EU cloud competitors: Microsoft’s price increases amount to blackmail

The Association of Cloud Infrastructure Services Providers in Europe (CISPE) reacted with outrage to the renewed price increases that Microsoft put into effect on April 1 for cloud-based services such as Azure, OneDrive and MS 365, including teams for business customers. CISPE Secretary General Francisco Mingorance sees the initiative as a sign that the US company now has so much market power that it can “raise prices knowing that customers have no choice but to pay”. The industry representative, who used to be with the Microsoft-friendly Business Software Alliance (BSA), also accuses the software group of trying to “anticipate competition law investigations at EU level” with private agreements.

At the same time, Mingorance welcomed the fact that the Federal Cartel Office initiated proceedings against Microsoft at the end of March. It wants to check whether the company has “outstanding cross-market importance for competition”. Should this turn out to be the case, the authority could in future take up and prohibit any anti-competitive behavior at an early stage. Microsoft justifies the increases announced at the beginning of January with the exchange rates. Ultimately, corporate customers in the euro area now have to pay eleven percent more. The group had increased the costs for the MS 365 office package by up to 25 percent just last year. Microsoft also plans to adjust prices twice a year to fluctuate exchange rates.

European cloud providers have long accused the competitor of severely restricting market competitiveness. Andreas Thyen from the provider LicensingDirect describes it as remarkable that classic software licenses as well as hardware and offers for private customers have not been affected by the moves so far. Here the legal disputes up to the European Court of Justice (ECJ) and the Federal Court of Justice (BGH) are still bearing fruit, which made today’s used market in this sector possible.

Thyen also refers to a “Handelsblatt” report, according to which the extent of the price increases for Microsoft subscriptions has now reached a level that is causing displeasure even among CEOs. Customers whose subscription contracts expire at different times would be confronted with increases of 30 to 40 percent, as negotiation consultant René Schumann reports. In many places, this leads to sheer horror. For a larger medium-sized company with a turnover of one billion euros, an increase of 6 million euros would have to be expected, assuming annual costs of 20 million euros for Microsoft products. We’re talking about a stranglehold on the software giants.

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Thyen also sees a “rude awakening from the cloud dream” linked to the latest reactions. For a long time, customers suppressed the negative effects of subscription and cloud models and gave little thought to the “lock-in effect, loss of data sovereignty and unilateral price increases”. In addition, there is the “aggressive behavior with which Microsoft implements its conditions”. State intervention alone is not enough. Customers would also have to “take on more responsibility themselves” and weigh up carefully whether buying software and running it on their own computer systems would make more sense and be more profitable. At the same time, this enables them to exploit the advantages of the market for used software.


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