Summary
The UK’s competition authority has just delivered a damning verdict on Microsoft’s cloud licensing practices. For customers worldwide, the bill is already hundreds of millions—and rising.
The Monopolist’s New Clothes
When the UK’s Competition and Markets Authority concluded its exhaustive investigation into cloud services this week, the verdict was unambiguous: “Competition is not working well.” After nearly two years of examination, the CMA found that Microsoft’s software licensing practices are “adversely impacting the competitiveness of AWS and Google in the supply of cloud services,” creating what regulators termed “an adverse effect on competition” that costs UK customers alone “hundreds of millions more per year than they need to.”
The problem extends far beyond Britain. Microsoft has orchestrated the systematic erosion of customer choice in the digital economy, turning licensing complexity into an anti-competitive weapon.
Microsoft’s licensing labyrinth turns market dominance into an anti-competitive weapon.
As a business owner myself, I understand the appeal of strong market positions. Microsoft has constructed a licensing labyrinth that traps customers in artificial dependencies, inflated costs, and manufactured complexity. The sole purpose: eliminate meaningful choice. Understanding how Microsoft licensing actually works reveals the deliberate nature of these restrictions.
The Three-Tier Trap
The true genius (and malevolence) of Microsoft’s anti-competitive strategy lies in a deliberately complex three-tier licensing regime that most customers don’t fully understand until they’re already ensnared.
Here’s how it works:
🟢 Tier 1 — Azure: The Golden Path
Microsoft’s own cloud platform enjoys the most flexible licensing terms, the broadest range of software options, and the most generous usage rights. If you’re using Azure, Microsoft makes licensing as smooth as possible.
🔴 Tier 2 — AWS, Google Cloud, Alibaba: The Penalty Zone
These platforms face the most restrictive licensing terms. Microsoft deliberately makes running Microsoft software on these platforms more difficult and expensive. Choose our competitors, pay the price.
🟡 Tier 3 — Smaller Cloud Providers: The Middle Ground
Smaller cloud providers get better terms than the big three competitors, but still not as good as Azure. Microsoft can afford to be somewhat generous here because these providers don’t pose an existential threat to Azure’s market position. However, service providers face their own complex licensing challenges that often get passed on to customers.
The most egregious aspect? Software Assurance requirements that force customers to pay twice. Microsoft blocks customers from bringing on-premises licences to any cloud provider unless they maintain active Software Assurance. Microsoft forces customers to re-licence software they already own, paying again for the privilege of exercising choice in cloud providers. The complexities of Software Assurance create additional barriers that few customers fully understand.
🖐 Navigate complex licensing structures with confidence. Learn more: Microsoft Audit Defense.
The Customer Cost Crisis
The CMA’s investigation found that UK businesses alone pay hundreds of millions more per year than necessary due to Microsoft’s licensing restrictions. Globally, businesses pay billions in artificial costs for wanting to choose their cloud provider based on technical merit.
Consider a typical enterprise customer. They’ve invested millions in Microsoft software over decades. They want to migrate to the cloud, but discover that using their existing licences on a technically superior platform comes with prohibitive licensing costs or outright restrictions. Enterprise Agreement customers face particularly complex decisions when their agreements come up for renewal.
Customers pay billions globally due to restrictions that punish cloud neutrality.
The Coalition for Fair Software Licensing, representing organisations across multiple industries, puts it bluntly: “Restrictive software licensing imposes real-world threats like pricing increases that directly influence how we are able to assist healthcare providers and the patients they serve.” When a healthcare technology company cannot choose the best cloud platform for patient care because of licensing restrictions, the harm extends far beyond commercial interests.
Innovation Through Intimidation
Microsoft’s defenders often point to the company’s impressive pace of innovation and development. Microsoft has maintained remarkable technological momentum. Microsoft systematically eliminates customer choice.
When customers cannot freely evaluate and choose between cloud platforms based on technical merit, pricing, or strategic fit, innovation across the entire cloud ecosystem suffers. Why should AWS or Google Cloud invest in developing superior SQL Server hosting capabilities if Microsoft can simply make running those services prohibitively expensive for customers? The complexity extends to hosting providers who struggle with intricate SPLA licensing requirements that create additional barriers to competition.
Artificial barriers suppress innovation across the cloud ecosystem by making competition economically irrational.
The result is a chilling effect on competition that extends beyond cloud infrastructure. Enterprise software vendors studying Microsoft’s model see a blueprint for locking in customers through licensing complexity rather than product excellence. If licensing manipulation becomes the industry standard, customers across all technology sectors will face increasingly limited choices and artificially inflated costs.
The Regulatory Awakening
The CMA’s findings represent just the latest in a growing wave of regulatory concern about Microsoft’s practices. The investigation concluded with a recommendation that the CMA Board use its new powers under the Digital Markets, Competition & Consumers Act to designate Microsoft with “strategic market status” (a designation that would allow regulators to impose legally binding conduct requirements and pro-competition interventions).
The CMA’s approach focuses on “measures which might encourage appropriate technical standardisation, reduce data transfer charges incurred in switching and multi cloud and/or ensure fair licensing of software.”
True portability—not regulation alone—is the cornerstone of fair cloud competition.
The CMA’s approach aligns perfectly with what customers actually need: true portability. The ability to run their software on the cloud platform that best serves their technical and business requirements, without being penalised through licensing restrictions or artificial cost barriers.
The Portability Solution
The remedy to Microsoft’s licensing empire requires no complex regulation or antitrust sledgehammers. Software portability offers a straightforward solution. Customers who have legitimately licensed Microsoft software should be able to run it on any cloud platform without penalty, restriction, or additional licensing fees for exercising choice.
The Coalition for Fair Software Licensing has articulated this principle clearly: “Freedom to run on-premises software on the cloud provider of choice” and “Freedom from retaliation for choice of cloud service.” These principles represent basic commercial fairness that most other software vendors already follow.
Portability is the simplest and most powerful fix: freedom to choose without financial penalty.
True portability would immediately:
Eliminate artificial cost barriers that force customers to pay hundreds of millions in unnecessary licensing fees
Restore competitive pressure on cloud providers to compete on technical merit and service quality
Enable multi-cloud strategies that give businesses resilience and negotiating power
Encourage innovation across the entire cloud ecosystem.
Beyond Microsoft: A Precedent for the Digital Economy
Microsoft’s licensing practices have company. Oracle has implemented new VirtualBox licensing terms that, according to licensing consultant Bernhard Halbetel, could leave users “liable for a licensing charge under the updated terms and conditions, even if they are not using the software.” Oracle advisor Eric Guyer warned, “This is surely bad for customers as there is less contractual ambiguity when Oracle pursues companies based on the download activity it tracks.”
Oracle isn’t an outlier. Other vendors are beginning to adopt similar licensing tactics.
Major software vendors weaponise licensing complexity to trap customers and eliminate choice. If Microsoft’s three-tier licensing regime becomes the accepted model, other vendors will follow. The digital economy will see customer choice become theoretical, with genuine competition replaced by vendor lock-in strategies.
The Path Forward
Regulatory action, while necessary, represents only part of the solution. Customers themselves must recognise the true cost of accepting Microsoft’s licensing restrictions and demand better. Microsoft’s ongoing changes to licensing terms continue to favour vendor lock-in over customer choice.
Such recognition means:
Challenging licensing terms during contract negotiations and refusing to accept artificial restrictions on platform choice
Supporting industry initiatives like the Coalition for Fair Software Licensing that advocate for customer choice
Making vendor lock-in a key evaluation criterion when selecting software providers
Demanding transparency in licensing terms and rejecting unnecessarily complex licensing structures
Seeking independent licensing expertise to understand the true costs and alternatives before signing agreements
🖐 Challenge anti-competitive terms in your next agreement. Learn more: Microsoft Enterprise Agreement Negotiation.
Business leaders must also recognise that licensing disputes transcend technology procurement. We are fighting to preserve our ability to make strategic decisions based on business merit rather than vendor manipulation.
The Bottom Line
Microsoft has built a licensing empire that extracts hundreds of millions in artificial costs from customers worldwide while systematically eliminating choice in the digital economy. Their three-tier licensing regime represents the triumph of monopolistic strategy over competitive markets, with costs borne by every business that wants the freedom to choose their technology partners based on merit rather than licensing convenience.
Software portability is the baseline for fair competition and meaningful customer choice.
Microsoft customers need the ability to use legitimately licensed software on the platform that best serves their business needs.
Software portability is essential for preserving competition, innovation, and customer choice in the digital economy. Microsoft’s licensing empire will face serious challenge. The question concerns how much unnecessary cost customers will bear, and how much innovation the market will lose, before that challenge succeeds.
The CMA has shown the way. Now it’s time for customers, regulators, and the industry as a whole to demand what Microsoft should have provided all along: genuine choice in the digital marketplace.
The author is a business owner and advocate for competitive technology markets. The views expressed are their own and do not represent any organisation or client.