Microsoft in talks over cloud licensing complaint in the EU

Microsoft is in talks with Cloud Infrastructure Services Providers in Europe (CISPE) to settle the trade body’s complaint about its cloud software licensing practices in the European Union (EU).

“Today, CISPE confirms that it has opened discussions with Microsoft aimed at resolving ongoing issues related to unfair software licensing for cloud infrastructure providers and their customers in Europe,” the trade body said in a statement, adding that both parties are exploring potential remedies.

The trade body, which consists of 26 small cloud providers in EU member countries and Amazon Web Services, had filed a complaint with the EU’s antitrust authority, the European Commission, in November 2022 claiming that Microsoft’s new cloud software licensing terms published in October that year were bad for the EU’s cloud ecosystem.

It is concerned that they favor Microsoft’s own Azure service, and could adversely affect competition in cloud services including desktop virtualization and application hosting, limiting CIOs’ options for where they run certain workloads.

Microsoft published the new cloud licensing terms for its software in an effort to avoid another complaint brought on by German software provider NextCloud, France’s OVHcloud, Italian cloud service provider Aruba and a Danish association of cloud service providers.

These companies and the association had alleged to the Commission that some of the companies practices in the EU were anti-competitive in nature.

Specifically, the Commission had received complaints from European cloud companies that raised concerns about Microsoft charging customers more to run Microsoft software in non-Microsoft cloud environments. The European cloud firms had called this a restrictive cloud licensing policy.

Although both parties are seeking a solution, the statement sent out by the trade body said that the discussions were at an early stage.

“To ensure swift and effective progress, CISPE has stipulated that substantive progress must be achieved in the first quarter of 2024,” CISPE said in a statement, adding, “We are supportive of a fast and effective resolution to these harms but reiterate that it is Microsoft which must end its unfair software licensing practices to deliver this outcome.”

Dario Maisto, a senior analyst at Forrester, said, “Microsoft trying to settle the antitrust complaint is a sign of the times where hyperscalers are trying to reinforce trust from EU companies that they are indeed trustworthy vendors.”

The trust component is fundamental, he noted. “It is really key for Microsoft to try to limit both economic and reputational damage from a possible investigation.” 

Olivier Blanchard, research director for devices, automotive, policy, and regulation at The Futurum Group, sees Microsoft’s involvement in discussions as a key step toward accomplishing that.

“Given the breadth and quality of Microsoft’s solutions portfolio, I don’t think that having discussions with regulators and looking for a compromise that satisfies all parties will impact Microsoft’s long-term prospects in the EU. In my view, being perceived as a good-faith actor in the EU market will more than make up for any hypothetical short-term losses in revenue,” Blanchard says, adding, “Whatever the resolution looks like, Microsoft should be able to adjust course fairly quickly.”

The European Commission has received other complaints against Microsoft recently.

Last year, it began looking into a complaint regarding Microsoft’s bundling of Teams with Microsoft 365.