Dusseldorf Microsoft’s strategic realignment is a success story. Within a few years, the software manufacturer has become one of the world’s largest cloud service providers. However, some competitors accuse the group of gaining market share through unfair business practices – and are now submitting an antitrust complaint to the European Commission, according to Handelsblatt information.
“Microsoft is using its own dominance in productivity software to direct European customers to its own cloud infrastructure Azure, at the expense of European cloud infrastructure providers and users of IT services,” says the document from the Cispe association, which sees itself as representing the interests of European cloud service providers , but also includes the global market leader Amazon Web Services (AWS) among its members.
There is a whole range of anti-competitive practices, Cispe Secretary General Francisco Mingorance told the Handelsblatt. In essence, it is about Microsoft’s license terms: the group demands a surcharge when other IT providers offer the Office 365 program package with applications such as Word, Excel and PowerPoint via their own cloud infrastructures, as is often the case.
Microsoft disagreed with the Handelsblatt: “The license changes that we introduced this fall offer customers and cloud providers around the world even more opportunities to operate and offer our software in the cloud.”
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“We remain committed to addressing legitimate licensing concerns and supporting a competitive environment in which all vendors can thrive,” a spokesman said.
After the turn of the millennium, Microsoft was already the focus of American and European competition policy – at that time it was about bundling the Windows operating system with the Internet Explorer browser.
In recent years, however, Satya Nadella’s management has tried to get on well with the authorities. Now the pressure is likely to increase again: Including the new complaint, four procedures are currently underway in Brussels, albeit some in early phases.
Microsoft responded to the allegations in a friendly manner
The current case has a longer history. In 2021, a group of European cloud providers, including Cispe members Aruba and OVH Cloud, filed an antitrust complaint with the European Commission.
Microsoft was conciliatory: “Not all of these claims are true, but some are,” said President Brad Smith. In response, the group announced five “European Cloud Principles” including “better support for European cloud providers”.
In August, the group revised the license conditions that apply to the use of products such as Windows Server in the cloud. The big competitors, including Cispe member Amazon, are an exception to this.
From the point of view of the association, however, the situation has not improved, Cispe Secretary General Mingorance describes the changes as a “smoke candle”, especially since the conditions are difficult to understand even for experienced lawyers. The criticism can be roughly summarized in three categories.
- First: According to Cispe, Microsoft gains advantages over the competition by bundling products. The Onedrive storage service is closely linked to the Windows operating system and Office 365 office software.
- Secondly: The organization complains that the group is engaged in price discrimination. For example, it is cheaper to run Office 365 in the Microsoft cloud than using the infrastructure of another provider. That “makes it far cheaper to buy anything on Azure,” Mingorance said.
- Third: Several contractual and technical details make business difficult for the competition. Cloud service providers would now have to pass on the data of new customers to Microsoft, said the manager – “an extremely worrying requirement”.
Cispe wants to use its own role as a complainant to force regulation. In 2021, the organization formulated “ten principles for fair software licensing” together with the French IT user association Cigref. These should form the basis for an audit of software license conditions, which should be commissioned by an independent European supervisory body.
Market share doubled in five years
Microsoft is one of the major providers of IT infrastructure and the platform services based on it in the cloud. Customers can rent storage space and computing power, analyze data with artificial intelligence or control the operation of apps without putting their own server into operation.
AWS invented this principle and is number one with a 33.6 percent market share, according to a study by Synergy Research. However, Microsoft has caught up significantly in recent years and now has a market share of 21.2 percent, almost twice as much as five years ago. Behind is Google with 10.5 percent.
European companies, on the other hand, are struggling. Providers such as OVH and Ionos are reporting growing customer numbers, and in addition to software solutions from the cloud, SAP offers a platform for expanding its own programs, which brings in more than one billion euros in sales. In the Synergy table, however, these values are almost just a rounding error.
In view of this development, Cispe warns of a “decline of the European cloud infrastructure sector”. Thriving vendors are “an essential element in fostering European technological innovation and excellence and ensuring strategic autonomy in the cloud.” The association did not comment on the role of member AWS, who also comes from the USA.
More: “Microsoft is acting like a elephant in a china shop” – IT companies are raising software prices sharply