One of Google Cloud’s top executives is pushing for regulators to better scrutinize Microsoft’s cloud licensing practices, suggesting Microsoft’s strategy is creating various “harmful downstream impacts” for businesses and the IT world.
“Microsoft’s cloud licensing restrictions restrict choice and create harmful downstream impacts for companies, ranging from higher costs, to more security breaches, to a chilling effect on smaller cloud and software providers including European AI startups,” Amit Zavery, general manager, vice president and head of platform for Google Cloud, wrote on X, formerly known as Twitter.
Google Cloud’s Zavery (pictured) said Microsoft’s tactics seek to lock in customers in Azure, with the monopoly stunting innovation and forcing higher costs for customers who don’t use Azure cloud.
“Microsoft should end the arbitrary ‘Listed Provider’ designation and allow customers to run their previously purchased software on any platform without paying as much as 5X more to use non-Azure clouds,” Zavery said. “Microsoft shouldn’t be permitted to pick and choose who it competes with.”
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Microsoft Licenses Face EU Scrutiny
Cloud computing market share leaders Microsoft and Amazon Web Services have been facing scrutiny as of late with various government regulators in the European Union (EU) as well as in the U.S.
For example, the European trade group Cloud Infrastructure Services Providers in Europe (CISPE) recently began debating with Microsoft to fix issues related to unfair software licensing for cloud infrastructure providers and their customers.
“We are glad MSFT is coming to the table to negotiate with CISPE regarding its complaint with the EC on anticompetitive licensing in Europe. This is a step in the right direction, acknowledging that these restrictions have no technical basis and can be modified at MSFT discretion,” said Zavery.
A Microsoft spokesperson said data shows “competition between cloud hyperscalers remains healthy.”
“In 2023, Microsoft and Google made small gains on AWS, which continues to remain the global market leader by a significant margin,” Microsoft said.
In 2022, Microsoft made several changes to its licensing tactics to quell similar Europe controversy at the time.
One U.S.-based solution provider who partners with both Google Cloud and Microsoft told CRN that Microsoft does have a history of keeping people on Azure via its licensing or customers face costly non-Azure alternatives.
“We sell millions of Azure and GCP. I will say this: it’s very hard for us even as a partner, let alone the customer, to understand all the ins-and-outs of a Microsoft software license,” said the executive, who declined to be identified. “They make it challenging for Microsoft customers to switch off Azure. Flexibility in cancellation policies or moving to another cloud, like Google—it isn’t easy. But that’s a strategy you can do when you’re the largest software company and people want the solutions you have.”
The executive said Zavery’s comments about customers paying up to five times more to use their software on non-Azure clouds is “fair.”
“It’s not cheap to run Microsoft software on non-Microsoft infrastructure,” he said. “We haven’t seen customers paying 5X more like he said, but it can definitely be 2X or 3X.”
However, the solution provider feels like Microsoft’s overall software and cloud portfolio is what’s driving market share increase, not necessarily a lock-in licensing strategy. “Microsoft wants to win just like Google and Amazon. They have what customers want,” he said.
Global Cloud Computing Market Share
As of fourth quarter 2023, Microsoft is the No. 2 global cloud market share leader in the $270 billion cloud infrastructure services market at 24 percent share, according to IT market research firm Synergy Research Group.
AWS ranks No. 1 in the world with 31 percent market share, while Google Cloud ranks third at 11 percent global market share.
Interestingly in Q4 2023, Microsoft’s cloud share increased by nearly 2 points year over year—22 percent share to 24 percent share—while AWS share dropped 2 points, from 33 percent share to 31 percent share.
Google Cloud’s market share has slightly grown over the past few years but mostly has been hovering around 11 percent share since around 2022.
In 2023, worldwide enterprise spending on cloud infrastructure services reached $270 billion, an increase of 19 percent compared with 2022. Synergy expects cloud revenue to increase at a similar pace in 2024.
AWS, Microsoft and Google all made CRN’s 2024 Data Center 50 list, as well as being ranked a ‘Leader’ in Gartner’s new Cloud Database Management Systems Magic Quadrant.
Google Cloud CEO: ‘We Are The Most Open Cloud’ For AI
For CRN’s 2024 CEO Outlook project, Google Cloud CEO Thomas Kurian said his company provides the world’s most open cloud platform for the new era of artificial intelligence.
“Importantly, we’re the most open cloud when it comes to AI,” said Kurian. “Google Cloud is the only major cloud provider offering both first-party AI models and third-party AI models on equal footing, which is an incredible differentiator when our partners speak with customers.”
Kurian said Google Cloud is not “all in or dependent” on any particular model but committed to offering a broad choice.
“Our Model Garden on Vertex AI offers 130-plus foundation models today,” said Google Cloud’s CEO. “The choice of models and depth of capabilities on Google Cloud will continue to grow.”
Google Cloud is now on a $37 billion annual run rate.
Google Cloud’s Zavery said his company will continue to raise issues around Microsoft’s licensing practices on behalf of its customers.
“This should be a transparent process where all affected stakeholders have a seat at the table,” said Zavery. “Only a resolution that is fair for all in the cloud market will create a level playing field for all.”