Microsoft has escaped the recent backlash against the power and wealth of America’s biggest tech companies.
Despite a stock market value that has ballooned to more than $2 trillion due to his dominance of various parts of the trading software market, he has avoided a repeat of the complaints that made him the most high-profile target of antitrust action in the US. late 1990s.
That is, until now.
Changes to some of the company’s basic business terms have caused growing unrest among some of its biggest customers, as well as sparking complaints from rival cloud companies. Among the results is a wide-ranging, though still informal, antitrust review in Brussels.
According to its critics, Microsoft has used anti-competitive tactics to attract customers to its Azure cloud computing service and alienate them from rivals, notably Amazon Web Services, which dominates the cloud market. By using Windows and Office to fuel the growth of Azure, critics say it’s repeating the kind of illegal “tethering” that was at the heart of the last round of regulatory action against the company.
Microsoft said it was not “closing” the market by preventing rivals from running its software in its clouds and that it was free to offer more favorable terms to its software customers if they also used its Azure service.
However, Brad Smith, the company’s president, admitted that Microsoft had been partly to blame, without elaborating, a stark contrast to the aggressive stance the company took when facing competition complaints more than two decades ago.
“While not all of these claims are valid, some are, and we will absolutely be making changes soon to address them,” Smith said in a statement. Microsoft, he added, was “committed to listening to our customers and meeting the needs of European cloud providers.”
The accusations of harsh trade tactics follow a period in which Microsoft became known for the conciliatory stance it took after its latest round of antitrust battles in Washington and Brussels.
A large Microsoft customer, who declined to be named, said Microsoft’s stricter terms affected the use of a version of Office that runs in Amazon’s cloud, affecting tens of thousands of its workers. The result would be “millions of dollars” a year in additional license fees, although Microsoft had delayed the start of the higher costs after the customer complained. “Microsoft [is] not really looking out for the best interests of [its] customers,” said this person.
There are signs of a regulatory response. In an informal questionnaire sent to rivals last month, and seen by the Financial Times, the EU asked about the terms under which it could run Microsoft’s software and whether this would put it at a disadvantage.
At the center of the controversy is a change to Microsoft’s license terms made in October 2019. The change affected how the company charges for products like Office when they run in Amazon Web Services data centers, Google and Alibaba, so-called “hyperscale” cloud services that compete with Microsoft’s Azure.
Customers were required to pay an additional license fee, even if they had already paid Microsoft to run the software in their own data center under an existing agreement. Microsoft’s own cloud service, Azure, was included in the list of hyperscale groups affected by the higher charges, although customers received a special discount that offset much of the increase.
“You can still run all these products on someone else’s cloud, but you have to be willing to pay a premium to do so,” said Wes Miller, a former company executive and now an analyst with Directions on Microsoft, which advises Microsoft clients. .
Among the affected services was AWS Workspaces, a service launched in 2014 that made it possible to provide workers with a “virtual desktop,” an experience that looked like a Windows PC but was actually powered by software running on Windows. the Amazon cloud. Microsoft didn’t launch a similar service of its own until shortly before it imposed sweeping license increases, making it more attractive for customers to opt for Azure.
Microsoft said that competing productivity apps, such as those from Google, provided an alternative and made individual parts of Office, such as the Excel spreadsheet program, available to customers who only wanted to pay for part of the software.
Charging higher prices to use its software in rival clouds is just one way Microsoft has tried to lure more customers to its own cloud platform, according to critics. Other license terms and the end of technical support for certain services added pressure on customers to switch to Azure, they said.
Another tactic that has been criticized, and is also under review by the EU, is to bundle or bundle a number of services into a single product, even if many customers only require one item.
For example, the highest level of security is only available to Microsoft 365 software suite customers if they pay for a premium version known as E5. According to Directions on Microsoft, this is another “bundle” that also requires you to purchase many other features.
Some of the accusations echo Microsoft’s latest round of antitrust battles. They include a complaint that the company made it difficult for users of the latest version of Windows to use a non-Microsoft browser, a tactic it was also accused of in the 1990s to destroy browser pioneer Netscape. In response to the latest discontent, two weeks ago Microsoft made it easy for users to change the default browser in Windows.
Most Microsoft customers have three- or five-year contracts, known as enterprise agreements, which means many have yet to renew their license since the 2019 changes. Additionally, Microsoft has made unique concessions in licensing negotiations with some customers to delay the impact of the new pricing formula.
Even if Microsoft’s tactics aren’t illegal under current law, they could break new laws designed to prevent powerful tech companies from favoring their own services, said Frédéric Jenny, a French antitrust expert who was commissioned by a group of companies from the cloud. in Europe last year to report on potentially anti-competitive behavior by large software companies like Microsoft
Europe’s Digital Markets Law, adopted last month, aims to impose new restrictions on companies deemed digital “gatekeepers”. Many details of the law remain to be ironed out, and it was initially aimed at consumer Internet platforms, not enterprise software companies like Microsoft.
However, the focus is growing in the company. Customers are “very frustrated with what they perceive as Microsoft not letting them use the cloud of their choice,” said Gartner analyst Michael Silver, who has advised the software company’s clients for more than 25 years. He added that, to many, the licensing craze “seems like a throwback to old Microsoft.”
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