Google files first ever complaint with European Commission against Microsoft

Google Cloud Platform has filed a complaint with the European Commission alleging Microsoft software licensing policies are anti-competitive, including claims customers are being charged four times more to run Windows Server in non-Azure clouds.

Some of the arguments have been heard by Reg readers for more than 15 months, with the issues first raised by Amit Zavery, Vice President and head of GCP, in 2023, when he exclusively spoke to us about a "software tax" he said businesses were being charged to run their on-premises licenses for the operating system in Google datacenters.

Today – in the first ever antitrust complaint Google has filed with the EC against Microsoft – he claimed the rival's "restrictive software licensing infringes on EU law and harms customers." The complaint was filed last night and we have seen a summary, but the full formal document will not be made public for some weeks.

"We believe this regulatory action is only way to end Microsoft vendor lock-in and for customers to have a choice and create a level playing field for competitors," he added. "Microsoft strategy is simple. It leverages a software monopoly to lock customers into Azure."

Windows Server "remains the dominant operating system," with 70 percent "plus" market share, and the fear is that with 68 percent of companies running fewer than half of their workloads on the cloud – according to McKinsey – Microsoft will replicate its mastery in the cloud world.

Zavery pointed to research which found European businesses and public sector organizations pay up to €1 billion a year to run various forms of Microsoft software in cloud environments outside of its own Azure public cloud.

This figure is based on findings from Frédéric Jenny, emeritus professor of Economics at ESSEC Paris Business, commissioned by AWS backed trade group CISPE – which itself filed a complaint against Microsoft in November 2022 and resolved the dispute with a confidential settlement earlier this year.

In that report, Jenny said a Microsoft change to Bring Your Own Licensing for rivals "may have resulted in first-year license repurchase costs equivalent to €560 million ($597 million) for the European market. An additional overcharge of €1 billion ($1.07 billion), relating to licensing surcharges imposed on non-Azure deployments of SQL Server, may further be attributed to the policy change."

Microsoft introduced the software licensing changes in 2019, as we have written previously. Before that point, Google said customers could run pre-purchased workloads on any hardware or cloud.

"But as soon as Microsoft got into the cloud space and became serious about it, they started tying what you did with Windows Server to Azure, and they created a linkage between two unrelated products and made sure that customers are forced down the path of choosing Azure as the only place they can easily deploy the Windows Server," Zavery said.

"That's really the bundling issue… it creates a lot of harm for customers: One, organizations have less choice. They have higher cost. When they want to migrate on-premise licenses to Azure, there's one choice, but if they want to use somebody else's, they have to pay a markup to Microsoft around 400 percent and this is advertised by Microsoft on their website, telling customers, if you choose somebody else, you will have to pay extra, [and] you will also have less security and reliability by restricting access to a lot of updates on third party cloud providers.

"This, of course, creates a single attack surface and single point of failure, as you have seen with some of the issues recently with CrowdStrike and Microsoft, where you are now concentrating all the environment into one system," said Zavery.

A customer who bought a Windows Server license in 2020 "running it on premise or in their own datacenter" and later decided to use the cloud to deploy it had two options, the Google Veep said.

“One, repurchase the software at a much higher price with a 400 percent plus markup, and get a limited product to run on Google or AWS or a lot of other cloud providers. Or go to Azure, because that's where the easiest path for customers would be, unfortunately, and get the updates and not have to pay any kind of markup. So we believe that time to act is now.”

“The EU cloud market is at an inflection point. I mean, a lot of businesses and organizations do depend on the digital environments and the economy is going to grow based on the digital evolution as well as lot of workloads today remain on premise.

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“So there's a huge amount of workloads still running on premise, which will move to the cloud, and lot of that is all Windows OS, and that’s when customers decide they need to be able to have a choice of where they want to move to and they should be able to pick any cloud provider which makes sense for them, technically and commercially.”

Zavery added: “We’re asking the European Commission to act now.”

The EC confirmed to The Reg: “We have received the complaint, which we will assess under our standard procedures.”

We asked AWS if it plans to launch its own complaint with the EC, as it too has highlighted various concerns with Microsoft licensing. It refused to comment.

A Microsoft spokesperson told us: "Microsoft settled amicably similar concerns raised by European cloud providers, even after Google hoped they would keep litigating. Having failed to persuade European companies, we expect Google similarly will fail to persuade the European Commission." ®