Yet More Evidence of Microsoft’s Discriminatory Prices in Europe

Feb 2, 2024 | Comments, News

New research from CCIA reiterates the significant harm visited upon cloud infrastructure service providers in Europe by Microsoft’s unfair software licensing terms and discriminatory pricing. Launched at an exclusive event at the European Parliament, organised by Spain’s Start-up Association AES and hosted by Spanish MEP Del Blanco, the research reveals that:

  • Overall, one in four customers were offered cloud infrastructure services free of charge as part of their productivity software licences.
  • Nearly 40 per cent reported some sort of discount for buying ‘bundled’ software and cloud.
  • In the UK, where Microsoft controls over 65% of the productivity software market, almost one third of those surveyed reported getting their cloud infrastructure for free!

These unfair licensing terms are a deceptive trap that locks customers into a Microsoft monoculture. Once ensnared, they have little opportunity to switch providers in the future as their needs change and are helpless to resist future changes to pricing and terms. Microsoft’s unfair software licensing practices leverage its dominance of ‘must have’ productivity software suites (including word processing, presentation, communications, database and CRM software) to squeeze the margins of competing cloud providers with discriminatory pricing that destroys competition.

The survey, conducted for CCIA by Savanta, also finds that among those who have considered switching cloud infrastructure (IaaS) providers, 40% state that existing licensing terms prohibit them from taking on-premise licences to another vendor, and a further 40% worried about losing discounts.

Of course, none of this comes as any surprise to us. Our own research and the detailed insights from our members have highlighted these ongoing harms many times.

  • Professor Jenny estimated a 28% surcharge or tax paid by customers (or their vendors forced to absorb the cost) just to run Microsoft productivity software in a non-Microsoft cloud.
  • For a single product this could add up to half a billion euros every year.

In submissions to DG Competition, CISPE members have provided detailed evidence of the harm they suffer through these discriminatory prices.

  • The cost of Microsoft software for our members is higher than the price charged by Azure to its customers, so that even at zero margin, members cannot profitably sell Microsoft software on their own cloud infrastructure. In fact, CISPE members have provided evidence showing how they must provide Microsoft software at a loss to themselves to be competitive.
  • Discriminatory pricing is luring customers away from European providers to Microsoft. A CISPE member has provided the Commission with a list of customers lost due to Microsoft’s pricing-related abuses; they total almost €20,000,000 in lost revenue in the past 3 years.
  • CISPE members are forced to sell must-have Microsoft productivity software below cost to compete with Microsoft selling its own software on Azure. This squeezes margin to the point at which they cannot win deals, or are forced to absorb negative margins.

The Savanta survey adds new weight to the considerable evidence piling up against Microsoft’s unfair and anticompetitive behaviours. Microsoft’s discriminatory pricing distorts competition, deprives customers of choice and locks them into a single cloud infrastructure. The evidence is clear and overwhelming – urgent action is needed now to force Microsoft to change its ways and defend a vibrant competitive market for cloud infrastructure in Europe.

Read the Savanta study here

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