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Microsoft won't lower software costs on AWS, Google clouds

Microsoft plans to loosen restrictions to lower the cost of running Office and Windows on clouds smaller than Azure. The changes won't affect running the products on its largest rivals.

Changes that Microsoft plans to make to its cloud-licensing rules in response to a review by European regulators won't alter restrictions that raise the cost of running its software on competitors AWS and Google.

Last week, Microsoft pledged to ease conditions that made it more expensive to run Windows, Office, Windows Server and SQL Server on cloud providers other than Azure. On Tuesday, the company clarified that the policy changes wouldn't apply to its largest rivals. It declined to say when the changes would take effect.

"[The upcoming licensing is] aimed at increasing the opportunities and benefits for cloud providers other than hyperscale cloud companies," Microsoft spokesman Stark Sutton said in an email.

Microsoft promised to alter its practices after cloud firms OVHcloud and Nextcloud filed confidential complaints with the European Commission. OVHcloud's complaint said Microsoft forced it to sign an agreement that charged higher prices for the company's products, Bloomberg reported.

The European Commission confirmed it is assessing the complaints. Reuters reported last month that regulators sent out questionnaires to cloud providers and Microsoft's customers to get their opinion of the company's practices.

To address the complaints filed with the EC, Microsoft plans to let more cloud companies host Windows and Office on their infrastructure. The company said it would also make its licensing terms more flexible for customers who want to run Microsoft software on a third-party cloud provider.

Businesses that want to run Office or Windows on AWS or Google can do so but face higher costs.

Microsoft tailored the changes to avoid trouble with regulators while maintaining its fight against fellow cloud giants, said Wes Miller, an analyst at Directions on Microsoft.

"I think [Microsoft's announcement] very surgically, strategically, precisely addresses some of the concerns" raised in the complaint to the European Commission, Miller said.

Microsoft hasn't released details of the changes, leaving some critics skeptical.

"I want to see the goods," said Francisco Mingorance, the secretary-general of the European cloud provider trade association CISPE.

Mingorance called on Microsoft to make its amended licensing language available for third-party audits to ensure it reflects the changes they've announced. The European Commission should continue examining Microsoft's practices as well, he said.

"Without the leverage and threat of competition-law sanctions, I don't know why Microsoft would change a very lucrative business model," he said.

The EC fined Microsoft heavily in the 2000s for anticompetitive behavior. The company's actions included charging unreasonable prices for information that would allow other software companies to integrate with its products.

Microsoft lags Amazon as a cloud provider. In February, AWS held about one-third of the cloud market, while Microsoft accounted for 21%, according to the Synergy Research Group. The group reported that Microsoft, Amazon and Google comprise 71% of the public cloud market.

Mike Gleason is a reporter covering unified communications and collaboration tools. He previously covered communities in the MetroWest region of Massachusetts for the Milford Daily News, Walpole Times, Sharon Advocate and Medfield Press. He has also worked for newspapers in central Massachusetts and southwestern Vermont and served as a local editor for Patch. He can be found on Twitter at @MGleason_TT.

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