‘Businesses are being steered to Azure by financial penalties rather than by merit’: US IT leaders hit out at Microsoft licensing practices in call to action for regulators

Organizations are sticking with Microsoft Azure largely due to the risk of financial penalties rather than merit, according to a new survey.

A poll conducted by the Coalition for Fair Software Licensing (CFSL) has concluded that Microsoft's software licensing practices are a widespread barrier to competition and choice.

More than three-quarters (83%) of software and cloud decision-makers said Microsoft's rules meaningfully limit which cloud providers they can realistically consider.

61% that shopped around said they chose Azure to avoid fees, not because it was the better product. Nearly all reported at least one concrete harm from Microsoft’s licensing practices, with 65% reporting three or more.

Notably, if cost wasn't a factor, eight-in-ten said they would migrate workloads away from Azure if Microsoft's licensing restrictions were lifted.

These concerns have led nearly two-thirds of organizations to keep a workload on their own servers, rather than migrating to the cloud, according to the CFSL.

Microsoft licensing practices raise the stakes with AI ambitions

According to the survey, 82% of respondents with AI projects said Microsoft licensing practices have affected which AI platform they can use. More than half (52%) said they’ve subsequently delayed, scaled back, or cancelled a project.

Meanwhile, licensing cost increases have led 56% to raise prices for their own customers, with 42% of all organizations passing on most or all of the increase. More than half have cut other spending, with a third slowing hiring or reducing headcount. 

"Microsoft's customers are telling us the system is broken. Businesses are being steered to Azure by financial penalties rather than by merit," said Ryan Triplette, CFSL executive director.

"They are passing the costs on to their own customers and delaying the AI tools they need to compete. Some are choosing not to migrate to the cloud at all, rather than incur the costs associated with Microsoft’s licenses to do so."

More than two-thirds said they'd been audited in the past three years, with a quarter incurring unexpected added costs – and those who evaluated a competitor say they are 2.2 times more likely to face an audit.

As a result, 94% said they support letting businesses run software they already own on any cloud without added fees, and 86% said federal regulators should examine software licensing practices that limit which cloud providers businesses can use.

"The closer a decision-maker is to Microsoft's licensing practices, the more urgently they want regulators to step in," said Triplette.

"Regulators should take note: what happens next matters to every American business, and every consumer paying more because of Microsoft's anticompetitive licensing practices."

Licensing practices under scrutiny

Microsoft is already facing scrutiny over its software licensing, and is currently under investigation by the UK's Competition and Markets Authority (CMA) over its Microsoft 365 licensing approach.

The CMA also plans to look into the way Microsoft bundles products, whether customers have an effective choice, and the impact of Microsoft’s licensing practices on these choices.

ITPro approached Microsoft for comment, but did not receive a response by time of publication.

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