Leaving Microsoft, 3/7: licences shape the cloud choice

To examine competition in the cloud, British investigators posed an unusual question: what would Microsoft have to pay for the software its Azure customers use if it faced the same terms it sets for Amazon or Google? They took observed usage, applied the prices in the competitors’ contracts, then compared that hypothetical cost with Azure customers’ spending on software licences. The calculation appears in the Competition and Markets Authority’s final report of 31 July 2025. ^{[1] [8]}

The exercise exposes Microsoft’s distinctive position. It sells software needed for certain cloud services and operates its own cloud, Azure. Amazon and Google can therefore be its competitors for hosting an application and its customers for the rights to the software that runs it. The CMA concluded that Microsoft’s licensing practices weaken their ability to compete for these workloads. Microsoft disputes that conclusion. ^{[1] [14]}

For a public administration, this dual role has a practical consequence. Software selected years earlier can still influence the choice of a hosting provider. After examining operational dependencies and the contracts that establish them, this third instalment follows usage rights into the data centre. Changes made during 2026 are part of the story: several options have opened up, each within a defined scope.

Software travels with conditions attached

Consider a hypothetical application used to administer a public service. It relies on a SQL Server database installed on a Windows Server virtual machine. SQL Server organises the data; Windows Server is the operating system on which it runs in this example. The virtual machine provides a computer defined in software, hosted on a physical server. The CMA examines precisely this combination in its licensing analysis. ^[8]

The IT team wants to move the application. It must check that the service can work at the destination, with its data, access permissions and connections. It must also establish the right to run each piece of software there. Microsoft’s universal terms make the customer responsible for compliance with its licence agreement wherever the hardware is located. They set specific conditions for using machines managed by a third party. ^[2]

Bring Your Own Licence, or BYOL, means using licences the customer already holds with a hosting provider. Several mechanisms fall under that description, with eligibility depending on the product and the coverage purchased. Software Assurance adds new-version rights and other benefits to a licence for the duration of the coverage. Certain subscriptions provide equivalent rights. A perpetual licence may continue to permit its underlying use after that coverage ends, while benefits requiring active coverage expire under their respective terms. ^{[4] [6]}

This explains why saying “we have already bought the software” still leaves work for the buyer. The team needs to identify the version, licence type and rights that remain active, then check them against the proposed service. The money already spent and the ability to deploy elsewhere answer different parts of the question.

Three destinations for the same application

On Azure, Azure Hybrid Benefit lets customers make use of eligible Windows Server or SQL Server licences with active subscriptions or Software Assurance. For Windows Server on an Azure virtual machine, Microsoft describes a benefit covering the Windows licensing component; compute resources remain chargeable. The terms and required quantities depend on the product and service. Existing entitlements can therefore make Azure financially attractive to a customer already using Microsoft’s software. ^[7]

Another route is available through an Authorized Outsourcer, a category defined in Microsoft’s terms. Since October 2022, Flexible Virtualization Benefit has allowed eligible software to be used on these providers’ dedicated or shared servers, with active subscriptions or Software Assurance. Windows Server is included. The product’s licensing obligations continue to apply, including requirements governing the resources covered and access rights. ^{[2] [4]}

The definition of the hosting provider matters. An Authorized Outsourcer must fall outside the Listed Providers category and must not use one of those providers as a data centre provider for the service. Microsoft’s published list comprises Alibaba, Amazon, Google and Microsoft itself. A European intermediary hosting the service on one of these companies’ infrastructures therefore gains no eligibility under this mechanism simply by having a European address. Azure has its own entitlements, including Azure Hybrid Benefit. ^{[3] [7]}

For AWS or Google, the two software layers in our example need to be considered separately. SQL Server may qualify for License Mobility through Software Assurance, which permits deployment with an eligible partner under the product’s conditions and subject to licence verification. Microsoft’s documentation explicitly excludes the Windows Server operating system from this mechanism: the chosen partner must provide it. In this shared-hardware example, a customer can therefore bring an eligible SQL licence while purchasing a service that includes Windows from the hosting provider. ^{[5] [8]}

Scope of the diagram

An explanatory example on shared infrastructure, based on terms consulted on 9 October 2026. The routes shown require eligible licences and active coverage as specified by each mechanism. Azure Hybrid Benefit, Flexible Virtualization Benefit and License Mobility have their own conditions; quantities, access rights and verification requirements must be checked for each product. AWS and Google are considered here as eligible partners for application server licence mobility. Historical rights on dedicated hardware, individual agreements and fully managed database services fall outside the diagram. [2] [3] [4] [5] [6] [7]

The acquisition date matters too. Changes announced in 2019 preserved certain options on Listed Providers’ dedicated hardware for licences acquired before 1 October 2019 and versions already available at that point. Upgrading to a version released on or after 1 October 2019 brings the new terms into play. That exception calls for an examination of the contract and licensing history. Extending it to newer versions would give an inaccurate picture of the available options. ^[18]

An April 2026 announcement requires similar care. Microsoft extended Software Assurance-equivalent rights to Windows Server and SQL Server subscriptions purchased through the CSP channel under the Microsoft Customer Agreement. Perpetual licences purchased through that channel remain unchanged. The word “mobility”, however, covers several rights. The Product Terms distinguish reassignment between servers in the same server farm from deploying applications with a partner. In the Windows Server table, the License Mobility entry still applies only to the External Connector, an access entitlement separate from the operating system licence. The mobility guide continues to exclude the operating system. The April announcement must therefore be read alongside each product’s specific terms. ^{[9] [6] [5]}

A rival buys part of its offering from Microsoft

Return to the British calculation. A hosting provider that includes Windows Server in its service obtains the necessary rights from Microsoft, including through a SPLA, or Services Provider License Agreement. That licence becomes a cost of supplying the service. Microsoft thus sets the terms for a component used by a competitor while selling an Azure offering that uses the same component to the end customer. ^{[1] [8]}

To examine this relationship, the CMA used data from UK Azure customers in 2024. Usage is measured in virtual core-hours, combining running time with the number of virtual processor cores. It calculated the licensing costs their consumption would incur under AWS’s and Google’s SPLA terms, adjusting the data for differences in billing and utilisation. In its comparison with Azure licensing expenditure, it included Windows Server usage covered by Azure Hybrid Benefit and SQL Server usage paid for on a consumption basis. SQL licences brought by customers follow a different route, which explains their exclusion from the latter category. Fully managed SQL services also fall outside this calculation. ^[8]

Method and limitations

Final report of 31 July 2025, Appendix T, paragraphs T.5–16, T.25, T.55–65 and T.72. UK Azure data for 2024; customers spending less than $10,000 a year are excluded from the cost and price analyses. For Windows Server, observations with positive AHB usage but zero recorded licensing expenditure are removed. The method adjusts for utilisation and, for SQL, the mix of editions. The comparison covers Windows Server AHB and SQL Server PAYG, excluding SQL PaaS. Spending data were supplied by Microsoft, which raised concerns about the AHB measure; the CMA defends its use after exclusions. Customer prices are net of discounts. The method does not observe Microsoft’s actual internal costs, and detailed price differences are redacted from the public report. The diagram explains the calculation without inventing prices or bills. [1] [8]

The significant finding concerns where the difference arises. For some products and customers, the CMA found that the price competitors are charged for the software can exceed the licensing price charged to Azure customers. It concluded that rivals pass through at least some of these costs and that Microsoft’s practices reduce competition in UK cloud markets. ^[1]

The report also contains an important qualification for buyers. For the pay-as-you-go instances selected by Microsoft, AWS’s list prices were equal to or lower than Azure’s. The CMA relates this comparison to customers without pre-existing licences eligible for Azure Hybrid Benefit. The licences a customer already holds can change the result of the comparison. Offers therefore need to be assessed against the same requirement and the same starting position. ^[1]

Microsoft put forward a different interpretation in its response of 4 June 2026. It pointed to its competitors’ growth, the changes brought by AI and what it considered the small share of their businesses accounted for by its licensing fees. It defended prices that vary with the breadth of rights granted and disputed whether regulatory intervention would improve outcomes for customers. These are the supplier’s arguments, submitted to the new British investigation. ^[14]

Detailed SPLA terms and precise price differences are redacted in the public record. Calculating a premium for an individual customer therefore requires that customer’s offers and existing licences. The report explains why two providers with capable infrastructures can make different offers to a customer seeking to keep the same software. Some of the commercial terms are set by their common supplier. ^[8]

What European hosting providers secured

The position has changed since the early complaints. On 18 July 2025, CISPE, an association of cloud infrastructure providers, announced an agreement enabling qualifying members to offer products including Windows Server and SQL Server on a pay-as-you-go basis through the CSP-Hoster programme. The association described pricing terms comparable to Azure’s and the ability to host these workloads without disclosing customer contact details to Microsoft. These benefits supplement Flexible Virtualization Benefit. ^[10]

The announced scope covered existing members and eligible European providers joining CISPE in the following months. Listed Providers were excluded. The statement provided for a review after the first year, with a possible extension of access. The documents examined do not establish that the arrangement became automatically available to every hosting provider in 2026. ^[10]

In September 2026, the European Cloud Competition Observatory’s fourth report kept Microsoft at green status in its monitoring. ECCO reported cooperation on implementing the commitments finalised in July 2025 and welcomed a change to Extended Security Updates pricing. The observatory brings together CISPE members, with customer organisations participating as observers, under the association’s auspices. Its assessment records progress against their agreement. It is separate from a competition authority’s decision. ^[11]

This development matters for European sovereignty. Better terms for supplying software their customers already use give the providers concerned a route to hosting those applications on their own infrastructure. A relationship with the software vendor remains: the available products, rights and programmes are still defined through Microsoft agreements. Greater choice of infrastructure and continued dependence on the software need to be assessed together.

Security updates move to a different pricing model

Extended Security Updates, or ESU, prolong access to certain security updates after a product’s support ends. Their commercial terms could provide an additional reason to consider Azure. For SQL Server 2014, for example, Microsoft notes that customers running Azure virtual machines received these updates at no additional cost, while those running the software on premises or in other clouds paid for them. ^[9]

On 27 March 2026, Microsoft announced the same list price across deployment locations and purchasing channels for new ESU offers launched from 1 April 2026. The announcement explicitly excluded existing offers, including Windows Server 2012, Windows 10 version 22H2 and SQL Server 2014. The April announcement for SQL Server 2016 confirms that Azure pricing is aligned with other environments. ^{[12] [9]}

This changes a specific part of the decision. For the new offers covered, this element of the list price ceases to vary with the destination. Infrastructure costs, negotiated discounts and deployment rights retain their own rules. A migration budget therefore needs dated assumptions and clearly identified versions. Reusing an older comparison that consistently presents free ESU on Azure as an advantage would misrepresent the new offers.

Two regulatory proceedings remain open

On 31 March 2026, the CMA distinguished measures taken or announced on data egress and interoperability from licensing, where it said it had found no material progress. The measures’ effectiveness in improving customer choice still needed to be assessed. That assessment preceded the investigation into Microsoft’s business software ecosystem, opened on 14 May. The investigation will determine whether Microsoft should be designated as having strategic market status, or SMS, for that ecosystem. On 9 October 2026, the official case page still showed an open investigation. Its timetable envisages a proposed decision in October, followed by a final decision no later than 13 February 2027. The timetable itself does not establish that a decision has been published. ^{[13] [15]}

In the European Union, the Commission announced its preliminary position on 25 June 2026 that Amazon and Microsoft should be designated as gatekeepers under the Digital Markets Act for their AWS and Azure services. It referred, among other things, to switching costs and the effects of their ecosystems. This stage concerns the role of the cloud platforms and is distinct from a ruling on any particular licensing clause. ^[16]

These proceedings also illuminate the difference between competition and sovereignty. Making it easier to move from Azure to AWS or Google can strengthen competition among those providers. Developing European services capable of hosting the same software adds another dimension to the choice. Maintaining or replacing the software itself requires further capabilities. Any discussion of an “exit” therefore needs to identify the intended destination.

Choosing who can run the service tomorrow

For a public administration, procurement is more useful when it describes a concrete route: this service, with these versions and licences, must be able to run with that other provider. Teams can then request the applicable terms, identify the rights they must maintain and compare offers they can actually use. The exercise brings lawyers, buyers and technical staff together around the same scenario.

Hosting security requires its own assessment. France’s cybersecurity agency, ANSSI, explains that SecNumCloud evaluates factors including operational autonomy and protection from laws outside Europe. Its requirements are designed without prescribing the underlying technologies. The agency also makes clear that qualifying a cloud offering does not establish the security level of a digital service a customer hosts on it. The qualified scope and the rights to any software brought to the platform therefore need to be established separately. ^[17]

This third instalment reveals a dependency between the software and the building that houses it. An application may be technically transferable while its destination changes the licences required. Conversely, broader deployment rights can open up hosting options while leaving the migration work to the team.

Planning reversibility means connecting these two realities. An alternative becomes usable when the organisation can both make it work and exercise the rights needed to use it. That connection gives a public buyer’s claim to sovereign choice practical meaning.

Next instalment: the business applications and procedures that keep a public service connected to Microsoft once the licensing question has been clarified.

Sources and limits of the investigation

This investigation draws on public sources consulted on 8 and 9 October 2026. The CMA’s 2025 report concerns UK markets and uses, among other evidence, data from 2024. It is not a quotation for a French customer in 2026. Redacted contractual prices prevent full replication of its calculations. Microsoft’s general terms must be read alongside the agreement, product, version and programme applicable to each customer. Announcements by Microsoft and CISPE are attributed to their authors. We conducted no interviews, audits of public administrations, migration tests or customer-specific commercial comparisons. The diagrams explain documented mechanisms. The cover is a conceptual illustration.

1. CMA, Cloud services market investigation, Final decision report, 31 July 2025. Summary, paragraphs 30–36: licensing findings; chapter 7, particularly 7.565–567: Microsoft’s PAYG comparison and the distinction from AHB-eligible customers.
2. Microsoft Product Terms, For all Software, consulted on 9 October 2026. Universal License Terms, Outsourcing Software Management and Software Assurance: third-party use, dedicated or shared hardware, customer responsibility and duration of additional rights.
3. Microsoft Product Terms, Glossary and Listed Providers, consulted on 9 October 2026. Definitions of Authorized Outsourcer and Listed Provider, and the list of entities covered.
4. Microsoft, Flexible Virtualization Benefit Licensing Guidance, consulted on 9 October 2026. Scope of the benefit introduced in October 2022, Software Assurance and subscriptions, shared hardware, Windows Server and continuing requirements.
5. Microsoft, License Mobility through Software Assurance, Application server coverage section, and License Mobility guidance, consulted on 9 October 2026. Conditional SQL Server eligibility, exclusion of the Windows Server operating system, eligible partners and licence verification.
6. Microsoft Product Terms, Windows Server, MCA programme and SQL Server, MCA programme, consulted on 9 October 2026. Software Assurance tables, equivalent subscription rights and licence reassignment. For Windows, the License Mobility entry covers only the External Connector.
7. Microsoft Product Terms, Microsoft Azure Services, EA/EAS programme, Microsoft Azure Hybrid Benefit section, and Microsoft Learn, Azure Hybrid Benefit for Windows Server, consulted on 9 October 2026. Eligible licences, active coverage and the distinction between the licensing benefit and compute charges.
8. CMA, Appendix T: Licensing analysis, 31 July 2025. T.5–16: data and adjustments; T.23–25: products and exclusions; T.34: the SQL/Windows combination; T.55–65 and T.72: comparison between hypothetical provider costs and Azure licensing expenditure, with AHB and PAYG scopes.
9. Microsoft Learn, April 2026 announcements. Announcement of 1 April on Windows Server and SQL Server subscriptions under MCA/CSP, distinguished from perpetual licences; announcement of 22 April on SQL Server 2016 ESU and the previous SQL Server 2014 arrangement.
10. CISPE, licensing reform agreement with Microsoft, 18 July 2025. The association’s account of CSP-Hoster benefits, qualifying members, the exclusion of Listed Providers and the planned review.
11. European Cloud Competition Observatory, Fourth Report, September 2026. Introduction: Microsoft’s continued green status, implementation of the agreement and ESU changes; description of the observatory’s membership and institutional affiliation.
12. Microsoft, Services: Pricing Consistency Update, 27 March 2026. A common list price for new ESU offers from 1 April 2026; explicit exclusions for existing offers.
13. CMA, Actions on cloud and business software through the UK digital markets competition regime, 31 March 2026, paragraphs 33–36. Distinction between egress and interoperability measures, effects still to be assessed, and licensing concerns.
14. Microsoft, response to the invitation to comment on the business software investigation, 4 June 2026, section 6. The company’s position on the CMA’s findings, market developments and prices reflecting different rights.
15. CMA, Microsoft’s business software ecosystem, investigation opened on 14 May 2026, page consulted on 9 October 2026. Status, indicative timetable and statutory deadline for the SMS investigation.
16. European Commission, preliminary position on AWS and Azure under the DMA, 25 June 2026. Services concerned, stated reasons and the preliminary nature of the published position.
17. ANSSI, FAQ on preparing for SecNumCloud qualification, consulted on 9 October 2026. Technological neutrality, operational autonomy, legal protection and the scope of qualification.
18. Microsoft, Updated licensing rights for dedicated cloud services, 1 August 2019. FAQ: rights preserved for certain licences and versions predating 1 October 2019, and treatment of new versions.