Amazon Web Services (AWS) has claimed that around half of Microsoft enterprise customers would migrate away from the provider if licensing costs enabled it.

In the latest documents submitted as part of the UK's Competition and Markets Authority's investigation into the cloud services market, AWS, Microsoft, and Google's "response hearings" have been summarized.

As first reported by The Register, AWS has hit out at Microsoft's licensing practices, claiming that "perhaps 50 percent of those workloads currently running on Azure would move elsewhere if it was economically feasible."

The CMA's investigation into the cloud services market has been ongoing since October 2023, and set out to see if there were elements of cloud service providers' offerings that had an "adverse effect on competition" (AEC).

Earlier this year, the CMA provisionally concluded that some AECs are arising from features of the market, ultimately calling for greater investigation into both Microsoft and AWS to decide if the companies have "strategic market status."

The CMA has since held "response hearings" with the big three cloud providers.

Beyond alleging that Microsoft customers are more or less being held hostage, AWS' summary sees the company argue against a lack of competition in the market, stating that its own market share has "fallen significantly and continues to decline," and reiterated its previous stance that its competition is also with on-premises solutions, giving the CMA "examples of customers switching to on-premises from cloud."

On the impact of AI, AWS said that "there is no separate market for high-end AI compute, but that AI is fundamentally compute, storage, and network, which are the foundation of cloud."

The cloud giant further suggested that AI could even reduce the cost of switching, and that the company does not know "how successful AI is ultimately going to be," but that it is driving competition, including with providers of on-premises technology, and many seeking to use large GPU systems choose providers other than AWS.

The company also argued that "it does not impose technical barriers which affect switching or multi-cloud. Its core services are fundamentally interoperable, and it has made significant investment into tools to enable and facilitate switching and multiclouding."

It was during the licensing section of the discussion that AWS turned on Microsoft, arguing that the latter's practices were "harming competitors" without a "credible justification."

"AWS said that it has customers who run Microsoft workloads and software on AWS, but many more are running these in Azure. It said Microsoft software can be run anywhere, including on-premises, but the pricing mechanisms implemented by Microsoft make it economically unfeasible for customers to run workloads elsewhere than Azure. AWS stated that it cannot offset all those costs in a profitable way."

The cloud giant concluded that it believes Microsoft should be required to make contractual changes so that the company cannot "discriminate based on which cloud customers use its software on."

Notably, AWS warned against "SMS designation," for which it is also currently being considered, arguing that customers do not want to wait for that designation for Microsoft's licensing practices to be changed.

Microsoft, meanwhile, unsurprisingly denied that there was a competition issue in the cloud services market, arguing: "AWS and Google are well placed to compete effectively for customers that are increasingly looking to use AI," adding "[the company] is not foreclosing its rivals partially via licensing practises and that any regulatory intervention in this area could have a negative impact on a dynamic and developing market which does not have tipping points or network effects."

Microsoft particularly noted Google's strength in meeting AI needs for customers, questioning the CMA's decision not to include Google in its investigation into SMS designation, adding: "UK IaaS market shares understate Google’s competitive significance and the CMA should place more weight on capital expenditure."

On the company's licensing practice, Microsoft described the CMA's provisional findings as "vague" in not explaining which workloads are impacted and why Google and Amazon are supposedly unable to compete, adding that "looking at breadth of margins and the revenues, Amazon and Google are doing well. Both companies have made significant capital investments, comparable to Microsoft’s."

Finally, in Google's response hearing, the company affirmed the CMA's provisional findings, saying it was right to find that "Microsoft and AWS have significant market power in the cloud market in the UK on any metric, well ahead of other providers," adding "it did not expect the market structure to change any time soon and that any remedies should apply to Microsoft and AWS."

Google, similarly to AWS, reiterated its experience that Microsoft's software licensing restrictions are harming competition and customers in the UK, adding that the company "has a strategy of leveraging its dominance in software to unfairly gain control of a large part of the cloud market."

Google further argued that data center capacity is the "best predictor for forward-looking market shares" and said that Microsoft has the largest data center capacity in Europe, which reflects that its growth is faster than both Google and AWS.

The company said that "Microsoft would likely dominate cloud in five years’ time if nothing changed in the market."

Overall, Google approves of the CMA's proposed licensing remedies. On a move to get rid of egress fees, "Google agreed that any egress remedies should be limited to AWS and Microsoft and that this would change the commercial conditions for the rest of the market, such that smaller providers would have to follow," though it opposed a total ban.