DMA must end unfair distortion of software licenses in cloud infrastructure markets – POLITICO


Cloud infrastructure is vital for the success of a more sustainable and dynamic European economy. It underpins growth, innovation and wealth creation in all sectors. Unfair software practices by some vendors hurt both cloud infrastructure providers and business users in Europe. The EU’s Digital Market Act (DMA) will determine the principles and processes that will shape access, use and contribution to the digital economy for decades to come. It is crucial for Europe that it gives itself the means to put an end to these practices.

Software licenses play a key role in controlling access to cloud infrastructure

CISPE, the voice of cloud infrastructure service providers in Europe, has long been concerned about the behavior of some software vendors as they seek to leverage their historic dominance to exert control over the emerging ecosystem of the world. cloud infrastructure. Users of business software, companies that buy, consume and innovate with digital technologies, represented by Cigref in France and AICA in Italy, share these concerns.

Software licenses play a key role in controlling access to the cloud. For decades, a handful of large companies that supplied the lion’s share of productivity, communications, and database software suites have wielded tremendous power in negotiating the terms of these licenses. Many abusive practices have multiplied. As companies now look to shift to the cloud as-a-service or pay-as-you-go model, those same companies are using their ability to dictate license terms to capture cloud infrastructure markets as well.

Established players, including Microsoft, Oracle, and SAP, can use unfair licensing practices to limit choice and hurt competition for cloud infrastructure services.

A new report, commissioned by the CISPE with the support of Cigref, and written by Professor Frédéric Jenny, professor emeritus at ESSEC Paris Business School and chairman of the OECD Competition Committee, finds indications that established players, including Microsoft, Oracle and SAP, could use unfair licensing practices to limit choice and hurt competition for cloud infrastructure services.

Unfair licensing practices have a detrimental effect on the European economy

Sustainable and unfair licensing practices are having a detrimental effect on European companies migrating to the cloud. Not only do they cost organizations of all sizes and across industries millions of dollars, but they stunt innovation and restrict growth. Some players intend to extend this damage as they seek to secure their own dominance in cloud infrastructure services. Money that could be spent to develop European services for European consumers is diverted into the pockets of some of the richest and largest software companies.

Typical and well-known anti-competitive behaviors clearly influence the choice of cloud infrastructure.

Old stuff, new scenarios

Typical and well-known anti-competitive behavior clearly influences the choice of cloud infrastructure. Exclusion tactics designed to limit choice by unfairly raising barriers to entry for others – include limits on interoperability, bundling and tied selling of products, exclusionary license conditions and artificially inflated migration costs. Exploitation tactics – designed to squeeze rent increases from ‘stranded’ customers – include aggressive audits and planned obsolescence requiring frequent upgrades:

The research provides preliminary indications that:

  • Microsoft is exploiting pooling tactics to win tenders (often after losing initially) by offering its own cloud infrastructure, Azure, for free with upcoming product license renewals.
  • The outcome of these bundles can result in a significant increase in costs. One respondent suggested that trying to remove aspects of cloud infrastructure and purchase the remaining products separately resulted in cost increases of up to 70%.
  • Artificially limit data portability. For example, users of a third-party technical support provider find that their ability to download data from Oracle is limited to 500 documents and that archived items must be deployed within 90 days – restrictions that do not apply if the maintenance support is purchased directly from Oracle.

Capture main applications

Equally clear is the role these software vendors play in controlling access to the cloud. Moving familiar software that is already essential for operation to cloud infrastructure is often the first step in companies’ digitization strategies. Part of the promise is to create more flexible and profitable consumption patterns. By capturing these core applications in their cloud infrastructure, legacy software companies are establishing a significant advantage. Technical, financial and resource barriers are created with unfair licenses to make it difficult to move to third-party cloud infrastructure.

These software companies are some of the most damaging gatekeepers to cloud deployment and the growth of the industry as a whole.

These software companies are some of the most damaging gatekeepers to cloud deployment and the growth of the industry as a whole. They have the power to restrict choice, distort competition and increase costs for many other players.

Professor Jenny’s research included companies of all sizes looking to digitize their operations to improve services, reduce costs, and provide choice for their customers. Its findings suggest the wide variety of unfair practices that can be deployed to deprive these customers of this choice, and therefore their consumers, of innovative and effective products.

A historic opportunity

Proving the illegality of these unfair practices requires lengthy and costly investigations under applicable competition laws. The timeframe and resources required mean that many European businesses, and in particular SMEs, will simply go out of business before any resolution – and that without the potential retaliatory measures many feared if they speak out.

DMA is a historic opportunity for Europe. But, as currently proposed, it fails to tackle the unfair practices described in Professor Jenny’s research. His research clearly shows that the unfair practices that distort the cloud infrastructure services market segment are practices of existing software vendors also offering cloud infrastructure, and not of cloud service providers as a whole. However, the scope of DMA is limited to a number of “core platform services” of very large companies. What is missing is a clear category of software “central platform service” to which the DMA obligations will apply. Therefore, market competitors and users of cloud infrastructure services will not be able to rely on DMA in its current form to prevent the abusive practices of legacy software vendors from distorting the digital marketplace.

This research highlights how certain current practices of some software vendors are clearly detrimental to the objectives of DMA. We submitted the research to the European Commission and disseminated it to several Members of the European Parliament. They must act on the basis of this evidence, and they must do so now to ensure Europe’s digital leadership.


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