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Google EU complaint: Microsoft is punishing enterprises that use rivals to Azure

Google on Wednesday told the European Union (EU) that Microsoft is illegally using its dominant market position in Windows to force enterprises to use its Azure cloud service or face a 400% price penalty and a denial of upgrades and security patches. 

The complaint said that Microsoft is only punishing enterprises if they try to use products from three rival companies: Google, AWS, and Alibaba Cloud. It said the Microsoft efforts “are simply an artificial and arbitrary financial penalty for not using Azure. If these penalties were to monetize Microsoft’s IP [intellectual property], then they would apply to all non-Azure cloud providers and not just Azure’s top competitors.”

Microsoft, in an emailed statement, didn’t address the particulars of Google’s complaint, but did predict that the EU wouldn’t be persuaded.

“Microsoft settled amicably similar concerns raised by European cloud providers, even after Google hoped they would keep litigating,” Microsoft said. “Having failed to persuade European companies, we expect Google similarly will fail to persuade the European Commission.”

Rafael Brown, the CEO at Symbol Zero, who is also a member of a Microsoft customer feedback group, said he thinks that Microsoft’s statement is more valuable for what it does not say than for what it did say.

“I think Microsoft’s statement is telling for the absence of response and for what it does not cover. It doesn’t address the particulars of Google’s filing,” he said. 

Brown said he was struck by the Google claim of a 400% markup, and noted that Microsoft opted to not address it. “The fact Google was that specific and that Microsoft entirely avoided it, they both just confirmed to me that it is correct,” Brown said, adding that such a markup would, in his view, constitute predatory pricing. 

That said, Brown doubts the key Google point, which is that some Microsoft customers are only using Azure because the pricing penalty is forcing them to do so. He pointed to the continued market dominance of AWS as one proof point. And he also questioned if that pricing tactic would even work for most enterprise IT executives. “The pricing doesn’t matter to them nearly as much as the capabilities and services,” he said.

As for the broader regulatory issues, he said that he thinks that Google’s filing might be effective in getting EU regulators to focus more on cloud pricing. “Does the cloud market need to be regulated? The answer is probably yes. Cloud is the new OS,” Brown said. “This filing is saying that the EU is not yet ready to deal with the cloud. The UK is much more focused on cloud.”

Microsoft is also facing regulatory inquiries in Spain, and it also tried to avoid EU regulatory antitrust issues this summer.

Dave McCarthy, an IDC research VP for cloud and edge services, said that he sees the context for the Google complaint being “an overall trend in the cloud industry (that) customers are rethinking how they are building applications in the cloud and who to work with. You can see evidence of this in the financial growth rates of the cloud providers: AWS and Azure have been experiencing a slowdown in growth, whereas Google has been accelerating.”

Although, he said, “Microsoft may succeed in the short-term by incentivizing customers to stick with Azure, the long-term impact of these commercial terms will drive customers to architect that technology out of their IT estate to facilitate more choice in the future.” 

Google elaborated on its official reasons for the EU filing in a blog post. 

“For years, in the productivity software space, Microsoft has locked customers into Teams, even when they preferred other providers. Now the company is running the same playbook to push companies to Azure, its cloud platform. Microsoft’s licensing terms restrict European customers from moving their current Microsoft workloads to competitors’ clouds — despite there being no technical barriers to doing so — or impose what Microsoft admits is a striking 400% price markup,” Google said in its blog post, signed by Amit Zavery, the GM/VP for Google Cloud, and Tara Brady, the president of Google Cloud EMEA.

“Microsoft is the only cloud provider to use these tactics, which have significantly harmed European companies and governments. Not only have they cost European businesses at least €1 billion [US$1.11 billion] a year, but also they have led to adverse downstream effects, including waste of tax funds, stifled competition, restrictions on distributors and channel partners, and heightened risk for organizations exposed to Microsoft’s ‘inadequate’ security culture.”

Tracy Woo, a principal analyst for cloud at Forrester, said that she was not especially impressed with the Google complaint, describing it as “a lot of whining.”

“Google is really upset with Microsoft that they are not offering to partner with them, given that they are playing nice with AWS,” Woo said. “Google is the hardest [of the major hyperscalers] to work with. They don’t share roadmaps, they are the least open about their data.”

QueryPal CEO Dev Nag said that he expects Microsoft’s EU defense to be “its licensing model reflects significant investments in integrating its software with Azure, providing unique value and performance. They could contend that customers still have the freedom to choose other platforms, and that their licensing simply incentivizes using an integrated Microsoft stack for optimal performance and support.”

But, Nag added, that might not be especially persuasive to EU regulators. “This defense is weakened by the apparent lack of technical justification for the licensing restrictions and the disproportionate cost increases for using Microsoft software on competing clouds,” he said.

Google argued that Microsoft has not always been this way. “Until 2019, customers could migrate to any cloud provider’s dedicated infrastructure, but this presented Microsoft a problem: How could it force customers to choose Azure and not a competitor?” the Google filing said. “Microsoft’s answer is to exploit customers’ reliance on products like Windows Server by imposing steep penalties on using on-premises software with Azure rivals.”

Google suggested that Microsoft is using marketing sleight-of-hand. It said Microsoft advertised that rival offerings are “up to 5 times more expensive than Azure for Windows Server and SQL Server,” which Google argues is somewhat disingenuous, given Microsoft is the one imposing the penalties to deliver that pricing difference. 


Read More from This Article: Google EU complaint: Microsoft is punishing enterprises that use rivals to Azure
Source: News

Category: NewsSeptember 26, 2024
Tags: art

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