Cloud giants point the finger at each other during regulator hearings

Google thinks Microsoft's software licensing is impeding customer choice; Microsoft says AWS has "first mover" advantage; AWS also picks on Microsoft's licensing – but all are against remedies being applied to the cloud market that might impact themselves.

This is what can be gleaned from reading the summaries of the hearings between the UK's market watchdog, the Competition and Markets Authority (CMA), and the three big cloud operators, which don't really want to see any changes as a result of the long-running investigation into the health of the local cloud services market.

Google pitches itself as the underdog, saying in its hearing [PDF] that it agrees with the CMA's views on the broader market dynamics, and in particular the significant market power held by AWS and Microsoft.

This is because AWS and Azure make up 60 to 70 percent of the British public cloud market, with Google a distant third on a share of 5 to 10 percent. But we're still talking about a cloud company that turned over $10.35 billion of revenue globally in a single quarter this year.

The Chocolate Factory claims Microsoft's software licensing practices are significantly impeding customer choice, and that technical barriers are amplifying the effects of these practices, such that there is a risk of "irreversibly tilting the market in Microsoft's favor."

Licensing practices have been much picked over already, and basically refer to Redmond allowing customers to reuse licenses for its software products if they are run on its own Azure cloud, but requiring them to purchase a separate license for use on a rival cloud.

However, when it comes to committed spend agreements (CSAs), wherein customers get a discount for agreeing in advance to a certain level of use of cloud resources, Google says it does not believe that a remedy to CSAs is necessary, and it is "concerned about the unintended consequences of imposing a remedy."

On the matter of egress fees – charging customers to extract their data from the cloud – Google says if the CMA finds an issue in the market with these, any remedy should "only apply to cloud providers that have significant market power," meaning the other two, of course.

Microsoft is much more confrontational in its hearing [PDF], and goes as far as claiming the CMA's emerging views on the competitive landscape "disregard real world evidence that the market is highly dynamic and rapidly evolving, customer satisfaction is high, that there is fierce competition between cloud service providers which drives down prices."

Of its rivals, Redmond claims "AWS has strengths in cloud from its first mover advantage," while Google, although it has not yet acquired as large a market share, has "unique competitive advantages, such as in advertising," which allow it to offer customers ad credits at almost no cost in order to land cloud deals.

On the matter of licensing, Microsoft is dismissive, saying its rivals are "an important marketing channel," and it is "difficult for AWS and Google to argue that they cannot afford to pay for its licenses, or that Microsoft is foreclosing them, when looking at their growth and profits."

In its hearing summary, Microsoft questions how other providers would be able to validate a license that a customer wants to import under bring-your-own-license (BYOL) and confirm that one was not still being used by that customer elsewhere..

On CSAs, Microsoft says the "conceptual framework" the CMA used in its working paper is "not reflective of business reality," assuming that customers do not modernize their workloads, which would allow them to move onto other clouds. It also claims that CSAs "enable it to invest in its relationships with customers early on," and without commitments from customers, the case for making investments would be much harder.

Likewise, the software giant claims "customers negotiate on almost everything, but they do not raise egress fees as it is not a significant issue for them," meaning that Microsoft doesn't want remedial action against egress fees, of course.

Interestingly, Microsoft says it will comply with EU regulations in relation to multi-cloud, but insists it "does not see a lot of customer interest in integrated multi-cloud other than in fairly specialized situations as it is not easy or convenient for customers."

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An odd thing to say since one of the aims of the CMA's investigation is to look into whether there are barriers to operating a multi-cloud environment, and here is Microsoft basically confirming that is so.

However, the Windows maker also explains that cloud providers differentiate themselves through new products and features, and the more those are adopted by customers the greater the technical differentiation between clouds will be.

We welcome the opportunity ... to talk about Microsoft's licensing practices

Lastly, AWS says in its hearing [PDF] with the CMA that it considers competition between IT providers to be well-functioning, and that cloud services meet the needs of customers both in terms of pricing, innovation, product choice, variety, and quality.

The biggest cloud operator of all echoed Google in saying it welcomes the opportunity to discuss Microsoft's licensing practices. In its view, there is a "history of cloud providers and customers being unhappy with Microsoft's conduct," which it says "could be easily fixed."

AWS says it supports the software licensing principles proposed by CISPE, including that customers should be able to choose freely which cloud provider to use their software on. AWS is a member and backer of CISPE, a group of 27 cloud providers in Europe.

When it comes to itself, poor AWS tells the CMA that it faces competition from on-premises IT, as we reported yesterday, saying some customers are moving from the cloud back to their own datacenters.

AWS says the evidence demonstrates that "customers can multi-cloud, switch between cloud providers when they want to," despite Microsoft claiming this is not easy or convenient.

Amazon's cloud arm also claims many customers end up using Azure because they are already using other Microsoft services or due to contractual terms – implying there are barriers to switching provider.

Like its rivals, AWS doesn't want to see remedial action against CSAs, claiming this would result in less predictability in its revenue and affect how it invests for the future. It doesn't even want to see limits on their duration, claiming the benefit of them derives from a combination of the amount of the commitment and the duration of it.

It also claims the CMA is incorrect to consider that data transfer out (DTO), or egress, fees are an issue for customers switching, saying "many customers pay a higher percentage of their cloud bill on DTO fees simply because of the nature of the company and how it uses the cloud."

The CMA's proposed remedies would reduce the incentive for AWS to invest in its own network, it complains – meaning that it doesn't want egress fees to go away either.

Strange then that Google, AWS and Microsoft all made a meal out of altering egress ransoms fees earlier this year.

So there you have it. Based on the information given in the hearings, all of the cloud giants believe there is nothing basically wrong with the UK cloud services market and see no reason to change, no matter what the smaller cloud operators might say. If there is something wrong, each say it's all the fault of their big rivals, naturally. ®