**The Cloud Titan’s Anti-Competitive Practices**
Microsoft, the tech giant renowned for its Azure cloud computing unit, has come under fire for allegedly abusing its market dominance to suffocate the growth and profitability of rival cloud platforms in Europe. This bombshell revelation stems from a complaint filed by CISPE, a leading trade association representing cloud infrastructure providers.
**Tweaks in Licensing: A Strategic Sabotage**
CISPE’s accusation stems from Microsoft’s cunning licensing maneuvers in 2019. Through these changes, Microsoft cunningly forced businesses to purchase additional licenses and fee-laden “mobility rights” if they desired to run Microsoft software on cloud services offered by alternative providers.
Furthermore, companies were forbidden from leveraging previously acquired perpetual licenses to operate Microsoft applications on competing cloud platforms, including Amazon, Alibaba, and Google. Microsoft essentially forced customers into purchasing new licenses, while specific software like Office 365 and Windows Apps was outright banned from running on rival clouds.
**The Devastating Impact on Competitors**
Microsoft’s anti-competitive practices have sent shockwaves through the cloud computing industry in Europe. Major players such as France’s OVHCloud and Italy’s Aruba, as well as the tech behemoth Amazon, have expressed outrage over these tactics, which have sparked an investigation by the European Commission.
CISPE’s research provides a chilling example of Microsoft’s merciless strategy. An unnamed cloud provider witnessed its revenues from selling Microsoft products skyrocket over 300% since 2018, contributing to Microsoft’s own financial success. However, this cloud vendor’s profit margins plummeted from a healthy mid-20% in 2018 to deep below zero in 2023.
What’s even more shocking is that the steepest decline in profit margins for this vendor occurred in 2019, the year Microsoft altered its licensing terms to favor running software on Azure. The CISPE report paints a clear picture: from 2019 to 2020, the affected cloud provider’s margin plunged from over 20% to a dismal zero.
**Evidence of Microsoft’s Monopolistic Pricing**
CISPE’s complaint also exposes evidence of Microsoft’s price gouging when it comes to its SQL Server software. Members have provided documents showing that Microsoft charges a premium for SQL Server licenses to businesses hosting their applications on rival cloud services.
For instance, a company licensing Microsoft’s software for application hosting and delivery would face a bill of 612.27 euros for a 2-core SQL Server Enterprise product. In stark contrast, Microsoft customers using Azure typically pay only 520.26 euros, a staggering difference of 92.01 euros.
**Independent Studies Corroborate Microsoft’s Abuse**
These allegations are further substantiated by a groundbreaking study conducted by Frederic Jenny, an economics professor at ESSEC Business School in Paris who specializes in competition law. Jenny’s research concludes that Microsoft effectively levies a whopping 28% “tax” on businesses that run its software on competing cloud services.
**The Road Ahead: Regulatory Investigations and Market Consequences**
The European Commission has acknowledged receipt of several complaints against Microsoft, including those related to its Azure product, and is examining them through its standard procedures.
In the United Kingdom, the Competition and Markets Authority (CMA) has taken over an investigation into the competitive landscape of the cloud computing market from Ofcom, the media and telecommunications regulator. The CMA has not yet responded to requests for comment.
Microsoft declined to provide any comment on these allegations, but in 2022, its President Brad Smith released a blog post announcing revisions to its licensing agreements, aiming to ease the competition faced by cloud providers.
Despite Microsoft’s efforts to present a reformed image, the industry and regulatory bodies remain vigilant in their scrutiny of the tech giant’s cloud computing practices, determined to protect fair competition and innovation in this vital sector. The outcome of these investigations and the ultimate fate of Microsoft’s market dominance remain to be seen, but the battle for cloud supremacy is far from over.
Data sourced from: cnbc.com
