The cloud capitalists are fighting

Today: Google takes a shot at Microsoft, promising signs for enterprise tech infrastructure in Africa, and the quote of the week.

a boxer gets ready to enter the ring
Photo by Attentie Attentie / Unsplash

Welcome to Runtime! Today: Google takes a shot at Microsoft, promising signs for enterprise tech infrastructure in Africa, and the quote of the week.

Lock them up

As growth-oriented cloud providers like to remind us, there are still an enormous amount of companies running tech infrastructure the way they always have, in their own data centers using self-managed enterprise software. Microsoft and Oracle dominated that era of enterprise IT, and according to Google, they're trying to hold on to those customers a little too tightly.

On Wednesday Google filed a complaint about Microsoft and its enterprise software licensing practices in response to an invitation from the Federal Trade Commission, which is on a bit of a tear through Silicon Valley these days. The complaint also mentioned Oracle, according to CNBC, but focused on Microsoft's Windows Server and Office 365 franchises and the "complex web" of licensing practices Google said were designed to make it harder for customers of those products to run them anywhere but Azure.

  • Google's Amit Zavery has been trotting out a version of this argument for several months alongside an investigation by the European Commission into Microsoft's licensing practices.
  • "They are leveraging a lot of their dominance in the on-premise (sic) business as well as Office 365 and Windows to tie Azure and the rest of cloud services and make it hard for customers to have a choice," Zavery told Reuters in March.
  • Microsoft offered to change some of those policies last year but it wasn't enough for a group of cloud providers in Europe that had complained about the practices, and a recent attempt to settle the dispute fell flat.
  • “With overly complex agreements that seek to lock in clients to their ecosystems (companies such as Microsoft and Oracle) are not only forcing customers toward a monolithic cloud model but also limiting choice, increasing costs for customers, and disrupting growing and thriving digital ecosystems in the U.S. and around the world," Google said in its letter this week, according to CNBC.

The foundation for this dispute started to come into focus in 2019, as Microsoft customers approached the January 2020 end-of-support deadline to upgrade an ancient version of Windows Server.

  • Companies that had been thinking about using cloud services but had yet to take the plunge were now starting at a hard deadline, and salespeople for all three cloud providers spent a lot of time that year trying to win their business.
  • But Microsoft made it very clear that Windows Server users will spend way more money if they choose AWS (or Google) for those workloads.
  • Customers moving those workloads to Azure can be eligible for the "Azure Hybrid Benefit" program, which is essentially a huge discount for existing Windows Server or Azure customers.
  • "Other cloud service providers may claim to have similar savings to the Azure Hybrid Benefit, but you'll need to repurchase your Windows Server license on those clouds," as Microsoft explains the situation to customers in its own marketing materials.

And that's the heart of Google's complaint: licenses for on-premises software that are otherwise in good standing can't be transferred to a Microsoft cloud rival, but will be accepted on Azure. The question is whether Microsoft should be forced to allow customers of on-premises software with current licenses to run it wherever they like.

  • "That's the big, big problem for many enterprises today where they can't bring their licenses wherever they choose to," Zavery told The Register last month. "There is nothing technically preventing that from happening either," he said, given that all that software runs on industry-standard servers available on all clouds.
  • It's not clear how many people actually want to do that, however; a lot of Windows Server customers might think it makes sense to move those workloads to a Microsoft-owned cloud for continuity and support.
  • But in 2019 AWS said it was actually running more Windows workloads on the cloud than Microsoft.

The FTC has a lot on its plate right now, and cloud competition probably isn't at the forefront of those concerns.

  • Google's letter resurfaces one of the oldest debates in enterprise software, the extent to which vendors are allowed to "lock" customers into their products.
  • The complexity of building modern tech infrastructure means that once you've done it, the incentives to do it all over again with a different company are hard to find.
  • But there are incentives, and then there are barriers.
  • Some CIOs I've spoken with over the years swear up and down they'll never allow themselves to be locked in by a vendor again, while others don't quite get the fuss.

There's only one way to settle this: Satya vs Sundar in a cage match.

Spinning up

Africa has been an afterthought when it comes to access to cloud computing. AWS and Microsoft operate a region in South Africa, and Google plans to launch one there soon, but that's just one tip of a massive continent.

Semafor reported this week that African companies are taking the matter into their own hands, with plans to launch up to 30 new data centers this year alone. A lot of that investment has gone to countries like Nigeria, Egypt, and Morocco, but now data centers are springing up in places like Ethiopia, Congo, and Uganda.

Localized data centers will also give Africans more control over their personal data, which for the most part is stored overseas. But the long-term economic benefits of making fast state-of-the-art tech infrastructure available to local businesses could be immense; just look at what happened around the rest of the world.

Quote of the week

"I’m a Midwestern Jew, I think that fully explains my exact mental model, very optimistic and prepared for things to go super wrong at any point." — OpenAI CEO Sam Altman, as told to Time.

The Runtime roundup

IBM is finalizing a deal to buy Apptio from Vista Equity Partners for $5 billion, the Wall Street Journal reported late Friday.

The Biden administration is looking into ways to corral the growth of Chinese cloud computing companies like Alibaba, according to The New York Times.

Microsoft's cloud division is full of unhappy campers after months of slowly materializing layoffs and salary freezes, Business Insider reported.

Thanks for reading — see you Tuesday!

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