Google Takes on Microsoft in Cloud Computing Battle: Urges EU Commission to Intervene
By Philip Blenkinsop
BRUSSELS (Multibagger) - Alphabet's Google (NASDAQ: GOOGL) has formally lodged a complaint with the European Commission against Microsoft (NASDAQ: MSFT), alleging anti-competitive practices designed to lock users into Microsoft's Azure cloud platform.
Google, which competes fiercely with Microsoft and Amazon (NASDAQ: AMZN) Web Services in the cloud computing sector, argues that Microsoft exploits its dominant Windows Server operating system to stifle competition.
In a briefing, Google Cloud Vice President Amit Zavery revealed that Microsoft's clients face a staggering 400% surcharge to run Windows Server on non-Azure cloud platforms. This punitive pricing does not apply to Azure users. Moreover, Zavery asserted that users of rival cloud systems receive delayed and less comprehensive security updates.
A 2023 study by cloud services organization CISPE highlighted that European businesses and public sector entities incur up to 1 billion euros ($1.12 billion) annually in Microsoft licensing penalties due to these practices.
In July, Microsoft reached a 20-million-euro settlement with CISPE to resolve an antitrust complaint concerning its cloud licensing tactics, thereby avoiding a full-scale EU investigation. However, the settlement excluded major players like Amazon Web Services (AWS), Google Cloud Platform, and AliCloud, drawing criticism from the first two.
Microsoft has responded by stating that it has amicably resolved similar concerns with European cloud providers. "Having failed to persuade European companies, we expect Google similarly will fail to persuade the European Commission," said a Microsoft spokesperson.
Google also accused Microsoft of compelling customers to use its collaboration tool, Teams, even when they preferred alternatives, employing the same strategy to promote Azure.
"The time to act is now," Zavery emphasized. "The cloud market will become increasingly restrictive if these practices continue unchecked."
Google is urging the European Commission to take decisive regulatory action to dismantle Microsoft's "vendor lock" and foster a competitive environment for all market players.
"We are asking the European Commission to act now. We're asking them to really look at this issue, help customers decide, and keep the choices going for them," Zavery stated.
Google noted that Microsoft's Windows Server and associated products command over 70% market share among European businesses.
Historically, Microsoft permitted its software to run on any hardware, such as laptops, but imposed restrictions in 2019 as it ventured deeper into the cloud industry.
The cloud computing sector in the EU is expanding at an annual rate of approximately 20%, offering significant growth potential. According to an April McKinsey study, two-thirds of EU companies currently have less than half of their workloads on the cloud.
($1 = 0.8943 euros)
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Breaking It Down: Why This Matters to You
What Happened?
Google has filed a complaint against Microsoft with the European Commission, accusing Microsoft of unfair practices that force customers to use its Azure cloud platform.
Key Points:
- Anti-Competitive Practices: Microsoft allegedly charges a 400% mark-up for running Windows Server on non-Azure platforms.
- Market Dominance: Google claims Microsoft uses its dominant position to restrict competition.
- Financial Impact: European businesses and public entities are reportedly paying up to 1 billion euros annually due to Microsoft's licensing penalties.
- Regulatory Action: Google is calling for the European Commission to intervene and level the playing field.
Why Should You Care?
- For Businesses: If you run a business, these practices could mean higher costs and fewer choices for cloud services.
- For Consumers: Limited competition can lead to higher prices and less innovation, affecting the quality and cost of the services you use.
- For Investors: This ongoing battle could impact the stock prices and financial performance of major tech companies like Google, Microsoft, and Amazon.
How It Affects Your Finances
If you're investing in tech stocks or rely on cloud services for business operations, the outcome of this complaint could have significant financial implications. Regulatory actions could lead to more competitive pricing and better services, ultimately benefiting your bottom line.
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By understanding these dynamics, even the most novice investor or business owner can grasp the importance of fair competition in the tech industry and how it impacts everyday financial decisions.