Introduction

The European cloud ecosystem is currently facing significant competition challenges as revealed in the first-ever competition barometer published by the Cloud Infrastructure Services Providers in Europe (CISPE). This detailed report casts scrutiny on some of the dominant providers in the market, notably Microsoft and Broadcom, whose cloud licensing models and practices have raised concerns about fairness, cost, and competitiveness across European cloud providers.

!Three professionals discuss data and global information in a high-tech conference room.

Background and Context

CISPE represents a broad coalition of European cloud providers, including major players like Amazon Web Services (AWS) and many smaller regional cloud companies. Since 2022, CISPE has been critical of Microsoft’s licensing terms surrounding its Windows Server, SQL Server, and other core software products, especially when run on non-Microsoft cloud platforms. The association argued that these terms effectively impose a "software license tax," with additional fees and technical restrictions that disproportionately disadvantage third-party hosting providers.

In response to an antitrust complaint lodged with the European Commission, Microsoft committed to developing a specialized "Azure Stack HCI Hoster Product." This hybrid-cloud solution was designed to enable European cloud providers to offer Microsoft products under commercially fair and competitive terms, including key features such as multitenancy support and pay-as-you-go SQL licensing.

However, by mid-2025, Microsoft failed to meet their delivery deadline for this solution, leading to skepticism regarding the feasibility of their commitments.

CISPE Report Findings and Analysis

The CISPE competition barometer delivers a combination of a yellow card for Microsoft and a red card for Broadcom. While Microsoft’s progress is characterized by challenges and delays, Broadcom’s licensing practices are considered significantly problematic.

Microsoft’s Licensing Challenges:

  • Missed Azure Stack HCI Deadline: Microsoft’s failure to deliver the promised "Hoster Product" by April 2025 puts the cloud ecosystem at a crossroads, delaying competitive alternatives that European providers need to keep cloud sovereignty intact.
  • Licensing Cost Disparities: Licensing costs for running Windows Server or Office on non-Azure clouds can be up to five times higher compared to Azure, creating economic disincentives for independent cloud providers.
  • Complexity in Local Hosting: The promised features like multitenancy and virtualization for European providers were technically complex and required significant infrastructure investment, which Microsoft underestimated.
  • Plan B Negotiations: Following the setback, Microsoft and CISPE are negotiating alternative commercially equivalent arrangements slated for submission by July 10, 2025.

Broadcom’s Red Card:

  • The report highlights Broadcom’s aggressive licensing terms and pricing structures that raise barriers for cloud providers and customers, affecting open competition and adoption of cloud services.

Implications and Industry Impact

For European Cloud Providers:

The lack of fair licensing options restricts market competition, driving up costs and limiting choices for customers. Smaller and mid-sized European cloud providers face disproportionate costs and technical hurdles, which may prompt them to delay modernization or shift toward less optimal hybrid solutions.

For Customers and Digital Sovereignty:

Europe’s regulatory and privacy frameworks necessitate that cloud solutions comply with data sovereignty laws like GDPR. The ability to run Microsoft workloads locally under neutral and fair terms is critical for maintaining strategic autonomy and security assurance.

For Regulators:

With heightened regulatory scrutiny under frameworks such as the Digital Markets Act, European and UK authorities are closely monitoring licensing practices and market conduct. Failed commitments and persistent licensing disputes risk triggering escalated enforcement actions or new antitrust complaints.

Technical Details

  • Azure Stack HCI: This hybrid cloud platform integrates on-premises infrastructure with Azure cloud services and was expected to enable local European providers to run Microsoft cloud workloads with features including multi-session Virtual Desktop Infrastructure (VDI) and pay-as-you-go SQL licensing.
  • Licensing Audits Suspension: As part of tentative agreements, Microsoft agreed to temporarily suspend licensing audits for CISPE members, easing one source of friction.
  • Multi-tenancy and Virtualization Support: Critical for cloud providers to offer scalable, cost-effective shared hosting services.

Conclusion

The CISPE report underscores the ongoing challenges in ensuring a fair and competitive cloud market in Europe. Microsoft’s delayed delivery of the specialized cloud hosting product leaves the industry uncertain and poses risks to innovation, customer choice, and European digital autonomy. Meanwhile, Broadcom’s licensing practices exacerbate concerns about the cloud market’s openness.

The upcoming "Plan B" proposals due in July 2025 will be crucial in determining whether Microsoft can provide commercially acceptable alternatives or face renewed regulatory scrutiny. For Europe’s cloud providers and their customers, the crux lies in achieving genuine platform neutrality where software licensing and technical capabilities foster competition rather than entrench dominance.