1 week Ago By Paul Kunert
Microsoft has weeks to produce a multi-tenant hybrid cloud for service providers in Europe – a failure to do this or to even out alleged anti-competitive pricing for its software licenses could again put it in a legal dogfight with smaller rivals. In mid-July, Microsoft signed a Memorandum of Understanding with trade group CISPE (Cloud Infrastructure Service Providers of Europe) to settle a dispute over, among other things, the higher cost of running Windows Server outside of Azure. Included in the terms was a pledge to build a "Hoster Product" within nine months.
This requires a version of Azure Local (formerly branded Stack HCI) to provide "full multi-tenancy," which includes oversubscription/overcommitment of CPU and RAM, storage, and network overlapping. The clock is running down. Already by the time of February's progress report – performed by two independent overseers brought in to assess the status of that work – Microsoft was running well behind schedule, so getting it ready in time for mid-April always seemed unlikely.
According to multiple sources across Europe - who spoke to us on the condition of anonymity - it now appears inevitable that engineers working for the cloud and software megacorp won't cross the finishing line before this month's due date. "Deadline is just after Easter. Microsoft almost certainly won’t make the product in time," said a senior source familiar with the matter.
"Microsoft underestimated the time and effort it would take to work." Another said: "I mean, these features are not easy, either they're built in the product from the beginning, or it's very, very difficult. If you think about it, to convert one product, single tenant into multi tenant.
.. It's quite a job.
An oversubscription is not easy either.” Senior figures at CISPE were whisked off by Microsoft to its HQ in Redmond last year, with plenty of wining and dining mixed in with some technical discussions about the expectations of Microsoft's product teams. Another person close to the matter told us there "hasn't been been any movement" since.
"Multi tenancy was the most important thing," he said, "also that we can deploy the services to our customers, and they don't have to sign up with Azure or go to to manage their resources through [Microsoft's] portal, because then suddenly we're sending our customers their way.” CISPE filed its complaint against Microsoft with the EU's antitrust team in November 2022. At that point CISPE comprised of 24 members and all but one, AWS, were based in Europe.
It claimed Microsoft used "unjustified and discriminatory bundling, tying, self-preferencing pricing and technical and economic lock-in" to "restrict choice". The complaint said it cost up to five times more to run some OSes on third party cloud infrastructure than on Microsoft's own. Negotiations to settle the disagreement continued for months amid tough talk from CISPE and resolution was reached in July .
Sources told us Microsoft still hasn't dealt with the pricing issues. “Most of the issues were around price discrimination” and these remain. Microsoft upset some CISPE members earlier this year.
The progress report said Microsoft had hiked the price of Windows Server user the Service Provider Licensing Agreement and this was not reflected in "commensurate increases in the price of hourly PAYGO prices for Windows Server licenses on Azure." Microsoft said in the February progress report that the SPLA and PAYGO products were “different value propositions,” so not comparable. And it said of the Azure Stack re-engineering that there was a misinterpretation and “European cloud organizations need to invest in this work” and have "reasonable expectations.
” The Register asked Microsoft to comment on meeting the deadline and it refused to respond. As part of the settlement agreement with CISPE, Microsoft paid the trade group around $22 million, some of which was recently used last week on open source cloud federation tech in Europe . Microsoft also agreed to suspend audits of the trade alliance's members for two years.
According to sources, there is no clawing back of this cash if the current terms of the MoU aren't met. “The worst case scenario is that CISPE re-opens the complaint but keeps the money.” Microsoft also settled a spat with OVH in 2023 over the same topic of licensing in non-Azure clouds.
A spokesperson told us they have no further legal action “currently underway or planned”. “However, the Group continues to closely monitor competitive dynamics at work within the cloud market, and to engage with authorities - in the EU and abroad – on the matter. Numerous competition authorities have pointed out that the cloud market remains highly concentrated around a handful of big tech companies whose practices are damaging users' freedom of choice and alternative providers' ability to compete.
” Google fired an antitrust complaint with the EU against Microsoft in September 2024 over licensing costs, and AWS has complained to the UK's Competition and Markets Authority about it. This topic doesn't seem to be going away, despite Microsoft using pocket change to confidentially settle the disputes. If the case with CISPE doesn't succeed soon, Microsoft heightens the risk of legal bills getting more bigger and the EU taking an even greater interest.
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