By Ryan Triplette, Executive Director, Coalition for Fair Software Licensing
This month, Microsoft changed the licensing terms for some of its most widely deployed software offerings. Microsoft first committed to change its terms in May of this year, seeking to address complaints lodged in both public and official forums by a growing chorus of companies and organizations in the European Union. Despite Microsoft’s repeated promises to “give customers more flexibility and choice,” these changes fail to address one of the biggest problems facing customers for the last three years: the use of software licensing terms to dictate which cloud providers customers can use, limiting choice and increasing costs.
From its inception, the cloud has allowed customers to freely bring the on-premise software they already own to whatever cloud providers they choose to best meet their business needs. This allowance, called, “bring your own license,” drastically reduced friction across customers’ cloud migration strategies.
In 2019, this freedom and flexibility ended. Rather than compete on the merits, Microsoft instituted a series of changes that made it more difficult— and expensive—for customers to bring their previously purchased Microsoft software to cloud providers other than Azure, specifically creating a new subset of Listed Providers which included Microsoft’s direct competitors in the cloud. As a result, customers had to navigate a web of deliberately complex and unfair licensing terms to determine the damage to their bottom line and digital transformation plans. Enterprises that purchased licenses for software such as Microsoft Windows Server, Windows Desktop, and Office were either prohibited from running the software on other cloud providers, or forced to purchase additional costly licenses. The message to customers was clear: Use Azure or pay more for your existing software.
In the years since, a growing number of companies and organizations—which the Coalition for Fair Software Licensing recently joined—have begun to work together to address the impact of restrictive and aggressive licensing practices. While Microsoft’s 2019 roll-back of cloud flexibility may have sparked the call to action, the effort and the solution presented is much broader; namely, for customers, partners, and providers alike to adopt the Principles of Fair Software Licensing to protect customer flexibility and choice in the cloud.
When Microsoft President and Vice Chair Brad Smith acknowledged problems with the company’s software licensing practices, he stated that the company’s goal was to “turn a long list of issues into a shorter list of issues.” But instead of addressing calls to adopt the Principles of Fair Software Licensing, Microsoft’s proposed changes add new layers of complexity, implementing even more programs and limitations that customers and providers alike are still struggling to comprehend. Simply put, Microsoft is creating two classes of cloud customers – one which are allowed “bring your own license” and another restricted from using the cloud provider of their choice. Despite promising to “give customers more flexibility and choice,” the new changes leave the majority of Microsoft’s software customers who have chosen not to use Azure in the same position they were in before.
The cloud offers unbelievable potential to transform nearly every industry. Software providers should be identifying opportunities to reduce barriers to digital transformation, enhance interoperability, and support budget efficiency for their customers. In the weeks since the changes took effect, though, we have not heard any organization state that the changes will provide them with either the flexibility, choice, or cost efficiency they need to realize the full potential of the cloud—and certainly not what they enjoyed in the pre-October 2019 world. For these reasons, we believe that organizations should remain wary of what the latest round of licensing changes mean to them and call for Microsoft to adhere to the Principles of Fair Software Licensing in their licensing negotiations.
If you have any questions about what these changes mean to your organization or would like to learn more about the Principles of Fair Software Licensing, please contact our team at [email protected].