Microsoft has responded to the UK's Competition and Markets Authority (CMA) probe into public cloud services and licensing by insisting that its terms "do not meaningfully raise cloud rivals' costs."

In its response to the investigation, which landed alongside multiple submissions today the company insisted that Amazon remained the market-leading hyperscaler in the UK, and noted that Google was growing quarter-on-quarter. It also said that Windows Server was declining relative to Linux regarding cloud OS share, and SQL Server remained second-ranked to Oracle.

"Amazon and Google are also both still growing their Windows Server and SQL Server Virtual Machine (VM) vcore hour usage by UK customers," Microsoft stated.

Google's cloud business is certainly growing. According to its Q2 2024 financials [PDF], revenues from Google Cloud grew just under 29 percent year-on-year to over $10 billion. However, AWS and Microsoft Azure remain the big beasts in the UK cloud market while Google trails behind. In addition, Microsoft is nibbling away at Amazon's lead.

The crux of the matter is how much Microsoft charges for customers to use its software in rival clouds compared to its own Azure cloud service. According to the CMA, most customers it spoke to understood that using Microsoft products on Azure was cheaper than opting for one of the major rivals.

This, plus other factors, could drive customers to Azure or make it difficult for them to switch from the service.

Microsoft's bullish take on this is that AWS and Google should be grateful that they even get to run its software. In its response, the company said: "This dispute on pricing terms only arises because Microsoft grants all rivals IP licenses in the first place to its software that is of most popularity for use in the cloud. It does this not because there is any legal obligation to share IP with closest rivals in cloud, but for commercial reasons."

Indeed, the more places its software runs, the more license fees Microsoft can collect.

It continued: "Microsoft believes it is common ground that companies, even if you assume they have market power, can license their software products for a fee that is non-zero. Microsoft believes it is also accepted that licenses to software can come with specific use rights and different use rights can have different fees."

This all sounds reasonable until you consider how an uplift in licensing fees might drive customers to one cloud or another. Google and AWS argue that customers should be free to take their licenses to the cloud. Microsoft, unsurprisingly, thinks differently: "This seeks to ignore the license terms and grant new rights to customer purchases that could have occurred a decade or more ago."

The company cited examples, including purchasing a printed book and then buying the ebook version for Kindle, and couldn't resist pointing out that Amazon would take a hefty cut from the transaction.

Indeed, Microsoft's argument appears to be that since cloud margins are so significant, both Google and AWS presumably have significant war chests with which to compete.

The company said: "Amazon and Google are investing $50 billion and $32 billion in capex which demonstrates their committed 'money where your mouth is' belief in a profitable and competitive future in cloud. These are not the actions of marginalised or weakened rivals struggling to compete with the burden of compensating Microsoft for making profitable use of its IP at (hyper)scale."

That said, Microsoft has made a deal with the Cloud Infrastructure Service Providers of Europe (CISPE) trade group in part to avoid regulator scrutiny over allegations of anti-competitive behavior. The deal, which at its heart sought to address the cost of running Microsoft software on rival clouds, explicitly excluded AWS. ®

https://www.theregister.com//2024/07/24/microsoft_cloud_cma/