The challenge of migrating established enterprise workloads from Microsoft Windows to Linux is a significant hurdle in the broader cloud infrastructure market, particularly as organizations transition their operations to public cloud providers. Major cloud players such as Amazon Web Services (AWS) and Google Cloud Platform (GCP) have highlighted how Microsoft’s licensing practices create steep cost differentials and technical barriers that essentially lock enterprises into using Azure, Microsoft’s cloud platform.
Historically, enterprises could leverage their existing Microsoft software licenses to run Windows Server and SQL Server on outsourced hardware or third-party cloud providers. However, changes implemented by Microsoft in 2019 introduced separate and more expensive licenses for virtualized Microsoft server software hosted on what Microsoft designates as “listed providers,” which include AWS, Google Cloud, and Alibaba Cloud.
This shift has made running Windows Server virtual machines (VMs) or SQL Server databases on AWS or GCP significantly more expensive—up to four times the cost compared to running the same workloads on Azure. Google explicitly told the UK Competition and Markets Authority (CMA) that this pricing disparity makes GCP “less competitive than on Azure,” effectively tilting the cloud market in Microsoft’s favor. AWS confirmed similar findings, estimating that half of its customers would consider switching cloud providers if Microsoft’s licensing price discrimination was reduced.
For enterprises with a substantial investment in Microsoft software, this translates into a coercive environment: either migrate workloads to Azure or endure prohibitively high licensing fees on competing clouds. The effect is to reinforce Microsoft’s cloud dominance by leveraging its entrenched Software Licensing Product Agreement (SPLA) ecosystem and vast installed Windows and SQL Server base.
The Microsoft-dependent application landscape within many enterprises is complex and deeply ingrained. Migrating Windows Server workloads, particularly those tied to legacy applications and specialized software, requires extensive rewriting and modernization which often spans years and significant financial investment. Google noted that example migrations took several years and entailed significant expense, making the shift to Linux impractical for most customers, especially those lacking large in-house development teams.
Furthermore, certain critical enterprise applications simply only run on Windows Server, making a switch to Linux infeasible without operational disruption or replacement software.
Given that Windows Server and SQL Server workloads generate 70-80% of Microsoft Azure’s revenue, Microsoft's practices cement Azure's market position by essentially bottling demand through forced licensing economics rather than purely competitive service offerings.
This scenario has essential downstream effects for enterprises, cloud vendors, and the cloud ecosystem at large. By reinforcing vertical lock-in, Microsoft’s licensing price differentials reduce incentives for customers to experiment with or switch to heterogeneous cloud environments, thereby stifling multi-cloud strategies and innovation.
While the CMA indicated no immediate concerns around egress fees due to discounts from cloud providers, smaller cloud players argue these discounts further entrench hyperscalers and limit competitive options.
Microsoft defends its pricing model, stating it tries to balance affordability with the business need not to underprice its software, which could drive customers to alternative platforms entirely. However, the CMA’s preliminary findings suggest Microsoft’s licensing approach harms competition, potentially leading to remedies to enable fairer licensing terms and better competitive dynamics.
Indeed, as many enterprises run sprawling, interconnected Windows-based applications, migrating these to Linux or other platforms involves risk not just of failure but of significant operational disruption. The cost of migration therefore extends beyond software licensing to encompass business continuity concerns—a factor well understood by cloud providers when framing their submissions to regulators.
From a strategic viewpoint, the licensing pricing difference acts as a form of vendor lock-in via economic and operational inertia rather than through direct service constraints.
Looking ahead, the CMA's impending final report, expected to propose remedies, may require Microsoft to re-evaluate its cloud licensing terms, potentially leveling the competitive playing field. This could include mandating uniform license fees irrespective of cloud provider, reducing barriers to migration, and fostering multi-cloud interoperability.
The CMA’s investigation and similar regulatory scrutiny worldwide highlight the growing recognition that cloud market fairness requires addressing not just data movement costs but also software licensing practices that influence platform choices.
For enterprises, this means continued vigilance about vendor lock-in risks, investing in cloud migration readiness, and advocating for regulatory outcomes that promote genuine competitive choice in the cloud infrastructure market.
For cloud providers and policymakers alike, it is a clarion call to balance innovation, competition, and legacy ecosystems to foster a cloud computing landscape that empowers rather than restricts enterprise digital transformation.
This analysis synthesizes information from the original report in The Register and related submissions and insights from cloud industry discussions , , , .
Source: Google and AWS: Linux too hard, so customers move to Azure
Microsoft’s Licensing Practices and Their Impact on Cloud Competition
Historically, enterprises could leverage their existing Microsoft software licenses to run Windows Server and SQL Server on outsourced hardware or third-party cloud providers. However, changes implemented by Microsoft in 2019 introduced separate and more expensive licenses for virtualized Microsoft server software hosted on what Microsoft designates as “listed providers,” which include AWS, Google Cloud, and Alibaba Cloud.This shift has made running Windows Server virtual machines (VMs) or SQL Server databases on AWS or GCP significantly more expensive—up to four times the cost compared to running the same workloads on Azure. Google explicitly told the UK Competition and Markets Authority (CMA) that this pricing disparity makes GCP “less competitive than on Azure,” effectively tilting the cloud market in Microsoft’s favor. AWS confirmed similar findings, estimating that half of its customers would consider switching cloud providers if Microsoft’s licensing price discrimination was reduced.
For enterprises with a substantial investment in Microsoft software, this translates into a coercive environment: either migrate workloads to Azure or endure prohibitively high licensing fees on competing clouds. The effect is to reinforce Microsoft’s cloud dominance by leveraging its entrenched Software Licensing Product Agreement (SPLA) ecosystem and vast installed Windows and SQL Server base.
Why Not Just Switch to Linux?
At first glance, one might assume that switching from Windows to Linux would be a straightforward way for enterprises to escape Microsoft’s pricing squeeze. However, Google and AWS submissions to the CMA affirm that this is rarely a viable option for large organizations heavily dependent on Windows.The Microsoft-dependent application landscape within many enterprises is complex and deeply ingrained. Migrating Windows Server workloads, particularly those tied to legacy applications and specialized software, requires extensive rewriting and modernization which often spans years and significant financial investment. Google noted that example migrations took several years and entailed significant expense, making the shift to Linux impractical for most customers, especially those lacking large in-house development teams.
Furthermore, certain critical enterprise applications simply only run on Windows Server, making a switch to Linux infeasible without operational disruption or replacement software.
Broader Implications for Competition and Innovation
This licensing strategy restricts competition in Infrastructure-as-a-Service (IaaS) markets, especially concerning workloads running Windows Server and SQL Server. Google's submission to the CMA points out that customers heavily invested in Microsoft software “are denied effective competitive choice or innovative alternatives” due to cost and technical barriers.Given that Windows Server and SQL Server workloads generate 70-80% of Microsoft Azure’s revenue, Microsoft's practices cement Azure's market position by essentially bottling demand through forced licensing economics rather than purely competitive service offerings.
This scenario has essential downstream effects for enterprises, cloud vendors, and the cloud ecosystem at large. By reinforcing vertical lock-in, Microsoft’s licensing price differentials reduce incentives for customers to experiment with or switch to heterogeneous cloud environments, thereby stifling multi-cloud strategies and innovation.
The Role of the UK Competition and Markets Authority
The CMA’s investigation into the UK cloud market highlights these issues critically. Apart from pricing, the CMA is also examining egress fees—charges for moving data out of a cloud provider’s environment—which can also deter switching between clouds.While the CMA indicated no immediate concerns around egress fees due to discounts from cloud providers, smaller cloud players argue these discounts further entrench hyperscalers and limit competitive options.
Microsoft defends its pricing model, stating it tries to balance affordability with the business need not to underprice its software, which could drive customers to alternative platforms entirely. However, the CMA’s preliminary findings suggest Microsoft’s licensing approach harms competition, potentially leading to remedies to enable fairer licensing terms and better competitive dynamics.
Technical and Strategic Barriers to Migration
The obstacles to migration are not solely economic; technical barriers such as application rewriting, lack of equivalent Linux-compatible software, the necessity for extensive testing and validation, and the risk inherent in large-scale IT infrastructure changes compound the migration challenge.Indeed, as many enterprises run sprawling, interconnected Windows-based applications, migrating these to Linux or other platforms involves risk not just of failure but of significant operational disruption. The cost of migration therefore extends beyond software licensing to encompass business continuity concerns—a factor well understood by cloud providers when framing their submissions to regulators.
Insights from Industry and Future Outlook
The cloud market's current state reflects a broader industry truth: legacy software ecosystems exert profound influence on technical innovation trajectories and competition. Microsoft’s leveraging of its installed base makes Azure the natural path of least resistance for enterprises embracing cloud infrastructure, disadvantaging competitors and limiting customer choice.From a strategic viewpoint, the licensing pricing difference acts as a form of vendor lock-in via economic and operational inertia rather than through direct service constraints.
Looking ahead, the CMA's impending final report, expected to propose remedies, may require Microsoft to re-evaluate its cloud licensing terms, potentially leveling the competitive playing field. This could include mandating uniform license fees irrespective of cloud provider, reducing barriers to migration, and fostering multi-cloud interoperability.
Conclusion: The Complexity of Cloud Migration and Market Fairness
Migrating significant Windows Server and SQL Server workloads to Linux or non-Microsoft clouds remains a daunting proposition for most enterprises. Microsoft's licensing strategy amplifies this challenge by economically incentivizing Azure over competitors. This situation distorts cloud market dynamics and limits customers from pursuing optimal, cost-effective multi-cloud strategies.The CMA’s investigation and similar regulatory scrutiny worldwide highlight the growing recognition that cloud market fairness requires addressing not just data movement costs but also software licensing practices that influence platform choices.
For enterprises, this means continued vigilance about vendor lock-in risks, investing in cloud migration readiness, and advocating for regulatory outcomes that promote genuine competitive choice in the cloud infrastructure market.
For cloud providers and policymakers alike, it is a clarion call to balance innovation, competition, and legacy ecosystems to foster a cloud computing landscape that empowers rather than restricts enterprise digital transformation.
This analysis synthesizes information from the original report in The Register and related submissions and insights from cloud industry discussions , , , .
Source: Google and AWS: Linux too hard, so customers move to Azure
