Amazon’s Cloud Computing Showdown with Microsoft: Who Will Come Out On Top?

According to a Bloomberg analysis, a trio of advocacy groups, led by Amazon, is actively working to hinder Microsoft’s increasing aspirations of becoming a prominent cloud computing contractor for governments.

The groups – Cloud Infrastructure Services Providers in Europe (CISPE), the Coalition for Fair Software Licensing and the Alliance for Digital Innovation – want to convince policymakers that Microsoft has wrongly locked customers into Azure, its cloud service, suffocating its competitors and preventing the technology from advancing in government and beyond.

These groups have dozens of members. But Amazon is the largest funder for two of them and the largest company that funds the other by revenue.

Spokesmen for the groups say no single company defines their agenda. But according to a Bloomberg News review of tax filings, documents and interviews with three people familiar with the group’s operations, Amazon Web Services is playing a direct role in their efforts to shape up in ways that would strengthen the cloud giant.

Through aggressive lobbying of policymakers, these groups want to ensure that customers can use popular Microsoft products such as the Office Suite or Windows on any cloud computing system — and especially Amazon Web Services, the world’s number one cloud infrastructure provider and retail giant. the best winning driver.

To summarize this message, they have filed complaints, lobbied regulators, and worked to shape the views of decision makers investigating the cloud market. In one case, an Amazon executive is listed as the author of a public comment to the Federal Trade Commission as well as testimony and letters sent to Congress on behalf of the group, according to an analysis of document metadata that reveals the tech giant’s role in the lobbying campaign. (The group says the documents reflect the consensus of its members.) Amazon denied writing the statements for the group.

“Companies in all major industries have a long history of working with trade associations,” Amazon spokeswoman Shannon Kellogg told Bloomberg, adding that AWS supports dozens of trade associations, as well as CISPE, the Alliance and the Coalition. “Our work with industry associations is entirely based on doing what’s in the best interest of our customers, and to say otherwise is completely false,” Kellogg said.

In recent months, EU and UK regulators have been investigating whether Microsoft engaged in anti-competitive behavior in the cloud market. In the U.S., the FTC is expected to release preliminary findings on Thursday from a comprehensive competitive review of the cloud computing industry — an assessment that will be influenced by Amazon both directly and through groups.

“While we invest and work to meet and exceed customer expectations, Amazon spends its time and resources creating advocacy groups to lobby the government,” said Microsoft spokeswoman Becca Dougherty.

Both Amazon and Microsoft are betting that public sector cloud computing will be the tech industry’s next big money maker: Bloomberg Intelligence estimates that the US cloud market could reach $1.3 trillion by 2027, up from $532 billion in 2022.

Microsoft has a large number of federal contracts thanks to its Office software and Windows operating system. More than 80% of federal employees use Microsoft business software. Like Amazon, Microsoft also funds outside groups that lobby decision-makers.

Meanwhile, Amazon has made inroads with government customers thanks to AWS, which companies and government agencies use to store data and run other applications. According to Gartner’s estimates, AWS has almost twice the market share in this arena as its closest competitor, Microsoft’s cloud, Azure.

Since 2016, Microsoft’s customers and competitors, as well as regulators around the world, have complained that the company is making it more expensive and difficult to run its programs and services through competing cloud providers. This locks government users into Microsoft’s cloud, even if they want to switch to Amazon or other cloud providers.

Microsoft said there is plenty of competition in the cloud computing market.

Bureaucratic red tape in the federal government makes switching cloud providers even more difficult, said Steven Weber, a professor at the University of California, Berkeley’s School of Information. “Amazon would be in a better place if there was free and open competition for cloud services,” he added.

in Europe

Since its inception in 2016, CISPE has been recognized by European cloud service providers as an effective industry advocate. According to CISPE documents, its founding members included OVHcloud, Aruba and Amazon Europe, its largest founding member by revenue. Microsoft is not a member.

CISPE members with annual revenues above $500 million, such as AWS and Aruba, pay about $30,000 in annual membership fees, according to spokesman Ben Maynard (OVHcloud is no longer a member). Because the group makes decisions on a majority basis, “it is impossible for one organization to dictate CISPE’s workflows, outputs or positions,” he added.

Amazon has committed additional funding to CISPE to fund “specific initiatives,” Maynard said, including privacy, diversity and sustainability. He declined to elaborate on whether it has given more money to those initiatives than other companies.

In April 2021, CISPE published a white paper urging Microsoft to allow its customers to use software like Office with more cloud providers.

CISPE added to the pressure the following year by filing an antitrust complaint against Microsoft with Europe’s leading competition regulator, claiming it had made it harder for customers to switch to cloud providers by tying its business software to the cloud.

By April, CISPE claimed victory and announced a potential settlement with Microsoft that would allow customers to more easily migrate to other cloud providers, including Amazon.

at the FTC

In the United States, the FTC examines whether companies operate fairly and protect customers in the cloud service industry.

In May, the FTC held a seminar as part of this review. It featured a handful of academics and experts with knowledge of cloud services, including Frederic Jenny, who presented CISPE-funded research showing that Microsoft’s practice of charging customers additional license fees to use its Windows and Office software potentially violates competition laws.

“People who are backed by big companies that have a lot of market power in certain areas that we look at have every right to comment on how we should think about those markets,” FTC spokesman Douglas Farrar said.

Amazon is also a major funder and facilitator of the Washington-based Coalition for Fair Software Licensing, according to two people familiar with the group, who would not publicly identify its members. Amazon previously said it had disclosed its stake in the group.

In September 2022, the coalition published proposed software licensing rules that appeared nearly identical to those published by CISPE the previous year. Alphabet Inc.’s Google and several tech industry-backed trade groups backed the coalition’s proposal.

Amazon is also a major funder of the Alliance for Digital Innovation, a trade group whose 27 members include Google and Salesforce; Microsoft is not a member. The alliance is lobbying the US government to move its operations to the cloud and has filed comments as part of the FTC process.

While the union has disclosed AWS’s membership, it has not disclosed that it is its primary funder, according to two people familiar with the organization.

The alliance’s messaging reflects the company’s cloud priorities, and its ranks include current and former Amazon executives. Jeff Kratz, vice president of AWS, sits on the alliance’s board. And AWS’s director of public sector policy wrote the alliance’s public comment to the FTC, as well as two letters sent by the group and congressional testimony from 2020, according to a Bloomberg analysis.

In a statement, Amazon denied any role in drafting these documents.

“Alliance policy positions and related documents are developed, written and edited by its staff,” said a spokesman for the alliance, who declined to be named. “Members have the opportunity to review, comment and contribute to the drafts, and the final products reflect this input and the consensus positions of our members.”