June 30, 2022

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Microsoft responds to European Cloud Supplier suggestions with new applications and ideas

You will have learn final month in information reviews about considerations raised in Europe about a few of Microsoft’s software program licensing practices that affect competing cloud suppliers. As I stated to journalists then, we felt that “whereas not all of those claims are legitimate, a few of them are, and we’ll completely make adjustments quickly to deal with them.” As a significant know-how supplier, we acknowledge our accountability to help a wholesome aggressive setting and the function that trusted native suppliers play in assembly clients’ know-how wants. We thought it was essential to start out taking significant motion inside weeks, quite than months or years, and we set a aim internally to take action by at the moment, a day once I’m in Brussels.

I simply completed an occasion in Brussels the place I mentioned our adjustments, and I needed to share our steps extra broadly on this weblog. We’re saying two intently associated initiatives at the moment:

  • The primary is a set of 5 European Cloud Ideas that Microsoft is adopting to run our cloud enterprise throughout Europe. These ideas, proven under and defined later on this weblog, will information all features of our cloud enterprise, improve transparency for the general public, and assist us to raised help Europe’s know-how wants.
  • The second, which implements considered one of these ideas, is a brand new initiative to help European Cloud Suppliers to allow them to extra simply host a greater variety of Microsoft merchandise on their cloud infrastructure. It will make European Cloud Suppliers extra aggressive by enabling them to raised serve clients.

Earlier than turning to the main points, I feel it’s essential on the outset to acknowledge that these steps are very broad however not essentially exhaustive. As I stated in a single video assembly a number of weeks in the past with the CEO of a European cloud supplier, our fast aim is to “flip a protracted listing of points right into a shorter listing of points.” In different phrases, let’s transfer quickly so we will be taught rapidly. At this time we’re taking a giant step, however not essentially the final step we might want to take, and we stay up for persevering with suggestions from European Cloud Suppliers, clients, and regulators.

Suggestions from European Cloud Suppliers

The adjustments we’re making at the moment on behalf of European Cloud Suppliers are grounded in suggestions we heard in conferences with a number of of these suppliers throughout Europe. I joined different senior Microsoft enterprise leaders so I might take part myself in distant conferences with the CEOs of two European suppliers. In current weeks, we additionally engaged different enterprise leaders and dispatched a group that met in individual with corporations and associations in a number of nations.

A number of the most compelling suggestions for me personally got here from a CEO who stated that he felt that he “was a sufferer of pleasant hearth in Microsoft’s competitors with Amazon.” It was arduous to listen to this – however he was proper. Over the previous few years, our give attention to competing with the biggest know-how suppliers has resulted in us not being as attentive to the affect on our cloud supplier companions. We’re making adjustments to treatment this, starting at the moment.

This suggestions captured an essential facet of current cloud competitors, highlighted within the graph under that was revealed final month within the Monetary Instances. Microsoft has a wholesome quantity two place relating to cloud providers, with simply over 20 % market share of world cloud providers revenues. We compete day-after-day with Amazon, which has constantly captured roughly 33 % of these revenues. Google in flip has been rising its share of cloud providers revenues and now ranks at quantity three.

Financial Times chart showing share of worldwide revenues by cloud providers.

Particularly as the biggest tech corporations have invested extra of their infrastructure and providers, the largest problem has been for smaller cloud suppliers, like these headquartered in Europe which have expressed considerations about our licensing practices and their capability to compete. Whereas these corporations have been rising, it has been at a price decrease than the market as an entire. You may see this within the declining collective market share for smaller cloud suppliers proven within the graph above.

Whereas a free market and fast technological change inevitably result in each new successes and challenges, we acknowledge that it is very important help a aggressive setting within the European cloud supplier market, during which smaller opponents have the chance to thrive. I personally recognize the significance of those points, having spent nearly a decade main Microsoft’s work to resolve its authorized points within the EU, with the final case finalized in 2009. It’s vital for us to stay aware of our duties as a significant know-how firm, and this has knowledgeable the steps we’re saying at the moment.

Saying: higher help for European Cloud Suppliers

At this time we’re saying a brand new initiative to help European Cloud Suppliers, beginning with the enlargement of our flagship program: the Microsoft Cloud Answer Supplier program. We’re creating new advantages for purchasers that European Cloud Suppliers can construct upon to ship new options to these clients. This initiative will apply throughout Europe, together with the UK. It should have a number of items, together with the highlights described under.

Extra choices for European Cloud Suppliers. First, we’ll allow extra European corporations that host software program to affix this program and can present all of them with extra alternatives and advantages than earlier than. Briefly, we’ll allow and even assist European Cloud Suppliers to host and run Microsoft merchandise on their infrastructure for purchasers, together with merchandise which have historically been licensed to run solely on a buyer’s personal desktop or server computer systems (sometimes referred to as “on-premises” within the software program business). It will embrace the next:

  • This enlargement will allow these cloud suppliers instantly to supply Home windows and Workplace (together with Home windows 11 and the Microsoft 365 Apps for Enterprise and Enterprise) as a part of a whole hosted desktop resolution that they’ll construct, promote, and host on their infrastructure. It will imply that European Cloud Suppliers could have the flexibility to offer this entire, end-to-end resolution to their clients for the primary time.
  • The enlargement may even allow European Cloud Suppliers to offer this similar service to clients who purchase Home windows and Workplace software program from different Microsoft companions and who could desire a European Cloud Supplier to host this software program for them.Financial Times chart showing share of worldwide revenues by cloud providers.
  • We’re additionally addressing a ache level we heard from cloud suppliers by increasing the vary of merchandise that may be supplied to clients at mounted pricing for longer phrases, which can present extra pricing stability and certainty to suppliers and their clients.
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Extra flexibility for purchasers. We acknowledge the significance of coupling the adjustments for cloud suppliers with higher licensing flexibility for purchasers. In current conferences throughout Europe, we heard requests to simplify our licensing, and therefore we’ve reviewed and can make adjustments impressed partially by the Truthful Software program Licensing Ideas created by two outstanding European organizations, CIGREF and CISPE, who’re targeted on Europe-wide points. Whereas we nonetheless have essential work to do in drafting and implementing the main points, they may embrace the next:

  • We are going to take to coronary heart the primary advice within the Truthful Software program Licensing Ideas and can try to craft revised licensing phrases which might be extra clearly written, higher allow clients to readily decide their licensing prices, and allow clients to find out their obligations extra simply.
  • A number of of the Truthful Software program Licensing Ideas relate to how clients can transfer their licenses to the cloud, leverage shared {hardware}, and have extra flexibility in deployment choices for the software program they buy. In help of that, we’ll revise and develop our Software program Assurance program, during which clients buy new model rights, catastrophe restoration, failover help, license mobility, and lots of different advantages. At this time, Software program Assurance advantages don’t embrace license mobility rights for merchandise resembling Home windows, Workplace, or Home windows Server, so clients should use that software program in additional restrictive applications or on {hardware} devoted particularly to these clients. We are going to develop Software program Assurance to allow clients to make use of their licenses on any European Cloud Supplier delivering providers in their very own datacenters, equally to how they’ll accomplish that on Azure at the moment, whether or not the {hardware} is devoted or multi-tenant. We are going to then companion extra intently with European cloud hosters so we will make this help expertise extra seamless for purchasers.
  • We are going to make it simpler than ever to license Home windows Server for digital environments and the cloud by stress-free licensing guidelines that mirrored legacy software program licensing practices, the place licenses are tied to bodily {hardware}. With the adjustments we will probably be making, clients will now be capable of purchase licenses only for the virtualized compute capability they want, without having to depend the variety of bodily cores on which the virtualized setting is hosted.

A brand new European Cloud Supplier help group. To make these adjustments as efficient as potential, we’ll create a brand new group that can work instantly with European Cloud Suppliers. This group’s mission will probably be to assist this neighborhood obtain its objectives, present licensing and product roadmap help, and proceed to help their progress round cloud options. This new group may even work to create a tighter suggestions loop, enabling European Cloud Suppliers to share ongoing suggestions in actual time and make sure that Microsoft is best related and supporting their wants.

Forging nearer partnerships with European Cloud Suppliers. We’re additionally wanting past the current narrower points and asking how Microsoft is usually a higher companion and supporter of European Cloud Suppliers. Know-how markets are persevering with to alter quickly. We imagine that each one of us might want to proceed to evolve our enterprise to stay profitable. We’re due to this fact considering figuring out new alternatives we will all pursue, together with collectively, to develop our companies by higher supporting clients.

The Microsoft Cloud Answer Supplier program, for instance, is meant to allow extra financial alternative for cloud suppliers than merely reselling our services and products. As clients more and more look to cloud suppliers for assist to handle their advanced environments, this system permits cloud corporations to offer a broad vary of managed providers to assist deploy, handle, keep, and help cloud providers. Small and medium-sized enterprises, specifically, want extra managed providers like this to make higher use of cloud and AI applied sciences.

We may even create new methods for native cloud suppliers to work with Microsoft, together with a brand new concrete initiative to serve governments with so-called “sovereign options,” described additional under. And we’ll again these efforts with new investments from Microsoft to assist speed up these efforts extra rapidly.

Saying: Microsoft’s European Cloud Ideas

The give attention to European Cloud Suppliers is a part of a broader initiative and set of European Cloud Ideas that I shared on the Brussels occasion at the moment. It units forth 5 ideas that can information our cloud enterprise throughout Europe. These are:

  • We are going to guarantee our public cloud meets Europe’s wants and helps Europe’s values.
  • We are going to guarantee our cloud gives a platform for the success of European software program builders.
  • We are going to companion with and help European Cloud Suppliers.
  • We are going to present cloud choices that meet European authorities sovereign wants in partnership with native trusted know-how suppliers.
  • We acknowledge that European governments are regulating know-how and we’ll adapt to and help these efforts.

Let me share right here a bit extra about every of those ideas:

We are going to guarantee our public cloud meets Europe’s wants and helps Europe’s values

Most broadly and importantly, we’re dedicated to making sure that Microsoft’s cloud helps Europe nicely. Now we have greater than 40 years of expertise in Europe, and personally I’m at all times proud to say that I spent my first three years as a Microsoft worker based mostly in Paris. That was nearly 29 years in the past.

Our focus right here has two components. The primary is a dedication to make use of Microsoft’s sources to put money into and construct a public cloud that can meet Europe’s financial, safety, and cultural wants in a deep and forward-looking method.

Now we have accomplished or are actually developing 17 datacenter areas in Europe and are quickly increasing our footprint throughout the continent. Since 2020 we’ve introduced plans to construct 9 new datacenter areas, in Austria, Belgium, Denmark, Finland, Greece, Italy, Poland, Spain, and Sweden (launched final November). In the course of the previous two years alone, we’ve made investments exceeding $12 billion, making Microsoft one of many largest sources of capital for Europe’s know-how future.

Building the Digital Infrastructure for Europe’s Future. 17 countries with local datacenters built or under construction. $12B of Microsoft capital spending in the past two years.

Nevertheless it’s not simply the big quantity we’re spending. It’s how we’re spending it. We’re not making an attempt to duplicate all of the providers that different tech corporations provide or enter companies that compete with our clients.

We focus as a substitute on creating cloud and AI applied sciences that may increase all of the elements of manufacturing wanted for financial progress. Economists have lengthy acknowledged that elements of manufacturing are the “constructing blocks of the economic system” – they’re what folks use to provide items and providers. Economists divide the elements of manufacturing into 4 classes: land, labor, capital, and entrepreneurship. Whereas digital applied sciences in fact are merchandise in their very own proper, we imagine our function within the European economic system is to create cloud and AI applied sciences that can be utilized by any European firm, NGO or authorities as an enter to enhance each issue of manufacturing and assist construct and improve its personal services or products within the pursuit of progress and prosperity.

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This function requires that we perceive and join intently with not simply the businesses however the communities the place we function. Our many years of native expertise and deep buyer connections give us many broad insights about native financial wants. This consists of huge appreciation for the management of European corporations giant and small in all kinds of specialised technical and enterprise domains which might be vital to the world’s future. Industries like vehicles, aerospace, chemical compounds, meals, prescribed drugs, and lots of different manufactured items are all good examples. In so some ways, European merchandise maintain the world and are the spine of Europe’s personal economic system.

However we additionally recognize {that a} altering world is creating new challenges for Europe (and certainly each a part of the world). A part of this can be a new set of challenges for particular corporations and industries. The worldwide competitiveness for a lot of European corporations within the decade forward would require using cutting-edge cloud and AI providers. Our mission is to satisfy this want.

There’s one extra facet that’s even broader and extra essential. We’ve reached a demographic turning level in human historical past that’s creating new challenges for the European Union, Japan, and lots of different industrial nations. It’s not simply that populations are getting older. A good broader problem is that working-age populations are getting smaller. As proven within the graphs under, we’ve entered uncharted demographic territory, because the working-age inhabitants (outlined as ages 20-64) will shrink in every decade forward.

EU working age population peaked in 2020 and total population peaked in 2010

EU working age population expected to decrease 6% (-14.8M) by 2030

Which means that many European nations might want to develop their economies and enhance prosperity whereas adapting to a consistently shrinking inhabitants of working-age folks. The implications of this variation are huge and profound. At their core, they imply that progress and prosperity will rely in no small half on higher know-how inputs resembling cloud providers and synthetic intelligence. Our goal, put merely, is to offer Europe with world-leading, cutting-edge know-how that may function a basis for assembly these financial wants.

There’s a second dimension as nicely. We recognize the vital significance of serving not solely Europe’s progress, however Europe’s values. We’re grounding our work as an organization in 4 key priorities – help for inclusive progress, the safety of democracy and basic rights, trusted know-how, and environmental sustainability.

We’re backing these objectives with concrete measures. For instance, we’re working to make sure not solely that our applied sciences help each a part of the European economic system, but additionally  investments in broad skilling initiatives, so folks and organizations have the experience wanted to place this know-how to efficient use. Already, we’ve reached nearly 9 million Europeans.

Equally, because the conflict in Ukraine has demonstrated, we’re dedicated to defending and even defending European democracies with world-leading cybersecurity measures, a subject I’ll handle in higher element tomorrow in London. We’re equally taking new steps to guard European democracies from international nation-state disinformation operations, whereas offering important cybersecurity safety for candidates, political events, and suppose tanks.

And we proceed to develop the work wanted to make sure that folks can belief the know-how they use – by way of steps like our EU Information Boundary for the Microsoft Cloud – and to assist meet bold local weather objectives, as I shared publicly yesterday in Germany. We do all of this with appreciation for Europe’s deep and different cultures, which have contributed a lot to humanity, and which we will use new know-how to guard and promote.

We are going to guarantee our cloud gives a platform for the success of European software program builders.

The European know-how market is in fact far broader than the marketplace for cloud infrastructure. The European economic system, particularly the 22.5 million small and medium-sized enterprises (SMEs) that comprise 99 % of all corporations in Europe, are buying greater than €50 billion in software program purposes and providers every year. That is projected to develop to €136 billion by 2025, with probably the most important progress coming from software program as a service (SaaS) suppliers.

We’re dedicated to supporting the success of European software program builders throughout the complete vary of those know-how markets. Our instruments and know-how are extensively utilized by European builders, with greater than 1 / 4 of energetic GitHub customers and nearly 9 million builders in Europe utilizing our Visible Studio household of merchandise at the moment.

As well as, we’ve labored with practically 50,000 European startups enrolled in our applications to scale up and speed up their progress, together with offering greater than $500M in know-how advantages and help during the last two years. Our 11 Microsoft Know-how Facilities throughout Europe are serving to corporations discover inventive know-how options to their enterprise challenges – efforts which were essential all through Microsoft’s 4 many years presence in Europe and are much more very important at the moment. And so they pay concrete financial dividends.

In response to a current IDC examine, by 2025, Microsoft’s ecosystem companions in Europe will generate $8.00 of income for each greenback of income generated by Microsoft itself, up from $6.79 at the moment.[1]

We are going to companion with and help European Cloud Suppliers.

Our announcement at the moment is designed not simply to deal with current and particular points, however to raise the significance of our work to companion with and help European Cloud Suppliers. As we glance to the long run, we imagine that altering know-how will create the necessity for a brand new era of managed cloud providers that may typically finest be offered by trusted native suppliers.

Many shoppers have outsourced IT providers for many years, and these providers at the moment contain information that’s extra delicate than ever for a enterprise and its clients. Whereas a big tech firm like Microsoft can excel at constructing a public cloud with international efficiencies, scale, and safety, that doesn’t essentially make us the appropriate supplier to handle the specialised IT sources and providers of each buyer. One in all our priorities due to this fact will probably be to put money into and higher companion with native cloud suppliers throughout Europe, so we will work collectively to offer forward-looking managed providers that meet evolving buyer wants.

We are going to present cloud choices that meet European authorities sovereign wants in partnership with native trusted know-how suppliers.

We acknowledge as an organization that many European governments need extra personalized cloud options for his or her sovereign know-how eventualities, particularly for public sector and sure vital infrastructure suppliers. More and more, European governments are creating information classification rules to allow them to deal with completely different classes of knowledge in several methods. That is serving to authorities officers develop a extra versatile and nuanced strategy that balances the sensitivity, and therefore safety safety, wanted for various information classes with alternatives to mix private and non-private cybersecurity menace detection, innovate sooner, and cut back know-how prices. This additionally displays the dimensions of various nations and governments, together with the dimensions of a authorities’s intelligence company that will want to assume sole and full cybersecurity duties for information safety.

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Briefly, there’s a quickly rising pattern throughout Europe that eschews a one-size-fits-all strategy and as a substitute presents nationwide governments extra selection and adaptability. As an organization, we’re dedicated to assembly this want. Primarily based particularly on Microsoft’s current expertise defending Ukraine from Russian navy cyberattacks, we acknowledge each the vital significance of this want and the chance to work in ways in which present particular person governments with the chance to decide on tips on how to deploy digital know-how to guard sovereign wants.

A vital facet of our cloud technique is due to this fact to work extra intently and depend upon trusted native know-how companions. We acknowledge that some governments could wish to present entry to some delicate workloads and information classes solely to native suppliers, secured even from cloud infrastructure suppliers. Or alternatively, they might wish to rely solely upon such an area companion for a subset of knowledge processes or make sure that such a companion can present oversight of the information flows of the infrastructure supplier. Particularly as a result of nationwide wants and selections differ, native choices and experience are vital.

Over the previous yr, we’ve moved rapidly to create extra native choices for European governments, partnering in every case with a trusted native cloud know-how firm. For instance, in Could 2021, we introduced a partnership with Leonardo in Italy to offer cyber safety for information and providers for strategic information belongings linked to the upcoming Nationwide Strategic Hub: Polo Strategico Nazionale (PSN). The identical month we introduced Bleu, a partnership with a French firm owned by Orange and Capgemini to offer a “Cloud de Confiance” service to satisfy sovereignty necessities in France.

Now we have adopted this with two extra steps through the previous six months. In December 2021, we introduced a brand new partnership in Spain with Telefonica Tech, to supply public sector organizations, together with protection and corporations in regulated environments, personalized infrastructure and cloud computing providers. And in February 2022, SAP and Arvato chosen Microsoft as their cloud know-how companion for a brand new German firm that can present a sovereign cloud infrastructure for the German public sector.

We’re dedicated to the persevering with evolution of this work, adapting in every nation to the nationwide authorities’s wants and necessities. We see this as one other alternative to companion extra intently with European cloud and different know-how corporations in every nation, and we plan to announce additional steps within the months forward.

We acknowledge that European governments are regulating know-how and we’ll adapt to and help these efforts.

The 2020s are creating a brand new period for know-how. In contrast to the previous couple of many years, we’ve entered an period that’s characterised by each know-how innovation and know-how regulation. Like all firm, there are days once we learn a specific proposal and grimace at what it could contain. However essentially, we imagine the tech sector must mature and adapt to, quite than struggle towards, a brand new age of tech regulation.

This isn’t a small or simple endeavor. As I said earlier, the subsequent three years will see the belief of the European Fee’s imaginative and prescient for a Digital Europe based mostly partially on the SaaS options of tens of hundreds of startups and SaaS choices from European enterprises. Briefly, cloud service suppliers of every kind should work by way of tips on how to finest meet the obligations of coming regulatory adjustments. This isn’t only a European phenomenon; it’s a worldwide problem. Regulatory adjustments are coming in a number of authorized fields and from many nations around the globe. Partly, as a result of democratic governments have waited so lengthy to manage digital know-how, they understandably really feel huge stress to catch up rapidly. And since the tech sector is so international, no business has ever needed to grapple with so many regulatory adjustments on such a global foundation.

Whereas the tech sector might want to mature and adapt, we additionally might want to push ourselves to be extra clear and assist authorities officers acquire info and insights about what’s wanted to allow innovation and regulation to maneuver ahead collectively. One factor I’ve discovered first-hand is that it’s typically simpler to design know-how than to construct it. And it may be simpler to construct a know-how service than to function it. That is vital for know-how regulation as nicely. We’d like know-how providers and rules that can work collectively in follow.

It will require that governments do extra to coordinate regulatory initiatives each internally and throughout borders. At Microsoft, we’re now monitoring greater than 300 regulatory proposals in a dozen authorized fields from a couple of hundred nations. Whereas the European Union is a worldwide chief in tech regulation, gone are the times when the EU might undertake one thing like GDPR whereas different governments’ regulatory initiatives had been standing nonetheless. This creates the necessity for extra dialogue and coordination amongst governments than up to now.

In the end, all this may create extra alternatives and challenges for everybody concerned within the discussions that can form the way forward for tech regulation. For me, that is maybe probably the most thrilling facet.

The way forward for know-how innovation and regulation would require individuals who can suppose creatively. Individuals who suppose throughout boundaries. Individuals who can construct bridges, not simply throughout nations, however throughout mental fields like engineering, pc science, and the liberal arts. As we advance AI and entrust computer systems to make selections that beforehand might solely be made by people, we’ll want extra folks steeped within the humanities and social sciences. We might want to make room on the desk for those who characterize the world’s nice cultures and essential religions.

Nice technologists will proceed to innovate. What all of us might want to do collectively is make sure that know-how innovation serves folks. Partly, this may require considerate know-how legal guidelines and regulation. And these can solely come from considerate people who find themselves dedicated to listening and studying collectively. At Microsoft, we’re excited to be a part of these conversations, and we’re dedicated to contributing constructively to their success.

[1] IDC Information Snapshot, sponsored by Microsoft, The Microsoft Cloud Dividend Snapshot: Europe, Doc. #US49115022, Could 2022.

Tags: cloud, cloud supplier, European cloud suppliers, ideas