Microsoft and CISPE Settle Antitrust Complaint, Cloud Market ‘Fundamentally Broken'

Microsoft and CISPE, the association representing cloud providers in Europe, have settled their differences. 

But not everyone is happy about the development.

On July 11, CISPE (Cloud Infrastructure Services Providers in Europe) confirmed earlier reports that Microsoft and CISPE have reached a deal over a long-running antitrust complaint. CISPE has contended that Microsoft’s cloud computing licensing requirements in Europe, implemented last October, erode rivals’ profit margins.

“Microsoft’s unfair software licensing practices make it economically unviable for European customers to choose any cloud but Microsoft’s Azure,” the group wrote in a Jan. 12 blog. "This denies customers choice of cloud infrastructure if they want to use the ‘must have’ productivity software and locks them into a Microsoft monoculture. Discriminatory pricing, bundling and tying of products as well as restrictions to features and capabilities all tighten Microsoft’s crushing embrace of European businesses and public sector organizations.”

The group had issued a request, now withdrawn, that the European Commission investigate the matter. That could have led to significant fines for Microsoft. 

What Comes Next for Microsoft and CISPE

As things stand, Redmond will shell out $21.7 million, and it will create a product that will let CISPE members run its software on their platforms, with pricing similar to Microsoft’s, per Reuters. CISPE described that new offering as “an enhanced version of Azure Stack HCI for European cloud providers … to offer features that Microsoft customers using Azure Stack HCI enjoy today.”

Related:CISPE and Broadcom: VMware Tussle Continues as EU Sends Info Request

Those features include multisession virtual desktop infrastructure based on Windows 11; free extended security updates; and pay-as-you-go licensing for SQL Server.

Microsoft has nine months to make good on the Azure Stack HCI commitment. If the company doesn’t meet that deadline, CISPE said it will refile its complaint with Europe’s regulatory authorities. Yet if all goes as planned, CISPE has promised not to start or support complaints about Microsoft, in Europe or anywhere else. Notably, the Microsoft and CISPE settlement does not prevent CISPE or its members from complying with regulators’ requests for information. CISPE further will continue to campaign for Fair Software Licensing in the Cloud.

Next, Microsoft also will funnel some of that more than $20 million into CISPE members’ coffers. It’s a move intended to compensate them for revenue lost to licensing expenses over the last two years. Microsoft and CISPE did not say how much money members will receive.

Microsoft and CISPE Leaders Talk Settlement

Brad Smith, president of Microsoft, told Reuters that Microsoft and CISPE engaged for more than a year on the matter.

“I am pleased that we've not only resolved their concerns of the past, but also worked together to define a path forward that brings even more competition to the cloud computing market in Europe and beyond," Smith said.

Microsoft's Brad Smith

CISPE said its new “collaboration” with Microsoft will enable its members to offer Redmond’s applications and services on local cloud infrastructure. That allows them to meet demand for sovereign cloud solutions, and, CISPE added, addresses “the disruption experienced by European cloud providers and their customers following Broadcom’s acquisition of VMware.”

To make sure all goes as planned, CISPE will establish what it’s calling an independent European Cloud Observatory to monitor development and functionality of the new Microsoft products. The ECO will include Microsoft, cloud infrastructure vendors in Europe and representatives from European customer associations.

Overall, said Francisco Mingorance, secretary general of CISPE, the settlement between Microsoft and CISPE represents “a significant victory for European cloud providers.”

“CISPE has given Microsoft the benefit of the doubt and believes that this agreement will provide a level playing field for European cloud infrastructure service providers and their customers,” Mingorance added.

Mingorance also said CISPE will revise its statutes “to ensure that European businesses and SMEs remain in the driving seat for CISPE campaigns should Microsoft or other global hyperscalers ask to become members.”

What About AWS, Google Cloud?

Of interest is that Amazon Web Services and Google Cloud specifically are excluded from the Microsoft settlement.

CISPE made clear that AWS, a CISPE member, and Google Cloud and AliCloud (not CISPE members) were not part of the deal with Microsoft. Those companies “will neither benefit from nor be bound by these terms,” the group said.

Reactions to Microsoft and CISPE Settlement: Remedies Needed

Amit Zavery, vice president, general manager and head of platform at Google Cloud, which also has beefs with Microsoft’s licensing practices, told Reuters his company is not happy with the settlement between Microsoft and CISPE.

"Many regulatory bodies have opened inquiries into Microsoft's licensing practices, and we are hopeful there will be remedies to protect the cloud market from Microsoft's anti-competitive behavior," Zavery said.

As such, he added, Google Cloud “is exploring our options.”

Zavery’s comments come amid a competitive cloud computing sector, where Google Cloud continues to rank third in the world, according to a variety of analyst firms. 

Meantime, the head of U.K. independent cloud computing provider Civo, which is not a CISPE member, either, also expressed disappointment about the Microsoft and CISPE news. 

The deal, said CEO Mark Boost, “is a clear signal that the cloud market is fundamentally broken. By making a deal with Microsoft that looks to be exclusive to CISPE members, CISPE members in the EU will receive some short-term benefits, but the cloud industry and their customers will pay the price in the long-term.”

Civo's Mark Boost

Boost also questioned whether all cloud providers in Europe will receive compensation from the Microsoft and CISPE settlement, or whether CISPE members will remain the sole beneficiaries. 

“Surely the regulators must now ensure that the mostly undisclosed benefits that CISPE members and their customers will receive will be extended to every cloud provider and every cloud user that has been at the receiving end of Microsoft’s unfair software licensing practices,” Boost said.

Other Ongoing Cloud Antitrust Activity

Amid the Microsoft and CISPE settlement news, though, is the reality that the U.K.’s Competition and Markets Authority continues to conduct its investigation into all AWS and Azure. That effort began last fall and has not yet been closed.

Civo’s Boost said he hopes the CMA’s work will help the U.K. forge a better path than its EU counterparts, when it comes to cloud computing.

“I hope it will not waste this opportunity and take decisive action across the board, including ending the scourge of the skewed system of cloud credits, and anti-competitive software licensing,” Boost said, noting “hyperscalers have operated unchecked for too long.”