European cloud providers locked in talks with Microsoft over licensing complaint

Redmond has until end of this quarter to make 'substantive progress'

A trade group representing 27 cloud businesses is back at the negotiating table in a bid to resolve the lawsuit it filed over Microsoft's alleged anti-competitive licensing policies.

The Cloud Infrastructure Service Providers in Europe (CISPE) association, which includes mostly local businesses and Amazon Web Services, launched a formal complaint in late 2022 against Microsoft with the Directorate General for Competition within the European Union.

The complaint hung on the higher costs of buying and running Microsoft wares in cloud infrastructure outside of Azure. Microsoft has already tried to settle the dispute but the offer was rejected by CISPE as "paltry," as exclusively revealed by The Register in May last year.

Now the parties are again locked in talks, indicating that the powers at Microsoft HQ are making further concessions. CISPE told us these discussions are at an early stage and are not guaranteed to lead to a resolution.

"CISPE has stipulated that substantive progress must be achieved in the first quarter of 2024," the trade group said in a statement sent to The Reg.

At the heart of the CISPE conflict is the policy change Microsoft introduced in 2019 so that customers could no longer bring their on-premises licensing to any cloud of their choice, and needed instead to buy a separate license.

In its submission to the UK Competition Markets Authority, which is running its own probe into the health of the local cloud market, AWS focused on this aspect, accusing Microsoft of making it "financially unviable" to run Microsoft software anywhere but in Microsoft Azure.

A senior Google cloud exec described this to us previously as Microsoft's "software tax."

A study commissioned by CISPE last year found the need to buy new Microsoft software licenses for non-Azure clouds equated to a cost increase of 80-100 percent for customers "compared to when there was no such requirement."

In a statement sent to The Register, CISPE secretary general Francisco Mingorance said of the latest negotiations: "Every passing day without resolution further undermines the viability of Europe's cloud infrastructure sector and restricts cloud options available to European customers.

"We are supportive of a fast and effective resolution to these harms but reiterate that it is Microsoft which must end its unfair software licensing practices and deliver this outcome."

Microsoft settled last year with OVHcloud, Aruba S.p.a, and DCC over a related case about software licensing and cloud infrastructure. The contents of the settlement are confidential, and it is highly likely that any settlement with CISPE will be too.

A spokesperson at Microsoft told us: "We continue to work constructively with CISPE to resolve concerns raised by European cloud providers."

Sources told us that regulators in the US, Japan, South Korea, and elsewhere are watching the developments in Europe with interest as regulators in other nations consider whether to makes moves themselves. ®

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