Under CISPE pressure, Microsoft opens the door to fairer cloud competition in Europe

Microsoft has made concessions to the organization representing Europe’s leading cloud providers, giving its members the ability to offer pay-as-you-go plans, match Azure pricing, and privately host customer workloads.

Some see this as merely one more development, not the culmination of the years-long battle between the tech giant and Cloud Infrastructure Services Providers in Europe (CISPE), which has long argued that Microsoft’s contracts harm the European cloud computing market.

However, “it seems like CISPE’s persistence has paid off, and Microsoft has taken a meaningful step toward fairer terms,” said Phil Brunkard, executive counselor at Info-Tech Research Group UK. “The real test will be whether that spirit holds as pricing and licensing evolve in the years ahead.”

What CISPE got out of the deal

Under the terms of the new agreement, qualified CISPE members will be able to offer Microsoft software to their customers on a pay-as-you-go basis through the CSP-Hoster (CSP-H) program. CISPE says this will offer stronger privacy for European customers and create pricing conditions that are “more comparable” to those of Microsoft’s Azure cloud platform.

Members can now access pay-as-you-go licensing models for products including Windows Server and SQL Server, in addition to the Flexible Virtualization Benefit already available to them. They will also have access to a new product, Microsoft 365 Local, what CISPE called another step toward “true digital sovereignty for European customers.”

On the privacy front, members are permitted to host Microsoft workloads as pay-as-you-go on independent European infrastructure, without having to share customer details with Microsoft as previously required; this was one of CISPE’s core concerns.

The new program is open to current CISPE members and eligible providers who join “in the coming months,” according to CISPE. Microsoft will review the program after the first year and could potentially expand access.

Importantly, CISPE notes, the program will be closed to hyperscale cloud providers designated by Microsoft as “Listed Providers” (licensees). This preserves its goal to “support competition and innovation in the European digital ecosystem by strengthening European cloud providers.”

CISPE does acknowledge that the deal lacks two provisions it has been pushing for: It doesn’t allow for Windows 10/11 VDI multi-session on European-owned multi-tenant infrastructure, as Azure Local would have, and it still enforces Entra ID with Microsoft 365, so customers can’t use alternative identity management.

De-escalating years of tensions

The conflict between CISPE and Microsoft goes back for years. Notably, in 2022, the member group filed a formal complaint with the European Commission alleging that the company was charging customers more to run its software on rival clouds. This happened shortly before the adoption of the European Digital Markets Act (DMA), designed to create fairer and more competitive digital markets.

“European cloud providers have long complained that Microsoft’s bring‑your‑own‑license rules pushed customers onto Azure by adding extra fees and paperwork everywhere else,” said Brunkard.

He pointed out that Microsoft ultimately compromised and introduced the Flexible Virtualization Benefit, which allowed customers to use their licensed software on any cloud provider’s infrastructure. However, it still blocked regional clouds from offering Windows Server or Microsoft 365 on “true pay-as-you-go terms.”

In March 2023, the company agreed to change its cloud licensing practices to avoid an EU antitrust probe, and in July 2024, Microsoft and CISPE reached a settlement that required the company to pay €20 million ($21.7 million) and develop a new product, Azure Local.

Azure Local would have allowed members to run Microsoft software on their platforms at prices equal to Microsoft’s. It was to include multitenancy support for customer workloads, pay-as-you-go licensing for SQL Server, unlimited virtualization and multi-session virtual desktop infrastructure (VDI) for Windows, and free security updates.

But then in May of this year, the European Cloud Collaboration Observatory (ECCO), which is providing independent oversight of the deal, found that “both Microsoft and CISPE have now agreed that Azure Local will not deliver the full set of features outlined in the agreement.” ECCO also described Microsoft’s offering as “disappointing,” and gave the company an Amber rating, indicating that concerns exist and corrective actions have been proposed.

Under the new agreement, any CISPE member who signs the new addendum can bill Windows, SQL Server, and Microsoft 365 by the hour through the CSP‑Hoster program, Brunkard pointed out. No volume agreement is required, and workloads can reside on a local provider.

“For many customers who want to keep their data within a national provider for sovereignty or latency reasons, the change should translate into simpler bills and lower overall costs once providers pass through the metered pricing,” he said.

The deal also helps Microsoft “cool off the threat” of a full antitrust probe under the DMA, Brunkard noted.

He emphasized that enterprises should treat their next renewal as a health check. “When hosters move to the new model over the coming quarters, customers should make sure that pay-as-you-go savings flow through to them, and that any true-up risk stays with the provider,” he advised.

What about non-CISPE members?

Some say that, while it may be good for CISPE members, the agreement fails to tackle the core issues undermining competition in the EU cloud market.

Mark Boost, CEO at cloud company Civo, pointed out that the concessions apply only to CISPE members, and that there’s no clarity as to what benefits, if any, other European cloud providers may see.

“Is this a private deal for a select few? Who decides who gets access, Microsoft or regulators?” he asked. “Without these answers, it is easy to arrive at the assumption that this is a workaround that protects market power instead of challenging it.”

Ryan Triplette, executive director of the Coalition for Fair Software Licensing, called it a stalling tactic that simply gives Microsoft more time to lock in customers with “restrictive and anticompetitive” licensing practices.

“This is more smoke and mirrors from Microsoft: Offer weak concessions in an attempt to avoid regulatory scrutiny and disingenuously pretend these actions promote European competition,” she said. “Meanwhile, Microsoft continues to line its pockets at the expense of customer choice around the world.”