Under CISPE Pressure, Microsoft’s Shift Towards Fairer Cloud Competition in Europe
In a significant move, Microsoft has recently made concessions to the Cloud Infrastructure Services Providers in Europe (CISPE), a key organization representing Europe’s leading cloud providers. These concessions grant CISPE members the ability to offer pay-as-you-go plans, align Azure pricing, and host customer workloads privately. This step marks a positive shift in the long-standing battle between CISPE and Microsoft, aiming to rectify the perceived imbalance in the European cloud computing market.
According to Phil Brunkard, an executive counselor at Info-Tech Research Group UK, this development signifies a meaningful stride towards fairer terms. However, the true test lies in how these changes will adapt as pricing and licensing dynamics evolve in the years to come.
What CISPE Achieved Through the Deal
Under the new agreement, qualified CISPE members can now provide Microsoft software to their customers on a pay-as-you-go basis through the CSP-Hoster (CSP-H) program. This move is expected to enhance privacy for European customers and establish pricing conditions that are more closely aligned with Microsoft’s Azure platform. Furthermore, members gain access to pay-as-you-go licensing models for products like Windows Server and SQL Server, alongside the existing Flexible Virtualization Benefit. Additionally, the introduction of Microsoft 365 Local is seen as a step towards ensuring genuine digital sovereignty for European clients.
Moreover, on the privacy front, members are now permitted to host Microsoft workloads as pay-as-you-go on independent European infrastructure without the necessity to share customer details with Microsoft, addressing one of CISPE’s core concerns. While the new program is currently open to existing CISPE members, eligible providers can also join in the coming months, with Microsoft slated to review and potentially expand program access after the first year.
It is worth noting that the initiative excludes hyperscale cloud providers designated as “Listed Providers” by Microsoft, preserving CISPE’s objective of bolstering competition and innovation among European cloud providers. Although the deal falls short of fulfilling all of CISPE’s demands, particularly regarding VDI multi-session capabilities and identity management, it represents a notable step towards addressing longstanding grievances.
Resolving Years of Tensions
The conflict between CISPE and Microsoft traces back several years, with European cloud providers consistently voicing concerns over Microsoft’s contractual practices that allegedly favored Azure. Over time, negotiations led to the introduction of the Flexible Virtualization Benefit, enabling customers to utilize licensed software across various cloud providers’ infrastructures. Despite this, the absence of genuine pay-as-you-go terms for Windows Server and Microsoft 365 persisted, prompting further discussions.
Following a formal complaint by CISPE to the European Commission in 2022 and subsequent regulatory scrutiny, Microsoft made commitments to alter its cloud licensing practices. The culmination of these efforts resulted in a settlement in July 2024, requiring Microsoft to pay a substantial sum and develop Azure Local, aimed at enabling members to deploy Microsoft software at equitable prices. However, recent evaluations by the European Cloud Collaboration Observatory revealed shortcomings in Microsoft’s proposed offering, leading to the latest agreement with CISPE.
By enabling CISPE members to bill Windows, SQL Server, and Microsoft 365 on an hourly basis through the CSP-Hoster program, Microsoft aims to enhance transparency and flexibility for customers. This shift not only facilitates simpler billing structures but also potentially lowers overall costs for customers choosing local providers for data sovereignty and latency reasons.
In addition to addressing immediate concerns, this agreement aids Microsoft in mitigating the risk of a comprehensive antitrust probe under the Digital Markets Act, highlighting the significance of compliance and fair competition in the evolving digital landscape.
Outlook for Non-CISPE Members
While the recent agreement holds promise for CISPE members, questions linger regarding its broader impact on the European cloud market. Critics, including Mark Boost from Civo, raise concerns about the exclusivity of benefits for CISPE members, urging clarity on access criteria and regulatory oversight to promote equitable competition.
Ryan Triplette, representing the Coalition for Fair Software Licensing, views Microsoft’s concessions as a strategic maneuver to maintain market dominance through restrictive practices. She emphasizes the need for transparent regulatory scrutiny to ensure that such agreements genuinely foster competition and customer choice.
In conclusion, Microsoft’s concessions to CISPE represent a significant step towards fostering fairer competition and enhancing customer choice in the European cloud market. While challenges persist, this development underscores the importance of collaboration, transparency, and regulatory oversight in shaping a more equitable digital ecosystem for all stakeholders involved.