Euro cloud crew says we-won't-sue deal with Microsoft is 'off-track'

Overseas pals urge US tech giant to 'rapidly' work on Azure Local project to make things right – sans licenses

Microsoft is not on track to meet technical commitments that form the basis of a settlement agreement intended to resolve a legal dispute over software licensing with a gaggle of cloud providers in Europe.

The Cloud Infrastructure Service Providers of Europe (CISPE) trade association agreed in July to call off the lawyers on the proviso Microsoft made technical concessions that, as they saw it, levelled the playing field.

The points of contention in a complaint CISPE filed with the EU competition authorities in November 2022 included Microsoft charging up to five times more to run certain software on third party infrastructure than on Azure, as well as the technical adjustments needed to run other programs on rival cloud services.

Under a memorandum of understanding, CISPE set up the European Cloud Computing Observatory (ECCO) to write progress updates for members. The first one, due last month, was published today and isn't exactly a glowing reference. The report [PDF] classifies the overall "status of the Microsoft MOU with CISPE as Amber/ Off-track."

Francisco Mingorance, secretary general at CISPE, told us: "Last summer, CISPE and Microsoft came to an agreement that sought to end unfair software practices and to create new benefits for all European cloud infrastructure service providers. But any agreement is only as good as its execution, so we created ECCO to ensure that commitments made were delivered. This report is an important part of that process."

ECCO is comprised of two "observer" roles currently undertaken by cloud CIO organizations Cigref in France and Beltug in Belgium.

Although Microsoft made good on the relatively easy bits of a Guarantee of Flexible Virtualization Benefit Availability and Migration License Support, two big areas were critically behind schedule and one was deemed off track.

Hoster Product Development and Service Provider Licensing Agreement Program Support and Sustained Competitiveness were awarded Red status, meaning "insufficient progress has been made at the time of the report."

The report states the MOU is "designed to give CISPE members confidence that Microsoft's SPLA licensing programme will continue for five years at least and offer a competitive means for them to combine Microsoft software with their own cloud infrastructures in ways that are free of additional price discrimination."

Yet it adds: "Recent price changes by Microsoft appear to undermine this commitment." One example is Microsoft Windows Server prices hikes under SPLA not being reflected in "commensurate increases in the price of hourly PAYGO prices for Windows Server licenses on Azure."

This is "contrary" to the intent of the MOU, according to ECCO, to "maintain SPLA as a viable alternative to Microsoft Azure for licensing Microsoft productivity software and recalls that price discrimination in SPLA was a key driver of CISPE antitrust challenge in Europe."

From Microsoft's perspective, disconnected software and connected services are "not comparable" as they offer end customers "different value propositions. The price of hourly Windows Server on Azure is far higher" than "disconnected Windows Server available on SPLA and this allows CISPE members to profitably compete with Azure and other cloud providers."

CISPE's ECCO claims Microsoft "should act in good faith and maintain both the spirit and the letter of the MOU to ensure that no new price discrimination is added between SPLA licensing of its software independent of absolute pricing and that which is available on Azure."

Hoster Product Development is another area given a critical or Red status. Microsoft previously took a contingent of CISPE to Redmond to discuss technical requirements, though we noted at the time the abundance of wining and dining taking place that seemed to overshadow intense discussions and tech.

During this workshop, CISPE told Microsoft engineers the core functions from any proposed multi-tenant hybrid cloud product development and the "ball was in their court." Specifically Microsoft needed to provide full multi-tenancy "including but not limited to oversubscription/overcommitment of CPU and RAM, storage, and network overlapping."

Microsoft reckons these do not mirror the commitments agreed in the MOU and "go beyond the product requirements and characteristics defined." Microsoft says it can develop those additional capacities, like those delivered by CISPE members to its customers, yet the European cloud organizations need to invest in this work and have "reasonable expectations," the report states.

The progress update says Microsoft is "still 'processing and evaluating' and 'digesting' these requirements." It adds: "CISPE has been told that Microsoft's engineering teams have a 'very long list of things they are working on.' This fuels concern that CISPE's requirements, necessary under the MOU, are being considered equally alongside other product development demands."

"CISPE members are also concerned that the proposed product, Azure Local, may require an Azure presence and licence for each of the cloud provider's customers. This is unacceptable to CISPE members."

ECCO says the "ultimate goal" of the MOU it signed with Microsoft is not the development of any specific product but for Microsoft to "ensure a fair and competitive market for European cloud infrastructure providers to sell Microsoft software to their customers."

It is calling on Microsoft to confirm promptly if Azure Local, previously branded Azure HCI Stack, can meet the requirements of the MOU and if not then alternatives should be co-developed.

Microsoft has nine months to meet the requirements as outlined by the settlement agreement signed in July, and failure to do so could result in legal action recommencing.

"There is a CISPE member concern that too much focus has been applied to the development of Azure Local as the route to delivering MOU requirements. Teams dedicated to the development of that product may not be working in full understanding of the legal requirements of the MOU and thus may not be prioritising the right work."

ECCO berates Broadcom

ECCO also published an assessment [PDF] of Broadcom, in which it points out that "CISPE has campaigned for Broadcom to reconsider its brutal and unacceptable changes to license agreements" for VMware software.

The document brings news that competition authorities across Europe haven't opened a formal investigation into Broadcom, or taken any action against the silicon-and-software company. ECCO is, however, aware that some licensing disputes have reached the courts as VMware users seek to "preserve previous licensing terms whilst fairer new terms are negotiated, or to provide time for migration to alternative solutions." That suggests European VMware users may feel Broadcom has breached contracts, an allegation raised by AT&T in a case it has since settled.

ECCO thinks Broadcom is using delaying tactics to prevent those cases being heard, and to keep any settlements private. Rumors have reached the org's ears that Broadcom has threatened litigants with reprisals such as new terms for mainframe software licenses. "As a result, the vast majority of those affected have been forced to accept new terms tying them into exorbitant licence fees for a minimum of three years because they simple could not replace the VMware software needed to service their customers," ECCO's assessment states.

It doesn't help that Broadcom offers "an almost total lack of communication, and certainly no option to negotiate."

A spokesperson at Broadcom sent a statement:

“We provide simplified licensing under a model that all leading enterprise software companies offer and delivered on our commitment to make VMware easier to use. Our customer retention rate has remained consistent, demonstrating the value we’re delivering."

- Simon Sharwood

"Microsoft is concerned that CISPE members are anchored on a product definition that goes beyond the scope of the pilot and that narrow focus will block successful co-development opportunities.

"CISPE members are concerned that the absence of progress on the hoster product exposes them to continuing harm. Microsoft will need to engage quickly to keep earning CISPE members' trust and co-develop a path forward.

"The situation is not yet critical, and ECCO remains positive that the project can be put back on track to deliver the terms of the MOU within the nine-month deadline.

"However, it urges Microsoft to rapidly assess the potential of Azure Local to meet these needs, and to suggest alternatives sooner rather than later if it finds this not to be the right solution," the ECCO report concludes.

Microsoft told us: "We are committed to ensuring a successful relationship with the European cloud community and a strong, durable and collaborative partnership with CISPE. We are reviewing the ECCO report and will work together to chart a path forward with CISPE and its members."

Nicky Stewart, senior advisor to the Open Cloud Coalition, which Microsoft previously described as a Google lobbying front, said in a statement sent to The Register:

"CISPE's settlement with Microsoft does nothing for the majority of European cloud customers. Despite claims of progress, nothing has actually changed in terms of fair software licensing for the broader market. To solve these issues, the only real option is urgent and robust antitrust enforcement that levels the playing field." ®