CISPE and Microsoft Settlement – What Does It Mean?

If you’ve been following the European cloud market, chances are you’ve heard about the recent settlement between the Cloud Infrastructure Services Providers in Europe (CISPE) and Microsoft. CISPE, a trade association representing 27 major cloud infrastructure providers across Europe, raised a complaint against Microsoft back in November 2022. The issue at hand: Microsoft’s perceived unfair competitive advantage when customers want to run Microsoft workloads—such as Windows Server or SQL Server—on public clouds that aren’t Microsoft Azure.

This dispute was more than just a technicality or a regulatory quarrel; it showcased a complex tug-of-war between established cloud hyperscalers, compliance, competition law, and customer choice. Now that Microsoft and CISPE have come to a terms—albeit with a nine-month window for Microsoft to deliver its commitments—it’s worth digging into what this settlement actually means for hosters, cloud customers, and the broader IT ecosystem, not just within Europe but worldwide.

To appreciate the fallout from the settlement, it helps to know why CISPE took Microsoft to task in the first place. In recent years, Microsoft imposed licensing restrictions and higher fees on customers who wanted to use their own Microsoft software (such as Windows Server, SQL Server, or even Office) in infrastructure clouds—in particular, those run by so-called "Listed Providers." This category, at present, includes Amazon Web Services (AWS), Google Cloud Platform (GCP), Alibaba Cloud, and a few others.

These policies, implemented in 2019, effectively made it more expensive, cumbersome, and less practical to run Microsoft workloads with cloud providers that aren’t Azure. This shoehorned customers into Azure—or forced them to pay significant premiums elsewhere, arguably stifling meaningful competition in the European public cloud sector. For the many European hosters and service providers building their own cloud offerings or reselling third-party infrastructure, this puts them at a clear disadvantage.

So, what did Microsoft offer to resolve the dispute? The headline item is a commitment to deliver a more enhanced, optimized version of Azure Stack HCI (Hyper-Converged Infrastructure) for European hosters. There’s a nine-month timeline for these changes to take effect, and the devil—as always—is in the details. Yet, there are open questions and, frankly, some skepticism about how far-reaching and impactful these changes really are.

One notable caveat: Azure Stack HCI has been closely tied to Microsoft’s Hyper-V virtualization engine. This is a crucial technical note, since a sizable chunk of European (and indeed global) hosters and service providers have built their environments on VMware technology. The question on everyone’s mind: Will this enhanced Azure Stack HCI give VMware-centric hosters equal footing, or does it lock them further into the Microsoft ecosystem?

Licensing Costs and Program Complexity

Another burning question is whether this settlement will have any real impact on licensing costs for hosters and their customers. Microsoft’s cloud licensing policies are notoriously complex, with subtle differences between CSP (Cloud Solution Provider) Hoster, SPLA (Service Provider License Agreement), Flexible Virtualization, and other programs.

Licensing expenses often make or break a service provider’s cloud business model. If the updated programs do not significantly lower compliance burdens or expenses for European providers, the impact of the settlement may be largely symbolic, serving only to appease regulators and keep antitrust lawsuits at bay.

The CISPE-Microsoft deal is targeted at Europe. But what about hosters and customers in the United States, Asia, or the rest of the world? For many service providers, this feels like déjà vu. The U.S. market—in particular—is awash with licensing uncertainty and overlapping cloud programs.

The question many have been asking: Will Microsoft extend similar leniency or improved licensing provisions for non-European hosters? The answer, at least for now, seems to be a resounding "not likely." The U.S. cloud ecosystem remains messy, with overlapping licensing models, complex audit requirements, and little in the way of clarity or harmonization.

Furthermore, for customers running multi-cloud environments—perhaps leveraging both AWS and Azure, or mixing in local and regional providers—the lack of licensing parity and shared program rules can create massive headaches. Navigating these pitfalls often requires specialized expertise (or costly consulting), leading many to ask whether such settlements are enough to address the root causes of market distortion.

During a recent conversation with a seasoned European hoster, the elephant in the room was addressed: What about the “Listed Providers”—namely, AWS, Google, Alibaba, and a select few others? The answer is that Microsoft, despite the settlement, is unlikely to give these hyperscalers more favorable terms for running Microsoft workloads. The restrictions and premium surcharges will likely remain, serving to maintain Azure’s competitive edge.

So, for most enterprise customers, businesses find themselves forced to make tough decisions:

• Commit more deeply to Azure for Microsoft-centric workloads,
• Pay significant premiums to run those workloads on AWS, Google, or Alibaba,
• Or attempt to leverage one of the smaller regional or European providers, who themselves are still sorting out the specifics of these new programs.

In many cases, the choices are unappealing, and the market remains fragmented.

For more than two years, Microsoft has been actively courting hosters and service providers through a patchwork of programs and initiatives. From Azure Stack (hardware and software that enables Azure services in local datacenters) to CSP Hoster to Flexible Virtualization, Microsoft offers ostensibly flexible options to partners and customers alike.

However, beneath the surface, the increasing complexity of licensing terms and program rules has left many partners and customers frazzled. Let’s break down why:

Key Issues for Hosters:

1. Tracking What’s Installed:

How can you, as a hoster, know precisely what’s deployed in your environment? Many programs (like SPLA) require monthly reporting and license purchasing, but mistakes can lead to costly true-ups or audits.

2. Varying Use Rights:

Microsoft licensing use rights and rules aren’t uniform. For example, Flexible Virtualization may allow customer-owned licenses to be used, but only with active Software Assurance (SA), and it typically still requires Client Access Licenses (CALs). CSP Hoster, on the other hand, bundles licensing but under different cost models.

3. Software Assurance Tracking:

Flexible Virtualization requires active Software Assurance for certain products. Ensuring you’re always in compliance, that customers’ agreements don’t lapse, and can be administratively overwhelming.

4. Audit and Compliance Clauses:

Does your customer agreement clearly spell out the procedures and liabilities in case of a Microsoft licensing audit? Vague language can expose both you and your clients to significant risk.

5. Cloud Provider Cost Analysis:

In an increasingly hybrid and multi-cloud landscape, are you certain which provider is most cost-effective for your scenarios? Each has its own nuances, so evaluating TCO (Total Cost of Ownership) is now a moving target.

6. Multiple Agreement Types:

It’s not uncommon for end customers to have numerous concurrent agreements—CSP agreements, Enterprise Agreements (EA), SPLA via the hoster, Open Value, and PAYG (Pay as You Go) directly with publishers. Are you tracking all these consistently? Are you sure there aren’t overlaps—or worse, inadvertent noncompliance?

While the headlines are dominated by CISPE’s negotiation success, my blunt recommendation is this: Focus on your own house first. Microsoft’s programs and regulatory decisions will continue to change, but ensuring you have clarity over your licensing footprint, compliance position, and customer contracts will always pay dividends.

Here are some actionable steps to take now:

• Inventory Regularly: Utilize tools or third-party auditing platforms to ensure all instances are tracked and licensed monthly. I recommend using Octopus Cloud’s tool for accurate, automated tracking.
• Educate Teams: Stay current on Microsoft’s (and other publishers’) program changes. Consider certification or workshops for staff.
• Review and Update Customer Agreements: Particularly the sections on self-reporting, compliance, and audit rights.
• Renew and Monitor Software Assurance: Help your clients keep their Software Assurance active if necessary for Flexible Virtualization or similar programs.
• TCO Analysis Tools: Invest in or develop tools to compare scenarios between providers for both yourself and your clients. Don’t assume one cloud is always cheaper.
• Participate in Communities: Sharing scenarios, audit stories, or program strategies with peers can help collectively reduce risk and confusion.

To help navigate these complexities, we’ve built a new community at Octopus Cloud’s Community for European and global service providers. Here, you can exchange best practices, ask questions, share real-life scenarios, and stay ahead of the curve on cloud and software licensing developments.

While the CISPE-Microsoft settlement is a step forward for European cloud competition, it’s not the final word. The industry remains in flux, and the lion’s share of responsibility still falls on service providers and enterprises to master the intricacies of cloud licensing. By focusing on compliance, transparency, and customer education, you can be better prepared for whatever regulatory (or vendor) changes come next.