Microsoft has assured the European Union (EU) that it will revise its cloud licensing deals in Europe and “partner with and support” other European cloud providers, many of which feel that the dominance of big players such as Microsoft and Amazon are making it harder for them to do business.
Brad Smith, President & Vice Chair at Microsoft acknowledged in a blog post that the intense competition in the cloud market has impacted smaller cloud companies. “While not all of these claims are valid, some of them are,” he added.
“Over the past few years, our focus on competing with the largest technology providers has resulted in us not being as attentive to the impact on our cloud provider partners. We are making changes to remedy this, beginning today,” Smith said in the blog post.
Last month, EU’s executive vice-president Margrethe Vestager revealed that Microsoft's cloud business and its impact on competition are under the scanner. The EU was approached by multiple companies including German software provider NextCloud, French data center provider OVHcloud and Italian cloud service provider Aruba. In their complaint, the companies alleged that Microsoft abused its dominant position to limit consumer choice and undermine fair competition in the cloud services market.
The assurance provided by Smith to dodge potential anti-competition cases is part of a two-pronged strategy announced in the blog post. The first strategy includes five cloud principles that will be implemented in Europe. It includes ensuring Microsoft’s cloud services meet Europe’s needs and the various governments’ sovereign needs, providing a platform for European software developers to grow, supporting Europe in regulating technology, and partnering and supporting cloud providers in Europe.
The second strategy is to focus primarily on supporting European cloud providers so they can easily host a wider variety of Microsoft products on their cloud infrastructure. Smith said that this will help European cloud providers serve customers better.
Microsoft’s stance to engage directly with companies marks a departure from the hostile reaction and denials of any allegation of anti-competition on part of other big tech companies. Many even have challenged decisions by antitrust regulators in various courts.
Smith explained that these steps were taken after various consultations and talks with various cloud providers across Europe. Smith and his team held remote meetings with the CEOs and business leaders of various cloud and software providers in Europe.
The cloud services market is dominated by three big tech companies that account for 65% of the cloud revenue. According to a February report by Synergy Research Group, Microsoft accounted for 22% of the cloud services market after Amazon (33%) and was ahead of Google (10%) in the first quarter of 2022.