When enterprises contemplate moving their substantial IT operations and applications to the cloud, those heavily invested in Microsoft ecosystems face a very challenging dilemma. The practical realities of migrating complex Windows Server and SQL Server workloads swiftly confront IT decision-makers, especially under the cloud market dynamics highlighted in the UK Competition and Markets Authority's (CMA) investigation.
At the heart of this issue lies Microsoft’s cloud licensing policies, which changed significantly around 2019. Historically, businesses could use traditional licenses for Microsoft server software even when hosting on outsourced or third-party cloud infrastructure. But Microsoft redefined licensing for virtual instances of Windows Server and SQL Server running on certain “listed providers” — a category explicitly including Amazon Web Services (AWS), Google Cloud Platform (GCP), and Alibaba Cloud.
With this reclassification, customers now require new, separate licenses—Software Provider License Agreements (SPLAs)—to run equivalent workloads on these platforms. The pricing for these SPLAs in competitor clouds is typically many times higher—up to four times the cost—than running the same software on Microsoft Azure. Google explicitly told the CMA that this escalation makes running Windows Server workloads on GCP “less competitive” compared to Azure, creating a substantial financial hurdle for customers.
This licensing structure strongly incentivizes customers entrenched in Microsoft software to migrate to Azure rather than run workloads on AWS or GCP, where they would incur heavy license markups. Although such markups might be conceived as a reflection of Microsoft protecting its intellectual property and revenue streams, from the customer perspective, the practical effect is a forced vendor lock-in within the cloud ecosystem.
Google and AWS have both submitted to the CMA that such a switch is far from trivial. Large enterprises have vast portfolios of legacy applications built and optimized for Windows Server and SQL Server. These applications have deep dependencies on Microsoft’s proprietary technologies, APIs, and behaviors. Migrating them to Linux or non-Microsoft databases essentially means rewriting or refactoring these applications from the ground up—a process measured not in months, but years. It demands significant software engineering resources, expertise, and financial investment that many companies do not have readily available.
Google’s submission to the CMA highlights that existing customers who have attempted this transition faced multi-year projects with high costs and often lacked the in-house capabilities to undertake such extensive modernization. The commercial realities thus force customers to pay Microsoft’s premium pricing rather than confront the disruption, expense, and risk of wholesale migration.
Data from Google emphasizes that 70-80% of Azure’s revenue derives from Windows Server and SQL Server—a core plank underpinning Microsoft’s cloud dominance. This entrenched dependency means Microsoft’s licensing policies effectively stifle competition by raising barriers against multi-cloud flexibility and cross-cloud migration.
The CMA recognizes the importance of Windows Server and SQL Server workloads in the cloud market. Remedying unfair licensing practices could unleash more competitive pricing among cloud providers, enabling enterprises to diversify their cloud strategies and avoid monopolistic lock-in.
However, critics argue that Microsoft is leveraging its massive installed base and dominance in enterprise IT to exert an unfair pricing stranglehold on the cloud infrastructure market, limiting choice and innovation.
However, the reality is complex. Enterprises will continue to face significant migration challenges, and clever licensing structures may persist in various forms as vendors seek to protect revenues.
Enterprises are often left paying a significant premium or investing heavily in long-term application rewrites that few can afford easily. The UK CMA’s investigation brings critical scrutiny to these practices, emphasizing the need for fair competition, transparent pricing, and reduced technical and financial barriers in cloud adoption.
For IT leaders and developers navigating this landscape, understanding these dynamics is essential for strategic planning. As regulatory pressure mounts, cloud pricing and market structures may shift toward healthier competition and greater customer choice—potentially unlocking broader cloud innovation and flexibility in the years ahead.
This detailed analysis highlights the multi-dimensional challenges enterprises face when migrating Microsoft-centric workloads to the cloud, shaped by licensing constraints and regulatory oversight. The interplay between legacy software dependencies, vendor lock-in, and competitive cloud economics is key to understanding the current and future state of cloud computing.
Source: Google and AWS: Linux too hard, so customers move to Azure
The Microsoft Licensing Conundrum
At the heart of this issue lies Microsoft’s cloud licensing policies, which changed significantly around 2019. Historically, businesses could use traditional licenses for Microsoft server software even when hosting on outsourced or third-party cloud infrastructure. But Microsoft redefined licensing for virtual instances of Windows Server and SQL Server running on certain “listed providers” — a category explicitly including Amazon Web Services (AWS), Google Cloud Platform (GCP), and Alibaba Cloud.With this reclassification, customers now require new, separate licenses—Software Provider License Agreements (SPLAs)—to run equivalent workloads on these platforms. The pricing for these SPLAs in competitor clouds is typically many times higher—up to four times the cost—than running the same software on Microsoft Azure. Google explicitly told the CMA that this escalation makes running Windows Server workloads on GCP “less competitive” compared to Azure, creating a substantial financial hurdle for customers.
This licensing structure strongly incentivizes customers entrenched in Microsoft software to migrate to Azure rather than run workloads on AWS or GCP, where they would incur heavy license markups. Although such markups might be conceived as a reflection of Microsoft protecting its intellectual property and revenue streams, from the customer perspective, the practical effect is a forced vendor lock-in within the cloud ecosystem.
Why Not Just Switch to Linux?
A natural question arises: why don’t these enterprises simply "ditch Windows and SQL Server for Linux and open-source databases," thus escaping the Microsoft lock-in?Google and AWS have both submitted to the CMA that such a switch is far from trivial. Large enterprises have vast portfolios of legacy applications built and optimized for Windows Server and SQL Server. These applications have deep dependencies on Microsoft’s proprietary technologies, APIs, and behaviors. Migrating them to Linux or non-Microsoft databases essentially means rewriting or refactoring these applications from the ground up—a process measured not in months, but years. It demands significant software engineering resources, expertise, and financial investment that many companies do not have readily available.
Google’s submission to the CMA highlights that existing customers who have attempted this transition faced multi-year projects with high costs and often lacked the in-house capabilities to undertake such extensive modernization. The commercial realities thus force customers to pay Microsoft’s premium pricing rather than confront the disruption, expense, and risk of wholesale migration.
The Cloud Market Landscape and Customer Dependency
This dependency creates a marketplace with high switching costs and limited effective choice. AWS estimates that half of their cloud customers would be more willing to move workloads off Azure if Microsoft’s licensing fees were more equitable across platforms.Data from Google emphasizes that 70-80% of Azure’s revenue derives from Windows Server and SQL Server—a core plank underpinning Microsoft’s cloud dominance. This entrenched dependency means Microsoft’s licensing policies effectively stifle competition by raising barriers against multi-cloud flexibility and cross-cloud migration.
CMA’s Investigation and Potential Remedies
The UK CMA is investigating this issue as part of a broader review of anti-competitive practices in the cloud infrastructure market. Key complaints include:- Licensing pricing disparities that establish Microsoft software as a gatekeeper expense barrier.
- Egress fees charged for moving data out of cloud providers, which critics describe as a "data migration tax," further locking in customers.
- Volume discount arrangements that tie customers into large, long-term contracts, giving incumbents an edge.
- Technical interoperability hurdles discouraging easy workload migration between clouds.
The CMA recognizes the importance of Windows Server and SQL Server workloads in the cloud market. Remedying unfair licensing practices could unleash more competitive pricing among cloud providers, enabling enterprises to diversify their cloud strategies and avoid monopolistic lock-in.
Microsoft’s Position
Microsoft defends these licensing policies, claiming they aim to strike a balance between recouping investment in software development and avoiding excessive costs that would drive customers to alternative platforms. They argue that making licenses too cheap risks undermining their ecosystem.However, critics argue that Microsoft is leveraging its massive installed base and dominance in enterprise IT to exert an unfair pricing stranglehold on the cloud infrastructure market, limiting choice and innovation.
Practical Implications for Enterprises
For enterprises heavily invested in Windows Server and SQL Server, the cloud migration journey is neither simple nor cheap. The choice often boils down to:- Paying the premium to keep existing software investments running on Azure.
- Facing years of expensive, risky development projects to modernize applications for Linux or open-source tech.
- Absorbing additional financial penalties by running Microsoft workloads on competitor clouds.
Beyond Licensing: Other Barriers to Cloud Migration
The CMA also flags additional issues impacting multi-cloud flexibility:- Egress fees: Data egress charges from cloud providers make switching platforms costly, limiting enterprise options and locking customers in.
- Technical barriers: Cloud providers intentionally or unintentionally make it hard to migrate workloads or integrate between clouds due to proprietary APIs, services, and performance discrepancies.
- Volume discounts and vendor lock: Deep discounts based on spend thresholds incentivize staying with a single vendor, discouraging multi-cloud or hybrid strategies.
Outlook and What to Expect
The CMA’s final report, expected soon, will likely mandate reform to Microsoft’s licensing pricing, limitations on egress fees, and encourage interoperability improvements. This move could signal a shift toward a more open, competitive cloud market, benefiting enterprises and diversifying cloud usage beyond the current hyperscaler duopoly.However, the reality is complex. Enterprises will continue to face significant migration challenges, and clever licensing structures may persist in various forms as vendors seek to protect revenues.
Conclusion: A Cloud Market at a Crossroads
The cloud infrastructure market, while booming and innovative, remains heavily shaped by legacy software ecosystems and licensing models. Microsoft’s licensing policies for Windows Server and SQL Server workloads create a formidable lock-in that deters migration to competitor clouds or open-source alternatives.Enterprises are often left paying a significant premium or investing heavily in long-term application rewrites that few can afford easily. The UK CMA’s investigation brings critical scrutiny to these practices, emphasizing the need for fair competition, transparent pricing, and reduced technical and financial barriers in cloud adoption.
For IT leaders and developers navigating this landscape, understanding these dynamics is essential for strategic planning. As regulatory pressure mounts, cloud pricing and market structures may shift toward healthier competition and greater customer choice—potentially unlocking broader cloud innovation and flexibility in the years ahead.
This detailed analysis highlights the multi-dimensional challenges enterprises face when migrating Microsoft-centric workloads to the cloud, shaped by licensing constraints and regulatory oversight. The interplay between legacy software dependencies, vendor lock-in, and competitive cloud economics is key to understanding the current and future state of cloud computing.
Source: Google and AWS: Linux too hard, so customers move to Azure
