The UK cloud computing sector is currently facing intense regulatory scrutiny, particularly focusing on the licensing practices of major cloud service providers Microsoft, Amazon Web Services (AWS), and Google Cloud. This follows the Competition and Markets Authority's (CMA) provisional findings that competition in the UK cloud market is impaired, partly due to Microsoft’s approach to licensing its software for use on rival clouds such as AWS and Google Cloud. Microsoft’s response to these concerns and the broader competitive dynamics in the cloud market illustrate the complex interplay between regulation, innovation, and market power in the digital economy.
The CMA’s provisional ruling issued in early 2025 highlights several critical issues within the UK cloud market. At the heart of their concerns is Microsoft’s licensing strategy that requires AWS and Google—or any cloud provider outside of Microsoft Azure—to pay significantly higher prices to license Microsoft’s software, such as Windows Server and SQL Server. In some cases, licensing costs on non-Microsoft clouds can be up to four times more expensive than when using Azure. This discrepancy has been described by AWS and Google as a “software tax” that puts them and their customers at a disadvantage, effectively foreclosing competition and hindering diversity in cloud offerings for end-users.
The CMA concluded that Microsoft has both the ability and incentive to leverage its software licensing practices to foreclose competitors like AWS and Google in their provision of cloud services. The authority considers this conduct harmful to competition and potentially detrimental to innovation and consumer choice in the UK cloud market. Alongside these licensing issues, the CMA also identified other structural concerns such as high egress fees (charges for transferring data out of a cloud) and interoperability barriers, both of which contribute to a high level of market concentration and significant barriers to entry for smaller or emerging cloud providers.
Microsoft also argued that the CMA has unfairly singled it out without considering how competitors like AWS and Google license proprietary software—which they do not make available to others in any scenario. The software giant noted that it offers competitive pricing expressly designed to win business on Azure, including standing discounts that effectively offset the cost of key Microsoft products like Windows Server and SQL Server when customers choose Azure for workload deployment. Microsoft contends that this is a pro-competitive strategy benefiting UK customers, and not a foreclosure tactic.
Furthermore, Microsoft positioned itself as a defender of innovation, associating the CMA’s narrow focus on licensing with a failure to appreciate the broader technology landscape—particularly rapid changes brought about by the integration of artificial intelligence (AI) technologies. Microsoft suggests that regulatory frameworks need to evolve to accommodate these new technological dynamics rather than clamp down on traditional licensing models which are part and parcel of their business.
Both AWS and Google have been vocal critics of Microsoft’s licensing terms, highlighting the economic disadvantage these practices impose on customers choosing non-Azure clouds. Google notably lodged its first-ever antitrust complaint against Microsoft with the European Commission in late 2023, reinforcing its view of Microsoft’s licensing as a “software tax” that stifles fair competition.
Interestingly, Microsoft accused Google of heavy lobbying efforts, spending significant sums to influence trade associations and regulatory bodies. Google, in turn, has joined coalitions like the Open Cloud Coalition to amplify its voice calling for interoperability and fair licensing practices.
Enhanced competition and fairer licensing models could translate into lower cloud costs and more choices for customers deploying Windows services on the cloud. It may also enable more cloud innovation, seamless integration between platforms, and better AI-enhanced security and productivity features. Conversely, overly harsh or misaligned regulatory measures could slow innovation or complicate service delivery.
Windows users and enterprise IT administrators should stay engaged with this evolving story, as changes in licensing practices, pricing, and cloud interoperability will affect how they consume cloud-powered software and services.
On the other hand, complaints from AWS, Google, and the CMA’s findings highlight the risk that entrenched market players can use legacy licensing and pricing strategies to entrench dominance and raise barriers for competitors.
Effective regulatory outcomes will need to reconcile these factors—upholding intellectual property rights and incentivizing innovation while ensuring that market power does not become a tool for exclusion or consumer harm.
This regulatory scrutiny promises to reshape how cloud licensing, pricing, and interoperability are managed in a world where cloud computing is integral to digital life and innovation in AI accelerates. Windows users and IT professionals should anticipate that these developments will influence service costs, cloud choices, and feature integrations in the near future.
Ultimately, this episode signals an important juncture where regulation must innovate as fast as technology to protect competition and cultivate an environment that benefits all market participants and users alike .
Source: Four times Windows Server costs? Method in the Microsoft
The CMA’s Concerns and the Provisional Ruling
The CMA’s provisional ruling issued in early 2025 highlights several critical issues within the UK cloud market. At the heart of their concerns is Microsoft’s licensing strategy that requires AWS and Google—or any cloud provider outside of Microsoft Azure—to pay significantly higher prices to license Microsoft’s software, such as Windows Server and SQL Server. In some cases, licensing costs on non-Microsoft clouds can be up to four times more expensive than when using Azure. This discrepancy has been described by AWS and Google as a “software tax” that puts them and their customers at a disadvantage, effectively foreclosing competition and hindering diversity in cloud offerings for end-users.The CMA concluded that Microsoft has both the ability and incentive to leverage its software licensing practices to foreclose competitors like AWS and Google in their provision of cloud services. The authority considers this conduct harmful to competition and potentially detrimental to innovation and consumer choice in the UK cloud market. Alongside these licensing issues, the CMA also identified other structural concerns such as high egress fees (charges for transferring data out of a cloud) and interoperability barriers, both of which contribute to a high level of market concentration and significant barriers to entry for smaller or emerging cloud providers.
Microsoft's Forceful Defense: Intellectual Property and Competition
In its detailed response to the CMA, Microsoft categorically rejected the suggestion that its licensing approach was anti-competitive or unjustified. The company described the CMA’s intervention as "extraordinary and unprecedented," arguing that no other software vendor in the industry is subject to such regulatory constraints on how they license their intellectual property. Microsoft emphasized that its licensing model reflects legitimate business practice and is fundamentally about protecting its intellectual property rights.Microsoft also argued that the CMA has unfairly singled it out without considering how competitors like AWS and Google license proprietary software—which they do not make available to others in any scenario. The software giant noted that it offers competitive pricing expressly designed to win business on Azure, including standing discounts that effectively offset the cost of key Microsoft products like Windows Server and SQL Server when customers choose Azure for workload deployment. Microsoft contends that this is a pro-competitive strategy benefiting UK customers, and not a foreclosure tactic.
Furthermore, Microsoft positioned itself as a defender of innovation, associating the CMA’s narrow focus on licensing with a failure to appreciate the broader technology landscape—particularly rapid changes brought about by the integration of artificial intelligence (AI) technologies. Microsoft suggests that regulatory frameworks need to evolve to accommodate these new technological dynamics rather than clamp down on traditional licensing models which are part and parcel of their business.
Market Dynamics: AWS, Google, and Microsoft’s Competitive Positions
The UK cloud market is dominated by AWS and Microsoft Azure, which account for roughly 50% and 30-40% respectively of the approximately £9 billion spent by customers in 2023. Google Cloud, while growing, remains a distant third in the UK but is advancing rapidly on the global stage.Both AWS and Google have been vocal critics of Microsoft’s licensing terms, highlighting the economic disadvantage these practices impose on customers choosing non-Azure clouds. Google notably lodged its first-ever antitrust complaint against Microsoft with the European Commission in late 2023, reinforcing its view of Microsoft’s licensing as a “software tax” that stifles fair competition.
Interestingly, Microsoft accused Google of heavy lobbying efforts, spending significant sums to influence trade associations and regulatory bodies. Google, in turn, has joined coalitions like the Open Cloud Coalition to amplify its voice calling for interoperability and fair licensing practices.
Potential Remedies by the CMA: Behavioral Over Structural
The CMA is currently weighing potential remedies with a preference toward behavioral interventions rather than structural breakups or radical reshaping of market players. Expected measures include:- Capping egress fees: To ease the financial penalty of switching cloud providers or adopting a multi-cloud approach.
- Mandating licensing parity: Requiring Microsoft to offer software licenses at consistent prices across all cloud platforms, removing the penalization for using software on rival clouds.
- Enhancing interoperability: Forcing cloud providers to reduce technical barriers that inhibit seamless workload migration and cross-platform services.
- Limiting volume discount-based lock-ins: Preventing cloud giants from using loyalty discounts as a barrier to switching or competition.
Implications for Windows Users and the Broader Ecosystem
While these regulatory debates may seem distant from the everyday experience of Windows users, the ramifications are significant. Cloud services underpin a broad range of applications and infrastructures that Windows users depend on—from Microsoft 365 productivity apps to cloud-hosted gaming and enterprise solutions.Enhanced competition and fairer licensing models could translate into lower cloud costs and more choices for customers deploying Windows services on the cloud. It may also enable more cloud innovation, seamless integration between platforms, and better AI-enhanced security and productivity features. Conversely, overly harsh or misaligned regulatory measures could slow innovation or complicate service delivery.
Windows users and enterprise IT administrators should stay engaged with this evolving story, as changes in licensing practices, pricing, and cloud interoperability will affect how they consume cloud-powered software and services.
Navigating the Balance Between Regulation and Innovation
This dispute exemplifies the broader challenge regulators face in balancing fair market competition with fostering innovation in technology sectors marked by rapid change. Microsoft's argument that AI and cloud innovations alter competitive dynamics calls for regulatory frameworks to be agile and forward-looking.On the other hand, complaints from AWS, Google, and the CMA’s findings highlight the risk that entrenched market players can use legacy licensing and pricing strategies to entrench dominance and raise barriers for competitors.
Effective regulatory outcomes will need to reconcile these factors—upholding intellectual property rights and incentivizing innovation while ensuring that market power does not become a tool for exclusion or consumer harm.
Conclusion
The ongoing clash between Microsoft, AWS, Google, and the UK regulator is a microcosm of the evolving cloud computing landscape worldwide. As the UK CMA prepares to announce final decisions, the stakes are high not only for these cloud giants but for the entire cloud ecosystem that supports countless businesses and individual users.This regulatory scrutiny promises to reshape how cloud licensing, pricing, and interoperability are managed in a world where cloud computing is integral to digital life and innovation in AI accelerates. Windows users and IT professionals should anticipate that these developments will influence service costs, cloud choices, and feature integrations in the near future.
Ultimately, this episode signals an important juncture where regulation must innovate as fast as technology to protect competition and cultivate an environment that benefits all market participants and users alike .
Source: Four times Windows Server costs? Method in the Microsoft