Accusations against Microsoft's cloud: "Then other competitors disappeared"

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Amit Zavery is Vice President and Head of Platform at Google Cloud. Before his job at Alphabet's cloud subsidiary, he worked in management at Oracle.

In an interview with heise online, he discusses the current situation for enterprise customers who want to host their Microsoft apps outside of Azure, why the topic is still barely being addressed and why Google is also supporting smaller providers.

heise online: Let's imagine I'm a corporate customer who currently intends to switch to the cloud with my Office app installation, but doesn't necessarily want to go to Microsoft Azure. What can I expect?

Amit Zavery: Let me give you a practical example. A high percentage of workloads in companies are built on Microsoft systems. Windows Server is the underlying operating system, for which I have bought the licenses, plus the respective apps. If one day I say I want to move to the cloud and it's not Microsoft's Azure, I have a problem.

Microsoft doesn't allow me to easily use the existing Windows server licenses to run them on the Google Cloud Platform (GCP) or on our competitors like Amazon Web Services (AWS). I then practically have to buy these licenses again and pay a high penalty fee. At the same time, if I run my Microsoft applications on third-party clouds, I will have plenty of problems with software updates and security updates.

So Microsoft is basically forcing me as a new cloud customer to take the Windows Server license and move to Azure because that's the only way to do it without penalty. The result is that most companies simply go straight to Azure.

Without Azure: higher costs, greater risk

Can you specify the penalties in more detail?

For Windows server licenses, this can be double to five times higher. The cloud providers naturally try to subsidize this, but then the business is hardly worthwhile. There is also another problem: updates for security vulnerabilities, which are known to occur frequently with Microsoft products, are first available to Azure customers. People naturally ask themselves: "Why should I take a risk and pay more at the same time?"

Is there a technical reason why Microsoft prefers Azure?

The software that would run on GCP is the same. There is no difference in the bits. There are no technical limitations. The only problem is the license terms.

So why does Microsoft do it?

The answer is simple: because they can. So why shouldn't they do it? And Microsoft's three biggest competitors are particularly affected: GCP, AWS and Alibaba. This is pure arbitrariness.

If you ask anyone at Microsoft why they're doing this, they'll tell you behind closed doors that they're doing it because no one is stopping them. It gives them the opportunity to move their Azure business forward without any restrictions. They're making a lot of money, their market share has increased significantly, they're growing faster than the market.

But not everyone is using Microsoft.

On the corporate side, there are two parts of the cloud business. Digital native companies that don't have legacy Microsoft products pick the best cloud and that's usually AWS or GCP. But when you talk about enterprise customers that have been committed to Microsoft products for a long time, unfortunately the market share in that space is going increasingly to Azure because that's the path that Microsoft is forcing.

"The second step is to raise prices"

This is all reminiscent of times long past, when Microsoft used its monopoly position in the PC market with Windows to push through its Internet Explorer browser, for example. Do you have the feeling that the same thing is now happening in the cloud sector?

100 percent. I think that several things are happening in the cloud sector. Firstly, competition is being prevented and customers have less choice because their preferences are set from the outset. The second issue is bundling, Microsoft is selling packages and stuffing more and more into them.

If you look at Microsoft 365, for example, it's no longer just a simple productivity package. It also offers security, video conferencing and much more. More and more products are being combined so that customers can then say: "Hey, we've licensed all of this. Why should we opt for another provider like Slack when Teams is one of them?"

In the second step, the prices for these initially so advantageous packages are then increased further and further. But then the other competitors have disappeared, so you really have no other choice. You have to pay more and more money to Microsoft because they are then the only provider in the area.

The European Commission has started to regulate the so-called gatekeepers, which include Google, Apple and others. There is a threat of billions in fines, for example, for app store monopolies. In your opinion, are the regulators currently blind when it comes to the cloud?

In my opinion, the EU is still in the process of understanding and grasping the cloud market. From the outside, it may look like there is competition here. However, I don't believe that the regulator has sufficiently recognized that the purchasing behavior of traditional companies in the IT sector is very different from that of digital native companies. This is because a Microsoft monopoly of on-premise is directly linked to the cloud. These are not two different segments. There is a direct connection!

The problem is that even if the competition authorities begin to understand this, they may be too late to do anything about it. Unfortunately.

"We may be number three in the market"

Google itself is a powerful company that is itself in the spotlight of the monopoly watchdogs in many areas. Can you be at all credible in the cloud sector with your commitment to competition?

The cloud business is an entirely different business to the consumer business with Google Search, for example. I can't tell you much about this area, it's not my focus. But we are not huge in the corporate customer business. We are perhaps number three and the gap to Microsoft Azure and Amazon's AWS is considerable.

Secondly, this is not just about Google. It's about ensuring competition, enabling people to find a cloud provider they like - and not forcing one on them. This information should reach people.

In this way, we are also helping cloud providers that are smaller than us. Google has long been committed to open standards in this area - think of the open-source Google invention Kubernetes, for example, which now forms the basis for many cloud applications. We want cloud software to be like desktop software, it should run on any server. We don't need special treatment.

"The AI market is heavily dependent on the cloud"

The increasing use of large language models and other AI applications requires enormous server resources. Microsoft provides Azure for OpenAI, for example, which is worth billions. What could it mean for the entire AI business if Microsoft continues to act as you accuse the company of doing here?

I think that if customers and providers lose choice and flexibility, innovation will suffer. Nobody will invest if they can't really win over the market on fair terms. And of course, the AI market is heavily dependent on the cloud. The reason AI has become a reality at all is because we have cloud providers that can scale and provide large capacity globally whenever it is needed. If Azure wins here, we'll go back to a single provider market for the cloud.

The interview has been edited and shortened for better readability.

(mki)