News

Microsoft Promises To Ease Unfair Europe Cloud Practices

• By Kurt Mackie
• 05/20/2022

Microsoft on Wednesday outlined concessions to European regulators and to European service providers that will be coming via the Microsoft Cloud Solution Provider partner program.

Microsoft President Brad Smith outlined the specific steps that Microsoft planned to take. Microsoft is planning to permit European service providers to:

• Host Windows and Office "(including Windows 11 and the Microsoft 365 Apps for Business and Enterprise)" on their own infrastructures.
• Host Windows and Office software purchased "from other Microsoft partners."
• Offer Microsoft products at "fixed pricing for longer terms."

European Complaints
The concessions likely represent Microsoft's response to complaints by European service providers that it has been more costly to host Windows Server and SQL Server on their infrastructures vs. Microsoft Azure infrastructure.

Such unfair competition (per European Commission regulatory thinking at least) apparently began with the outsourcing licensing changes Microsoft made back in 2019, according to an April 22 article by veteran Microsoft reporter Mary Jo Foley.

While the announcement by Smith just referred to European regulation and European service providers, the anticompetitive aspects of Microsoft's licensing may affect hosting service providers in other countries that are part of the Microsoft Cloud Solution Provider program.

In a May 18 article update, Foley received the following comment from a Microsoft spokesperson on whether Microsoft intended to alter its licensing practices for service providers in other markets:

While today's announcement is focused on Europe, the changes to the Microsoft Cloud Solution Provider and Software Assurance programs are global. We will be communicating directly with our cloud partners and customers in the coming days on the specifics of this announcement and how it will impact them.

Smith's announcement included a pledge by Microsoft to meet Europe's needs and to "adapt to and support" European technology regulations. Microsoft also pledged that its cloud services would help ensure the success of European software developers.

Licensing Simplification
Microsoft also claimed that it is working to simplify its licensing by following Fair Software Licensing Principles.

Licensing will be more clearly written, and the costs will be more easily determined, Smith suggested. Microsoft also plans to add a software license mobility capability to its Software Assurance program. Software Assurance is an annuity program that assures software upgrades, but it's an extra cost paid on top of Microsoft's software licensing costs.

Here's how Smith characterized the coming Software Assurance change:

We will revise and expand our Software Assurance program, in which customers purchase new version rights, disaster recovery, failover support, license mobility, and many other benefits. Today, Software Assurance benefits do not include license mobility rights for products such as Windows, Office, or Windows Server, so customers must use that software in more restrictive programs or on hardware dedicated specifically to those customers.

Smith also indicated that Microsoft is planning to drop the counting of physical cores on a server as part of Windows Server licensing costs when a server is used in hosted services environments:

We will make it easier than ever to license Windows Server for virtual environments and the cloud by relaxing licensing rules that reflected legacy software licensing practices, where licenses are tied to physical hardware. With the changes we will be making, customers will now be able to buy licenses just for the virtualized compute capacity they need, without needing to count the number of physical cores on which the virtualized environment is hosted.

The timing for these changes wasn't described, and they specifically pertain to European markets. However, Microsoft does appear to be contemplating making these licensing changes more broadly to its Cloud Solution Provider program, as well as to the Software Assurance program.

European Investments
Smith touted Microsoft's 40 years-plus operations in European markets and indicated that Microsoft has built or is building "17 datacenter regions in Europe." It's invested $12 billion in Europe over the past two years, Smith indicated. Microsoft has worked with "nearly 50,000 European startups," he added.

The announcement noted that Microsoft has 20 percent of the overall cloud services market, trailing Amazon's lead at about 33 percent, with Google in third place. Those figures come from a Synergy Research Group study.