused IT pros should keep abreast of evolving regulatory outcomes as these decisions will affect cloud budgeting, vendor negotiations, and strategic cloud architecture for years. This regulatory scrutiny represents a pivotal inflection point in cloud computing history, potentially disrupting the entrenched dominance of hyperscalers leveraging proprietary software stacks to solidify market share.
Broader Industry and Market Context
This situation is emblematic of larger trends: legacy software licensing models have struggled to adapt to modern cloud economics and multi-cloud adoption strategies. Enterprises face intertwined challenges of modernizing legacy monoliths while grappling with proprietary vendor lock-in tactics.Cloud market incumbents leverage their software product portfolios to create economic moats, particularly through differential licensing costs that disincentivize cloud competition. Regulatory bodies globally are reviewing these practices as cloud infrastructure increasingly underpins corporate and government IT strategies.
At the same time, open-source Linux ecosystems coupled with containerized, microservices architectures offer promising alternatives. However, a wholesale transition requires large upfront investments not easily absorbed by many enterprises dependent on mature Windows applications critical to business operations. Thus, a careful, incremental approach blending modernization, hybrid cloud, and improved regulatory frameworks emerges as the practical way forward.
Conclusion
The CMA’s investigation into Microsoft’s licensing policies highlights a nuanced and significant barrier to a healthy, competitive cloud market in the UK and beyond. While enterprises are heavily invested in Windows Server ecosystems that impede easy migration to Linux or alternative platforms, Microsoft’s licensing practices multiply the cost and complexity for customers who attempt to run workloads outside Azure.For enterprises planning cloud strategies, the message is clear: licensing costs and legacy dependency matter enormously. The choice is often between absorbing elevated Microsoft licensing fees on competitive clouds or enduring expensive, year-long application rewrites to modernize workloads for Linux. This dynamic reinforces Azure’s market dominance but may limit innovation and competitive pricing for end users.
The forthcoming CMA ruling and any ensuing regulatory remedies will be critical to watch, as they have the potential to reshape cloud vendor competition, software licensing norms, and enterprise IT strategies across the global cloud computing landscape. In the meantime, IT professionals must navigate these entrenched challenges with a careful balance of technical, financial, and strategic considerations.
This feature has aimed to provide a comprehensive analysis of the Microsoft cloud licensing conundrum as reported by The Register and illuminated through CMA investigation filings, blending the factual contours with practical implications and market insights valuable to WindowsForum.com readers and cloud IT professionals. For detailed exploration and community discussions on cloud migrations, Microsoft licensing, and enterprise IT strategies, stay connected to our forum and ongoing expert commentary.
Source: Google and AWS: Linux too hard, so customers move to Azure
