Practices under investigation reportedly include significantly raising subscription prices or charging high termination fees for customers who want to switch to another provider, and reducing the compatibility of Office 365 with competing cloud services.
The investigation is part of a broader movement led by FTC Chairman Lina Khan to build bipartisan support to address Big Tech’s influence and curb monopolistic practices in areas such as cloud services.
The FTC began its evaluation in November 2023 by requesting feedback from stakeholders such as industry, academia, and civil society across four major areas: competition among cloud service providers, single points of failure, security, and AI. Most of the feedback the committee received was concerned about licensing restrictions limiting customer choice.
A spark in Microsoft’s cloud strategy
The investigation, reported by the Financial Times, is still in its early stages, but if the FTC’s investigation becomes more serious, it is likely to have a significant impact on Microsoft’s cloud business, which has grown rapidly in recent years.
“Interoperability and concerns about vendor lock-in are important criteria for companies when choosing a cloud provider,” said Pareekh Jain, CEO of Pareekh Consulting. “This survey could have a negative impact on Microsoft’s brand image.” He pointed out. Jain added that Microsoft has faced similar scrutiny in the past regarding Teams interoperability.
This survey is also consistent with global regulatory trends. The UK’s Competition and Markets Authority (CMA) is conducting an investigation into Microsoft and Amazon based on complaints that it is difficult to change solution providers due to restrictive contract terms and high egress fees. In Europe, the company avoided a formal EU investigation by paying multi-million dollar settlements to resolve concerns of monopolistic practices raised by competitors.
Neither the FTC nor Microsoft responded to Computerworld’s questions about the investigation.
Microsoft’s position in the cloud market
Cloud computing is growing rapidly. According to Gartner, industry spending is expected to reach $675 billion in 2024. According to data from Statista, Microsoft holds about 20% of the global cloud market, coming in second behind AWS with 31% and ahead of Google Cloud with 12%.
Amid this competition, tensions between major suppliers are increasing. Microsoft has accused Google of using a “shadow campaign” to undermine Microsoft’s position through hostile lobbying.
In October 2023, Microsoft Deputy General Counsel Rima Alaili said in a statement, “Google’s astroturfing activities appear to have two ultimate goals. “By discrediting Microsoft, we are diverting attention from the intense regulatory scrutiny that Google faces around the world, and tilting the regulatory environment in favor of our cloud services rather than competing on our merits.”
AWS also accused Microsoft of anti-competitive behavior in the cloud computing sector and filed a complaint with the UK’s CMA.
These major cloud service providers have already filed an antitrust lawsuit in 2022, claiming that Microsoft is using software licensing terms to limit European companies’ choices when selecting cloud service providers for services such as desktop virtualization and application hosting.
FTC intervention and increased regulation of the cloud industry
Previously, the FTC raised legal issues regarding the $75 billion acquisition of Activision Blizzard, raising antitrust concerns regarding Microsoft’s cloud gaming business. Although a federal court allowed the acquisition, the FTC’s appeal demonstrates its continued willingness to monitor Big Tech’s market share.
Cloud computing is evolving from a simple storage solution to a core technology that supports AI model training and deployment. Microsoft, Amazon, and Google are competing in this space.
If this investigation continues, regulations on Microsoft’s cloud strategy may be strengthened. This demonstrates the FTC’s commitment to protecting competition in a market increasingly dominated by a few major companies.
“Going forward, all large cloud service providers will need to ensure that their cloud solutions are interoperable in both intent and execution,” said Jain of Parikh Consulting. “If they do not, they risk facing scrutiny that could damage their brands and businesses.” “He emphasized.
sharing responsibility
Meanwhile, it was pointed out that companies suffering from high cost burdens were also partly responsible. “Companies are happy to sign up for a discounted bundle price, but when the financial benefits end, they complain about lock-in,” said Yugul Joshi, partner at Everest Group. Joshi points out that while many companies recognize these conditions, they focus on short-term discounts and overlook long-term interoperability and freedom of choice.
“As the economic situation continues to deteriorate, pricing issues are looming larger,” Joshi said. Therefore, customers are more actively considering changing service providers to reduce costs,” he said. According to him, some customers have already switched or are planning to switch from Salesforce to the Microsoft Dynamics platform, making Microsoft the beneficiary.
editor@itworld.co.kr
Source: www.itworld.co.kr
