Economic study proposes anti-competition focus shifts to cloud

26 October 2021 | Melanie Mingas

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The focus of ongoing anti-competition investigations in Europe could be about to make the inevitable shift to cloud services.

Legacy software firms have been accused of distorting cloud markets through "long-lasting, pernicious and unfair licensing practices" in a report commissioned by trade body Cloud Infrastructure Services Providers in Europe (CISPE).

Suggesting the EU broadens the focus of its anti-competition investigations to include cloud, CISPE commissioned Frederic Jenny – who chairs the OECD's competition committee – to produce the report in a personal capacity.

Published today, CISPE said the study has been shared with MEPs, the Council and the European Commission as they review the Digital Markets Act (DMA).

Highlighting "long-lasting, pernicious and unfair licensing practices" which it said are "having a detrimental effect on the efforts of European businesses to move to the cloud", the study called for the outlined behaviours to be proscribed in the DMA.

Further, "not only are [unfair licensing practices] costing organisations of all sizes and in all sectors millions of Euros, but they are chilling innovation and restricting growth".

The document continued: "It is clear that certain players mean to extend these harms as they seek to secure their own dominance in the emerging cloud infrastructure environment. Money that could be spent on developing European services for European consumers is being diverted to the pockets of some of the wealthiest and largest software firms through unfair means."

Specifically naming Microsoft, Oracle and SAP as being "among those deploying unfair licensing practices to limit choice and harm competition", Jenny had three key findings: the de facto price for Microsoft Office productivity suite is higher when purchased for use on third-party clouds; bring your own license deals have disappeared; and actual vs potential user billing.

Further, CISPE said the research provided evidence of:

  • Legacy software players such as Microsoft exploit bundling tactics to win tenders  (often after losing out initially) by offering cloud infrastructure (Azure) for free with upcoming renewals of legacy software licenses;
  • Demanding information on its partners’ customers for ‘software billing purposes’ but then approaching the customers to switch infrastructure cloud providers;
  • Intentionally reduced compatibility to force customers to use specific cloud infrastructure;
  • Artificially limiting data portability;
  • Tying products to make third-party software less attractive;
  • Limiting interoperability.

The named providers are yet to respond to the report, however, April financial results from Microsoft and Google demonstrated significant growth in their cloud revenues, while Synergy Research Group data published today has found that Amazon, Microsoft and Google account for 63% of cloud spend dollars.

According to Ensono's report Cloud Clarity: A Snapshot of the Cloud in 2021, Microsoft Azure ranks as the most popular public cloud provider (with 58% of responses), followed by Google Cloud (41%), IBM (40%) and AWS (38%).

Gordon McKenna, Ensono's CTO of public cloud said: “With the EU’s new rules not yet set in stone, industry leaders must wait to see how this legislation will take shape and what the implications for providers and their customers will be.

 “One trend is clear: businesses are keen to adopt cloud infrastructure that allows them to tap into the best services that different providers have to offer. Multi-cloud is the direction of travel for the industry and the providers who put flexibility, transparency and autonomy at the heart of their offering will be well placed going forwards.”