Exclusive Google Cloud dangled hundreds of million of euros worth of financial incentives to ally itself with an association of European cloud providers that had lodged a complaint against Microsoft, according to confidential documents seen by The Register.
Amit Zavery, the former Vice President of Google Cloud Platform, presented to a selection of members of the Cloud Infrastructure Service Providers in Europe (CISPE) trade body, then to the board and finally to the entire organization, according to sources that asked to remain anonymous.
Microsoft wasn’t CISPE’s only suitor – it seems Google was willing to pay for its views on cloudy licensing to prevail
In the presentation, seen by us, Zavery offered to provide a Members Innovation Fund of €4 million, which Google described as €100,000 per member to be used as “immediate funding for projects and license fees of CISPE members to support innovation in open cloud ecosystems.”
CISPE actually has 36 members now, including Oxya, Leaseweb, UpCloud and AWS – the latter being the only non-European participant. The number has grown from 27 in July.
Google also offered to contribute an additional €10 million to the trade association, described in the presentation as “participating and membership resources.”
The final and most substantial incentive was €100 million of software credits of Google Distributed Cloud – effectively free software for Kubernetes-based cloud deployments.
According to a Google spokesperson, the offer was €100 million spread over five years.
Under the title “Considerations,” Google’s presentation states: “Members Innovation Fund and software platform would be available to current CISPE members; provided, the organization remains unrestricted in its ability to promote and advance the Fair Software Licensing Principles.”
The Register understands, based on conversations with CISPE sources, this was intended to convince the group to “carry on the complaint” against Microsoft over licensing, a policy which makes it inordinately more expensive to run Microsoft software in third party cloud infrastructure. The complaint was filed by CISPE in November 2022.
Google denies the two were linked.
Despite these advances from Google, CISPE opted to settle the dispute with Microsoft, understood to include a payment of between €10 million to €30 million; and Microsoft is working on an enhanced version of Azure Local (last week rebranded from Stack HCI) for CISPE members that includes features Microsoft customers use today.
Azure Local is designed to be an enterprise product for larger organizations that want to create a private cloud in their own infrastructure using Azure Local. It is a multi-tenant, multi-service environment and Microsoft has until April to get it up and running. It is being trialled by CISPE members now, we understand.
“It’s been a long battle [with Microsoft] and CISPE members are tired and want to have something to solve the [licensing] problem rather than more war, which is what Google was offering,” said a well placed source in CISPE. “There has to be recognition from Microsoft that mistakes were made – on purpose or otherwise – that limits European players.”
Instead, Google joined a trade group, the Open Cloud Coalition, comprised mostly of relatively small UK cloud providers and one based in Spain.
This may well be used to lobby officials in the UK’s Competition and Markets Authority, which launched an ongoing probe into the health of the local cloud market last year, as well as the antitrust authorities in the European Commission that in September received a complaint from Google over Microsoft’s alleged anti-comptitive cloud software licensing dominance.
Microsoft previously described OCC as an “astroturf group organized by Google… designed to discredit Microsoft with competition authorities, and policymakers and mislead the public.”
For its part, OCC says its mission is to: “advocate for open standards and eliminate restrictive licensing and other barriers that stifle competition and innovation; collaborate with policymakers to shape fair regulations and build a solid evidence base for a competitive cloud market”; and “ensure governments support diverse cloud providers, policies that improve security and reliability, and stimulate innovation.”
Google is concerned that as more customers opt to ditch their own datacenters in favor of using infrastructure provided by cloud providers, Microsoft will convert its on-premises customer base into Azure license payers.
McKinsey research reckons 68 percent of businesses are running fewer than half of their workloads in the cloud, and so the race is on between the three hyperscalers to convince those customers to be the infrastructure of choice.
Microsoft may have paid off CISPE, or so the argument goes, but the majority of the market is still dominated by AWS, Microsoft and Google, and in this area the software licensing policies from Microsoft are still said to be unfair.
Microsoft charges customers four times more to license some of its wares, Windows Server for example, in non-Azure clouds. This was based on changes Microsoft made in 2019. Google hasnt been backwards in calling out what it sees a customers being forced to pay a Microsoft “software tax.”
A spokesperson at CISPE told The Register today: “I can confirm that the CISPE members were presented with alternative options to accepting the Microsoft deal. I cannot reveal any of the terms. However, the members voted by a significant majority to accept the Microsoft offer which, in their view, presented the best opportunity for the European Cloud sector.”
Amit Zavery, the former Vice President at Google Cloud Platform, who last month left to become the chief operating officer at ServiceNow, was previously asked on a press conference call in September if Google had offered to pay to keep the CISPE complaint against Microsoft running.
“We basically work with many vendors to provide them support, to continue advocating for fair and open license practices. And we believe in that philosophy, and we do continue supporting that so if there are vendors out there who require that support, we continue to help them to have the latest technology and choose what technology they want to use and pick whatever makes sense for them.”
A senior Google communications professional then stepped in during the conference call to add: “Yeah, I’d answer more directly, no we did not”.
Google told us today: “Google Cloud has long supported the principles of fair software licensing. We were having discussions about joining as a member to help CISPE continue to fight against anticompetitive licensing and promote choice, innovation, and the growth of the digital economy in Europe.”
In Q2 this year, Synergy Research told us, the cloud infrastructure market in Europe generated $16 billion in spending. AWS had a market of 32 percent, Microsoft took 26 percent, and Google 15 percent. ®