The CMA must grasp this golden opportunity to end unfair software licensing

Oct 5, 2023 | Comments, News

Ofcom’s report [..] outlines concerns it has heard about the software licensing practices of some cloud providers, in particular Microsoft.”

says the UK Competition and Markets Authority (CMA). CISPE has shared evidence with Ofcom and the CMA, along with regulators across Europe, that shows how the unfair practices of certain software providers continue to reduce choice and increase costs as UK businesses move to the cloud. Those practices must stop and we will support a CMA investigation into the pernicious effect of unfair software licensing. Without it, dominant legacy software companies will remain free to reduce choice and raise costs for UK businesses moving to the cloud.

Global leadership

Many jurisdictions around the world have looked at the cloud market, but few have understood the harmful effect that unfair software licences can have in distorting competition in this, still nascent, sector. Dominant software providers wield enormous power through licences for ‘must have’ productivity software such as word-processors, spreadsheets, presentation, communication and messaging software as well as databases and many other essential applications. Unfair, restrictive terms, bundling of products and discriminatory prices are all powerful ways to lock customers into those firms’ own cloud infrastructures.

The CMA has shown itself to be a bold, future-focused regulator willing to stand up to powerful legacy players. Now is the time to make good on that reputation by ensuring software licensing is fully examined. Without an investigation, and ultimately prohibition of these unfair software licensing practices, there can be no free and fair choice of cloud infrastructure and other efforts to defend competition in the sector will surely fail.

Act now to defend the cloud

The need to act is urgent. Ofcom’s market report devotes an entire chapter to the ways in which Microsoft can use its dominance of productivity software to distort competition in the cloud. We are at the very beginning of the shift to the cloud and allowing it to dominated by the same legacy software firms who monopolised the world of CD-Roms and client-server software would be to hold back its potential. To fully capitalise on the efficiency, flexibility and potential of the cloud, firms of all sizes must be free to choose the cloud infrastructures that make most sense for them, unencumbered and unpressurised by the licenses they own for their productivity suites.

Smaller cloud infrastructure vendors, innovators and those offering bespoke services for specific applications must also be given the chance to thrive and offer customers a wide range of exciting, cost-effective alternatives. Currently, many CISPE members note that the unfair licensing practices of Microsoft make it simply economically unviable to provide the company’s ‘must have’ software on any cloud infrastructure other than Azure. It also means that profits for UK businesses offering managed cloud, hosting and cloud infrastructure services are virtually wiped out by the licence costs extracted by Microsoft.

A golden opportunity for the CMA to act

The CMA has a golden opportunity to lead the world in addressing these dangers. If those already monopolising the productivity software which UK business and public sector rely upon today are allowed to dominate the cloud, there will be no meaningful choice or competition. We urge the CMA to be bold and to grasp this chance to protect a competitive cloud sector by investigating unfair software licensing practices. By doing so it will play a leading role in ensuring a vibrant technology market not just in the UK but around the world.

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