Microsoft facing CMA probe of its business software portfolio

The regulatory body which last year accused Microsoft of inflating its office software’s license prices when it was run on rival cloud platforms to make those platforms less appealing, said Tuesday it will conduct a further investigation into the company’s entire business software ecosystem.

The probe by the UK’s Competition and Markets Authority (CMA), scheduled to begin in May, follows an  earlier investigation into the UK cloud services marketed by Microsoft and Amazon in which it determined that their dominance had stifled competition and inflated prices.

The strategic market status (SMS) investigation into Microsoft’s business software ecosystem, the CMA’s release said, allows it to act on a major concern emerging from the cloud market investigation: Microsoft’s use of software licensing reducing competition in cloud. “[The investigation] would also provide a route to ensuring a level playing field among providers at a critical moment, as AI-driven innovation reshapes competition in productivity software,” it said.

CMA Chief Executive Sarah Cardell further described the SMS probe as “[a way] to enable us to tackle remaining concerns around Microsoft’s licensing practices in cloud, and would also enable us to ensure a level playing field as AI is rapidly embedded into everyday business software tools.”

Cloud changes allow greater choice

The CMA stated in its release that, as a result of last year’s investigation, Amazon and Microsoft have “set out actions on cloud egress fees and interoperability to support greater choice for businesses and public sector organizations in the UK. These changes will reduce expense and effort for UK customers when using more than one cloud provider.” As a result, the CMA decided not to move forward with a future SMS probe into the companies’ cloud services.

In a blog post announcing the new terms for Azure customers in the UK, Microsoft President Brad Smith wrote, “The changes address the CMA’s commitment to ensuring that UK customers can continue to move, deploy, and operate their workloads in the clouds of their choice with confidence, flexibility, and ever-reduced friction.”

Smith added that Microsoft recognizes that the CMA “will continue to review and assess additional issues relating to our products and services, including in the business software market. We are committed to working quickly and constructively to address these issues, including by providing all the information the CMA needs to move forward with its reviews.”

A welcome move

Matthew Sinclair, senior director and head of the London office of the Computer & Communications Industry Association (CCIA), a group which represents a cross section of communications and technology firms, described the move by the CMA as “welcome news.”

It will, he said, “avoid overly broad and prescriptive interventions that would have impeded investment and innovation in UK cloud services. The regulator can focus its efforts on action to address specific issues, particularly restrictive software licensing terms for legacy software, which are costing UK users a fortune.”

A resilience and digital sovereignty issue

In response to both CMA decisions, Forrester senior analyst Dario Maisto said, “in times of increasing geopolitical volatility, organizations and authorities are reassessing risks coming from dependencies on foreign providers, to improve their digital sovereignty posture.”

He pointed out, “if we consider that Microsoft and AWS own some 70% of the European and UK public cloud market, we can easily understand how emerging sovereignty concerns add to existing concentration risk in a mix that urges action now more than ever.”

According to Maisto, Microsoft’s case is under even more regulatory scrutiny because European and UK organizations have a strong dependency on its productivity suite, regardless of the infrastructure layer.

Over the last two decades, he said, “organizations have grown their Microsoft cloud and solutions deployments under the motto that ‘nobody was ever fired for choosing Microsoft.’ This has resulted in an unparalleled concentration of risk which is further accrued due to what we call the ‘weaponization of IT’ and its relative retaliation counter measures.”

Efforts to boost interoperability and lower egress fees are fine, said Maisto, but the issue of the availability of real alternatives is still there. For example, he pointed out, to date, there is still no equivalent product that allows compatibility with Excel macros. “This is not just a competition problem, but rather a resilience and digital sovereignty issue for any organization with strong dependencies on foreign vendors,” he said. 

This article originally appeared on NetworkWorld.