The recent failure of Microsoft to deliver a special version of Azure for European Union (EU) cloud providers has brought its ongoing conflict with the Cloud Infrastructure Service Providers of Europe (CISPE) back into sharp focus. More than just a missed deadline, this episode underscores the persistent concerns about fair competition in the European cloud computing market and raises uncomfortable questions about the influence of tech giants, cross-Atlantic data flows, and regulatory enforcement. By critically examining the events, their context, and the technical and business implications, this feature explores the nuances of Microsoft’s missed Azure rollout, the broader impact on EU cloud infrastructure, and what’s at stake for customers and competitors alike.
Understanding the roots of this controversy requires revisiting the longstanding friction between Microsoft and Europe’s independent cloud providers. In November 2022, CISPE lodged a formal complaint with EU antitrust authorities, objecting to high costs and limiting conditions tied to running Microsoft’s core applications—Windows Server, Exchange, and SharePoint—on any platform other than Microsoft Azure. For years, these licensing practices effectively incentivized customers to stay within the Microsoft ecosystem: opt for anything else, and face steep fees or operational restrictions.
This issue, however, is not unique to the EU. Across global markets, large platform providers have faced similar accusations of using pricing and technology restrictions to create walled gardens. Yet, Europe’s cloud sector—with its strong privacy laws, patchwork of local providers, and ambitions for “digital sovereignty”—has emerged as a particular battleground, prompting the European Union to scrutinize licensing and market behavior more closely than many other jurisdictions.
By mid-May, the European Cloud Collaboration Observatory (ECCO)—an independent technical watchdog set up by CISPE—issued a blistering assessment: “Both Microsoft and CISPE have now agreed that Azure Local will not deliver the full set of features outlined in the Agreement.” This public acknowledgment not only confirmed the missed deadline but also made it clear that the original vision for the Hoster Product was off the table.
Microsoft, predictably, defended its record. A spokesperson told The Register that when facing “legitimate concerns from cloud providers, we listen and have made changes, and we continue engaging constructively. However, this particular research seems aimed at boosting the bottom line of some of the largest cloud market participants by changing licensing terms and tilting the regulatory environment in their favour.” The statement underlined a consistent Microsoft message: the company is responsive, but there is an ongoing tug-of-war over what constitutes genuinely “fair” competition.
Francisco Mingorance, secretary general of CISPE, issued a statement expressing both disappointment and cautious optimism: “It is disappointing that the proposed product did not deliver, but this is not the end of the Agreement. Phase 2 opens the door to discuss alternative, commercially equivalent solutions that enable CISPE members and Europe’s cloud infrastructure providers to compete fairly, while still offering Microsoft's productivity tools to their customers.”
In an interview, Mingorance cut to the heart of the issue. Many CISPE member companies, he suggested, “see Plan B as a better outcome than having to run more software, and more Microsoft software, to run on top.” He explained that “Azure Local” would have required dedicated hardware upgrades, representing significant capital expenditure for smaller hosters. More fundamentally, CISPE’s customers want to run Microsoft software “locally” as much as possible—without mandating use of Microsoft’s own cloud infrastructure, and without incurring additional fees for the privilege.
At the same time, the CISPE-Microsoft standoff encapsulates a deeper philosophical debate over the meaning of “platform neutrality.” Cloud products like Windows Server and SQL Server are industry standards; granting favorable terms only on Microsoft’s own platforms risks perpetuating lock-in and undermining the diversity and resilience of Europe’s digital ecosystem.
The UK’s Competition and Markets Authority (CMA) has also put Microsoft’s cloud licensing practices under scrutiny, asking for justifications around pricing and market impact. Although Microsoft has engaged with the CMA in an effort to explain and defend its strategy, the risk of further regulatory investigations—and possibly penalties—remains.
The ECCO’s findings, the momentum of antitrust actions, and calls for intervention from industry voices all suggest that the next stage of the CISPE-Microsoft relationship will play out under intense regulatory and public scrutiny.
CISPE’s disclosure that Google had actually offered a larger financial settlement not to resolve its complaint with Microsoft—an offer that CISPE ultimately declined in favor of a negotiated Microsoft proposal—underscores the complexity and, at times, the realpolitik of industry alliances and advocacy.
Some organizations may delay migrations or upgrades, others may settle for suboptimal hybrid architectures, while still others might cast about for open-source stack alternatives (with all the attendant compatibility headaches). For smaller or mid-sized European hosters, meanwhile, the opportunity they hoped would level the field remains elusive—at least for now.
Plans for Phase 2 may include:
For customers, the immediate consequence is uncertainty—a complicated patchwork of options without clear precedent or guarantee of parity. For Microsoft and the ecosystem, it is a reminder that market dominance carries both technical and ethical responsibilities, especially when the trust and competitiveness of an entire continent are on the line.
Ultimately, the success or failure of “Plan B” will not be measured just by new engineering features or licensing tweaks, but by the extent to which customers are truly free—free to run, migrate, and innovate on the platform of their choice, under terms that are genuinely fair, open, and competitive. Only then can Europe and the wider cloud industry claim to have learned the necessary lessons from this essential and instructive clash.
Source: theregister.com Microsoft blows deadline for special Azure for EU hosters
The Origin of a Dispute: Licensing, Lock-In, and Loyalties
Understanding the roots of this controversy requires revisiting the longstanding friction between Microsoft and Europe’s independent cloud providers. In November 2022, CISPE lodged a formal complaint with EU antitrust authorities, objecting to high costs and limiting conditions tied to running Microsoft’s core applications—Windows Server, Exchange, and SharePoint—on any platform other than Microsoft Azure. For years, these licensing practices effectively incentivized customers to stay within the Microsoft ecosystem: opt for anything else, and face steep fees or operational restrictions.This issue, however, is not unique to the EU. Across global markets, large platform providers have faced similar accusations of using pricing and technology restrictions to create walled gardens. Yet, Europe’s cloud sector—with its strong privacy laws, patchwork of local providers, and ambitions for “digital sovereignty”—has emerged as a particular battleground, prompting the European Union to scrutinize licensing and market behavior more closely than many other jurisdictions.
Microsoft’s Proposed Solution: Azure Stack HCI “Hoster Product”
With the antitrust complaint looming over its operations, Microsoft moved to negotiate. In July 2024, as part of a Memorandum of Understanding (MoU) with CISPE, the tech giant pledged to develop and promote a new version of Azure Local, officially known as Azure Stack HCI. This “Hoster Product” was designed to offer European hosters features previously restricted to Azure itself. Key promised features included:- Multitenancy support, allowing multiple customer workloads on a single physical infrastructure.
- Unlimited virtualization and multi-session Virtual Desktop Infrastructure (VDI) for Windows 10, 11, and future versions.
- Pay-as-you-go licensing for SQL Server, offering flexible licensing options.
- Free extended security updates, addressing a key need for organizations managing legacy systems.
A Missed Deadline, A Dampened Dream
The delivery date, set for mid-April, marked a crucial juncture. Yet as sources warned in early April, Microsoft’s commitment was undermined by the sheer complexity of replicating Azure’s cloud features at a local hoster level. The task, reportedly “low-balled” in terms of engineering scope, proved to be more daunting than Microsoft anticipated.By mid-May, the European Cloud Collaboration Observatory (ECCO)—an independent technical watchdog set up by CISPE—issued a blistering assessment: “Both Microsoft and CISPE have now agreed that Azure Local will not deliver the full set of features outlined in the Agreement.” This public acknowledgment not only confirmed the missed deadline but also made it clear that the original vision for the Hoster Product was off the table.
Industry Reaction: Frustrations and Fears
Key voices within the European cloud and open-source communities did not hold back. Mark Boost, CEO of UK-based Civo, argued, “Microsoft’s licensing practices have long been a barrier to fair competition in the cloud … customers are effectively incentivised to run legacy Microsoft workloads on Azure, with punitive costs or technical hurdles if they want to use alternative providers.” Frank Karlitschek, CEO of Nextcloud, echoed the irritation but added nuance: while criticizing Microsoft's tactics, he pointed out that other tech giants—Google among them, which financially backed a critical report—can be guilty of similar strategies. “We call on the European Commission to strongly enforce anti-trust and related regulations like the DMA against all big tech firms to ensure a level playing field.”Microsoft, predictably, defended its record. A spokesperson told The Register that when facing “legitimate concerns from cloud providers, we listen and have made changes, and we continue engaging constructively. However, this particular research seems aimed at boosting the bottom line of some of the largest cloud market participants by changing licensing terms and tilting the regulatory environment in their favour.” The statement underlined a consistent Microsoft message: the company is responsive, but there is an ongoing tug-of-war over what constitutes genuinely “fair” competition.
CISPE’s Response and “Plan B”
With the Hoster Product publicly abandoned, Microsoft and CISPE have pivoted to “Plan B”: to “focus on alternative, commercially equivalent approaches to meeting the fair licensing commitments outlined in the Agreement,” according to the ECCO report.Francisco Mingorance, secretary general of CISPE, issued a statement expressing both disappointment and cautious optimism: “It is disappointing that the proposed product did not deliver, but this is not the end of the Agreement. Phase 2 opens the door to discuss alternative, commercially equivalent solutions that enable CISPE members and Europe’s cloud infrastructure providers to compete fairly, while still offering Microsoft's productivity tools to their customers.”
In an interview, Mingorance cut to the heart of the issue. Many CISPE member companies, he suggested, “see Plan B as a better outcome than having to run more software, and more Microsoft software, to run on top.” He explained that “Azure Local” would have required dedicated hardware upgrades, representing significant capital expenditure for smaller hosters. More fundamentally, CISPE’s customers want to run Microsoft software “locally” as much as possible—without mandating use of Microsoft’s own cloud infrastructure, and without incurring additional fees for the privilege.
The Stakes: Digital Sovereignty, Customer Choice, and Competitive Fairness
Europe’s sensitivity to cloud sovereignty is well documented. Incidents such as the U.S. CLOUD Act and evolving trans-Atlantic data-sharing frameworks have made customers in the public and private sectors wary of dependencies that could expose them to unwanted foreign oversight or surveillance. As such, the ability for European providers to run critical Microsoft workloads natively—while maintaining compliance with EU privacy and security rules—is more than a technical luxury; it is a matter of strategic autonomy.At the same time, the CISPE-Microsoft standoff encapsulates a deeper philosophical debate over the meaning of “platform neutrality.” Cloud products like Windows Server and SQL Server are industry standards; granting favorable terms only on Microsoft’s own platforms risks perpetuating lock-in and undermining the diversity and resilience of Europe’s digital ecosystem.
Regulatory Pressure: Antitrust and the Digital Markets Act
Microsoft’s activities have not escaped the attention of European regulators. The European Commission, already heavily involved in enforcing antitrust rules, is empowered by new instruments such as the Digital Markets Act (DMA)—designed to rein in digital “gatekeepers” and promote contestability in key software and cloud markets.The UK’s Competition and Markets Authority (CMA) has also put Microsoft’s cloud licensing practices under scrutiny, asking for justifications around pricing and market impact. Although Microsoft has engaged with the CMA in an effort to explain and defend its strategy, the risk of further regulatory investigations—and possibly penalties—remains.
The ECCO’s findings, the momentum of antitrust actions, and calls for intervention from industry voices all suggest that the next stage of the CISPE-Microsoft relationship will play out under intense regulatory and public scrutiny.
The Role of Rivals: Google, AWS, and the Power Dynamics
The report critical of Microsoft’s cloud licensing was co-authored by Dr Aleksandra Boutin and Dr Xavier Boutin, with financial backing from Google. This detail, flagged by Frank Karlitschek and acknowledged in reporting, points to the layered complexity of cloud market competition. It’s a reminder that complaints about anti-competitive behavior often come from rivals with their own stakes in the outcome. Google, AWS, and other hyperscale providers aren’t immune to accusations of leveraging their own platforms and ecosystems to lock in customers.CISPE’s disclosure that Google had actually offered a larger financial settlement not to resolve its complaint with Microsoft—an offer that CISPE ultimately declined in favor of a negotiated Microsoft proposal—underscores the complexity and, at times, the realpolitik of industry alliances and advocacy.
Technical Challenges: Why “Azure Local” Stumbled
Beneath the legal wrangling and public statements lies a significant technical backstory. Azure’s draw is its tightly integrated, highly scalable infrastructure that links compute, storage, networking, and a rich ecosystem of services. Duplicating this environment locally, on hardware owned and managed by hundreds of independent hosters, presents unique engineering and security challenges.- Multitenancy: Achieving true multitenancy—where multiple customers share the same physical resources securely and efficiently—requires re-architecting key components of Azure’s control plane for third-party environments, ensuring no bleed-over of data or compute context.
- Virtualization and VDI: Microsoft’s virtual desktop solutions are deeply intertwined with licensing checks, telemetry, and real-time integration with Azure Active Directory and security services.
- Pay-as-you-go and licensing: Flexible “as a service” licensing adds another layer of administrative and technical challenge, given the need for accurate usage tracking outside the bounds of Microsoft’s direct control.
Customer Impact: Options, Uncertainty, and the Path Forward
For enterprise customers and public sector organizations across Europe, the effects of these delays and disputes are concrete. Many organizations, bound by regulatory, data residency, or security requirements, prefer—or are obliged—to keep sensitive workloads on premises or within geographically limited clouds. The failure of Microsoft’s Hoster Product to materialize on schedule (or at all) leaves such organizations with fewer straightforward paths to modernization, higher costs, greater complexity, or renewed dependency on Microsoft’s own regional Azure instances.Some organizations may delay migrations or upgrades, others may settle for suboptimal hybrid architectures, while still others might cast about for open-source stack alternatives (with all the attendant compatibility headaches). For smaller or mid-sized European hosters, meanwhile, the opportunity they hoped would level the field remains elusive—at least for now.
What Happens Next? Regulatory, Commercial, and Technical Timelines
A new deadline looms: Microsoft now has until July 10 to submit proposals for “commercially equivalent” solutions as mandated by its agreement with CISPE. This date, marking the one-year anniversary of the MoU, will likely be a key inflection point. Should Microsoft fail to propose a satisfactory alternative, CISPE has not ruled out returning to the European regulators with a renewed or expanded antitrust complaint—potentially elevating the issue to a legal showdown with much broader consequences.Plans for Phase 2 may include:
- Opening up selective licensing changes to allow third-party hosters to run Microsoft workloads without additional fees or infrastructural hurdles.
- Providing enhanced technical support or blueprints for secure local deployments of Microsoft’s core applications.
- Creating new, audit-ready frameworks to assure regulators and customers that local hosting can meet Microsoft’s (and Europe’s) compliance needs.
Notable Strengths and Potential Risks
Notable Strengths
- Transparency and pressure from independent actors: The existence of ECCO, CISPE, and a robust independent press—including outlets like The Register—ensures continued scrutiny and public accountability for all parties involved.
- Regulatory clarity: The DMA and EU antitrust framework provide both specific legal standards and an escalating set of remedies.
- Industry mobilization: The episode has galvanized not only CISPE but also a broader coalition of European providers and user groups, potentially accelerating the push for genuine cloud diversity and digital sovereignty in the region.
Potential Risks
- Continued vendor lock-in: If Microsoft is unable or unwilling to deliver genuinely platform-neutral licensing terms and technical capabilities, the practical effect—even with regulatory prodding—may be continued entrenchment of Microsoft’s Azure business at the expense of independent hosters.
- Technical fragmentation: Multiple “workarounds” and hybrid solutions could splinter the European cloud market, raising costs for customers and undermining competitiveness.
- Geopolitical escalation: Disagreements about data localization and licensing could become flashpoints in broader US-EU disputes, complicating matters for all participants.
- Regulator fatigue: If protracted negotiations or slow-motion Phase 2 workarounds fail to resolve the core issues, regulators may struggle to sustain intervention or muster sufficient political will for more aggressive remedies.
Conclusion: Cloud Competition at a Crossroads
Microsoft’s missed deadline for delivering a special Azure product for EU providers is more than just a missed business appointment; it is a moment of reckoning for the cloud industry, European digital autonomy, and international regulatory practice. As CISPE and Microsoft enter a second phase of negotiations, watched closely by regulators, rivals, and customers, the broader contours of the global cloud landscape are being shaped.For customers, the immediate consequence is uncertainty—a complicated patchwork of options without clear precedent or guarantee of parity. For Microsoft and the ecosystem, it is a reminder that market dominance carries both technical and ethical responsibilities, especially when the trust and competitiveness of an entire continent are on the line.
Ultimately, the success or failure of “Plan B” will not be measured just by new engineering features or licensing tweaks, but by the extent to which customers are truly free—free to run, migrate, and innovate on the platform of their choice, under terms that are genuinely fair, open, and competitive. Only then can Europe and the wider cloud industry claim to have learned the necessary lessons from this essential and instructive clash.
Source: theregister.com Microsoft blows deadline for special Azure for EU hosters
