Microsoft and the European Cloud Infrastructure Service Providers Association (CISPE) have been engaged in ongoing negotiations that have been characterized by “positive discussions,” a “constructive commitment,” and a “cooperative working relationship.” Despite these promising words, nearly a year has passed without any tangible progress. The main outcome has been the abandonment of the original approach, which aimed to develop a European-specific version of Azure Local tailored for Cloud Service Providers (CSPs) within Europe.
Initiation of the Project in Summer 2024
The formal process began in July 2024, following the signing of a memorandum of understanding (MoU) between Microsoft and CISPE. As part of this agreement, CISPE withdrew a lawsuit filed at the end of 2022 with the European Union. The previous complaint had accused Microsoft of imposing technical and pricing barriers that hindered the use of its software on competing cloud platforms.
This initiative centered around a dedicated version of Azure Local (formerly Azure Stack HCI), designed to replicate many of Azure’s benefits on European cloud infrastructure. The project was expected to deliver several key features:
– Multi-tenant capabilities
– Unlimited virtualization and multi-session Virtual Desktop Infrastructure (VDI)
– Pay-as-you-go pricing for SQL Server
– Free extended security updates
A Discouraging Interim Report in February
To monitor progress, a dedicated observatory was established. In February, this body issued its first interim report. The findings were disappointing; several objectives had not been met, raising concerns that alternative solutions might need to be considered to meet the nine-month deadline. Such alternatives could include “equivalent commercial solutions available through existing programs.”
According to the report, Microsoft believed that the project’s requirements extended beyond those agreed upon in July 2024. The company had called for “co-investment” and “reasonable expectations” but appeared to be asking for more than what was initially agreed. The CISPE indicated that Microsoft’s legal teams involved in product development may not have fully understood the legal requirements involved.
Although Microsoft had implemented a comprehensive testing program deemed “thorough,” participation among CISPE members was uneven. Out of about thirty companies involved, only three had fully evaluated the software, and just two had actively engaged in pilot projects. For many, access to the testing process was problematic, complicated by unclear obligations.
CISPE also raised additional concerns, including:
– A tendency by Microsoft to promote the existing Azure Local as “the” definitive solution for European CSPs
– The potential necessity for CSPs to obtain separate Azure licenses for each client
– Sovereignty issues, as the Azure portal remains the sole interface for managing services
An “Alternative Without Additional Software Development” is in the Works
The initial agreement included a backup plan (“Plan B”) should the current solution fail to meet objectives by April 10, 2025. This backup measure has now been officially activated through a “mutual agreement” between Microsoft and CISPE.
Under this plan, Microsoft is expected to present “formal proposals” by July 10, 2025, aiming to identify solutions that utilize existing programs without requiring additional software development. Discussions regarding free Extended Security Updates (ESUs), multi-session VDI, and pay-as-you-go pricing are ongoing, as confirmed by sources involved in the negotiations.
Another concern for CISPE pertains to the evolution of the Service Provider License Agreement (SPLA) with Microsoft. The association expects Microsoft to guarantee its members access to SPLA for at least five years and with “no discriminatory pricing.” However, recent developments suggest this commitment may be waning. The prices for Windows Server licenses have recently increased, yet there has been no corresponding rise in Azure’s hourly rates.
Microsoft argues that the value propositions of its cloud services and standalone software differ significantly. It further states that the hourly cost of Windows Server on Azure remains much higher than via SPLA. CISPE criticizes this stance, pointing out that price hikes within the SPLA program are not aligned with wider Azure pricing trends.
This ongoing clash reflects broader tensions about ensuring cost stability and fair pricing for European CSPs reliant on Microsoft’s services.
Published by:
Clément Bohic
