A top Google Cloud executive has sharply criticized Microsoft's cloud computing practices amid claims that the tech giant is seeking a monopoly in the industry that could harm competition in the long term.
said Google Cloud VP Amit Zavery Reuters The company has serious concerns about Microsoft's current trajectory in the cloud computing industry, warning that it could be trying to establish dominance in the space similar to what it had in software.
“We're concerned that Microsoft wants to relax their decade-old practices where they previously had a lot of monopoly on on-premise software, and now they're trying to bring that to the cloud.”
“They're creating this whole walled garden, which is completely controlled and owned by Microsoft, and customers who want to do any of these things have to go only to Microsoft,” he said.
In the long term, the company's practices could create a monopoly on emerging technologies like generative AI, Zavery warned, and lead to the creation of a “walled garden” in which customers are locked into platforms like Azure.
“If the Microsoft cloud does not remain open, we will have long-term problems, even in next-generation technologies like AI, because Microsoft is forcing customers to turn to Azure in many ways,” he warned.
Zavery urged regulators on both sides of the Atlantic to act.
“I think regulators need to provide some kind of guidance, as well as perhaps regulations that prevent the way Microsoft is building the Azure cloud business, not allowing their local monopoly to lead to a cloud monopoly,” he said.
The criticism is the latest in a long dispute between Microsoft and its competitors in the cloud computing industry amid increased regulatory scrutiny over its practices.
Regulators in the United Kingdom, for example, are investigating whether vendors such as Microsoft and Amazon Web Services (AWS) maintain a stranglehold on the country's cloud computing market.
In October 2023, Ofcom called for an official antitrust investigation into the state of competition in the industry, specifically highlighting Microsoft and AWS as potentially inhibiting growth and competition in the space.
Ofcom, which referred the investigation to the Competition and Markets Authority (CMA), said its investigation identified “features that make it more difficult for UK businesses to switch and use multiple cloud providers”.
A key concern highlighted by the research centered on “exit fees,” under which customers must pay to switch providers entirely or adopt a multi-cloud approach where they use multiple providers.
“Our market research has identified characteristics that make it difficult for UK businesses to switch to and use multiple cloud providers,” Ofcom said at the time.
“We are especially concerned about the position of market leaders Amazon and Microsoft.”
Late last year, tensions between the three hyperscalers rose after AWS and Google attacked Microsoft's licensing practices. The two companies claimed that Microsoft is creating “challenging conditions” for customers as its licensing practices discourage them from switching to alternative vendors.
Microsoft changed the terms of its license in 2019 and 2022 following complaints to EU regulators in a bid to make it easier for smaller providers to compete in the European cloud computing market.
But AWS and Google questioned the benefits of these changes, arguing that they resulted in few changes and still keep customers stuck with Microsoft products and services.
“To use many of Microsoft's software products with these other cloud service providers, a customer must purchase a separate license even if they already own the software,” AWS said at the time. “This often makes it financially unfeasible for a customer to choose a vendor other than Microsoft.”
Microsoft has made efforts to calm industry concerns and potential antitrust scrutiny in recent weeks. In early February, the tech giant revealed that it had started talking to the European cloud industry trade body, CISPE.
In 2022, CISPE filed a complaint with EU regulators for its alleged anti-competitive practices.
CISPE confirmed that talks with the tech giant could focus on resolving lingering concerns related to “unfair software licensing” practices for infrastructure providers and customers.
We are pleased that MSFT is coming to the table to negotiate with CISPE regarding its complaint to the EC regarding anti-competitive licensing in Europe. This is a step in the right direction, recognizing that these restrictions have no technical basis and can be modified at MSFT's discretion.February 26, 2024
In a post on X today (February 27), Zavery said he welcomed the move and described it as a positive step to improve competition.
“We are pleased that MSFT is coming to the table to negotiate with CISPE over its complaint to the EC about anti-competitive licensing in Europe,” he said. “This is a step in the right direction, recognizing that these restrictions have no technical basis and can be modified at the discretion of MSFT.
Microsoft is making major strides in cloud computing and artificial intelligence
Microsoft's success in the cloud computing and generative AI markets over the past 18 months has been no secret.
Since the launch of ChatGPT in November 2022, the tech giant has seen notable growth thanks to a wave of interest in AI technologies.
By working with OpenAI, Microsoft has integrated generative AI features and tools across its core product offering, spanning Windows, Azure, and even security products.
In January, Microsoft surpassed Apple as the world's most valuable company, reaching a market capitalization of $2.887 trillion. Much of this is due to its enormous successes in cloud computing and generative AI.
Microsoft's second-quarter 2024 earnings, released in late January, showed it posted 24% year-over-year growth across its overall cloud business.
The tech giant's Intelligent Cloud segment, which includes Azure, posted revenue of $25.8 billion.
At the time, Microsoft CEO Satya Nadella attributed the growth to growing interest in generative AI and noted that the company had expanded its customer base.
“We now have 53,000 Azure AI customers, more than a third are new to Azure in the last 12 months,” Nadella said. “Our new service offering models make it easier for developers to use LLM from our partners like Cohere, Meta and Mistral on Azure, without having to manage the underlying infrastructure.”
