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

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You will have learn final month in information experiences about issues raised in Europe about a few of Microsoft’s software program licensing practices that affect competing cloud suppliers. As I mentioned to journalists then, we felt that “whereas not all of those claims are legitimate, a few of them are, and we’ll completely make modifications quickly to handle them.” As a significant expertise supplier, we acknowledge our duty to assist a wholesome aggressive setting and the position that trusted native suppliers play in assembly prospects’ expertise wants. We thought it was essential to start out taking significant motion inside weeks, slightly than months or years, and we set a aim internally to take action by in the present day, a day once I’m in Brussels.

I simply completed an occasion in Brussels the place I mentioned our modifications, and I wished to share our steps extra broadly on this weblog. We’re saying two intently associated initiatives in the present day:

  • 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 points of our cloud enterprise, improve transparency for the general public, and assist us to higher assist Europe’s expertise wants.
  • The second, which implements one in all these ideas, is a brand new initiative to assist 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 higher serve prospects.

Earlier than turning to the main points, I believe it’s essential on the outset to acknowledge that these steps are very broad however not essentially exhaustive. As I mentioned in a single video assembly just a few weeks in the past with the CEO of a European cloud supplier, our rapid 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 are able to be taught rapidly. Right this moment we’re taking a giant step, however not essentially the final step we might want to take, and we look ahead to persevering with suggestions from European Cloud Suppliers, prospects, and regulators.

Suggestions from European Cloud Suppliers

The modifications we’re making in the present day 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 staff that met in individual with corporations and associations in a number of international locations.

Among the most compelling suggestions for me personally got here from a CEO who mentioned that he felt that he “was a sufferer of pleasant hearth in Microsoft’s competitors with Amazon.” It was exhausting to listen to this – however he was proper. Over the previous few years, our deal with competing with the biggest expertise suppliers has resulted in us not being as attentive to the affect on our cloud supplier companions. We’re making modifications to treatment this, starting in the present day.

This suggestions captured an essential side of current cloud competitors, highlighted within the graph under that was printed final month within the Monetary Instances. Microsoft has a wholesome quantity two place relating to cloud providers, with simply over 20 % market share of worldwide cloud providers revenues. We compete every single day with Amazon, which has persistently 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 issues about our licensing practices and their capacity 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 speedy technological change inevitably result in each new successes and challenges, we acknowledge that you will need to assist a aggressive setting within the European cloud supplier market, by which smaller rivals have the chance to thrive. I personally admire 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 conscious of our tasks as a significant expertise firm, and this has knowledgeable the steps we’re saying in the present day.

Saying: higher assist for European Cloud Suppliers

Right this moment we’re saying a brand new initiative to assist 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 prospects. This initiative will apply throughout Europe, together with the UK. It’ll have a number of items, together with the highlights described under.

Extra choices for European Cloud Suppliers. First, we are going to allow extra European corporations that host software program to hitch this program and can present all of them with extra alternatives and advantages than earlier than. In brief, we are going to 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 known as “on-premises” within the software program business). It will embody 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 answer that they’ll construct, promote, and host on their infrastructure. It will imply that European Cloud Suppliers may have the flexibility to supply this entire, end-to-end answer to their prospects for the primary time.
  • The enlargement will even allow European Cloud Suppliers to supply this similar service to prospects who purchase Home windows and Workplace software program from different Microsoft companions and who could need 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 provided to prospects at mounted pricing for longer phrases, which can present extra pricing stability and certainty to suppliers and their prospects.

Extra flexibility for purchasers. We acknowledge the significance of coupling the modifications for cloud suppliers with better licensing flexibility for purchasers. In current conferences throughout Europe, we heard requests to simplify our licensing, and therefore now we have reviewed and can make modifications impressed partially by the Honest Software program Licensing Ideas created by two distinguished European organizations, CIGREF and CISPE, who’re centered on Europe-wide points. Whereas we nonetheless have essential work to do in drafting and implementing the main points, they’ll embody the next:

  • We are going to take to coronary heart the primary suggestion within the Honest Software program Licensing Ideas and can attempt to craft revised licensing phrases which might be extra clearly written, higher allow prospects to readily decide their licensing prices, and allow prospects to find out their obligations extra simply.
  • A number of of the Honest Software program Licensing Ideas relate to how prospects can transfer their licenses to the cloud, leverage shared {hardware}, and have extra flexibility in deployment choices for the software program they buy. In assist of that, we are going to revise and broaden our Software program Assurance program, by which prospects buy new model rights, catastrophe restoration, failover assist, license mobility, and lots of different advantages. Right this moment, Software program Assurance advantages don’t embody license mobility rights for merchandise equivalent to Home windows, Workplace, or Home windows Server, so prospects should use that software program in additional restrictive packages or on {hardware} devoted particularly to these prospects. We are going to broaden Software program Assurance to allow prospects 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 in the present day, whether or not the {hardware} is devoted or multi-tenant. We are going to then companion extra intently with European cloud hosters so we are able to make this assist 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 enjoyable licensing guidelines that mirrored legacy software program licensing practices, the place licenses are tied to bodily {hardware}. With the modifications we will likely be making, prospects will now be capable of purchase licenses only for the virtualized compute capability they want, with no need to depend the variety of bodily cores on which the virtualized setting is hosted.

A brand new European Cloud Supplier assist staff. To make these modifications as efficient as doable, we are going to create a brand new staff that can work instantly with European Cloud Suppliers. This staff’s mission will likely be to assist this neighborhood obtain its objectives, present licensing and product roadmap assist, and proceed to assist their development round cloud options. This new staff will 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 linked and supporting their wants.

Forging nearer partnerships with European Cloud Suppliers. We’re additionally wanting past the current narrower points and asking how Microsoft generally is a higher companion and supporter of European Cloud Suppliers. Expertise markets are persevering with to alter quickly. We consider that every one of us might want to proceed to evolve our enterprise to stay profitable. We’re due to this fact excited about figuring out new alternatives we are able to all pursue, together with collectively, to develop our companies by higher supporting prospects.

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

We will 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 are going to again these efforts with new investments from Microsoft to assist speed up these efforts extra rapidly.

Saying: Microsoft’s European Cloud Ideas

The deal with European Cloud Suppliers is a part of a broader initiative and set of European Cloud Ideas that I shared on the Brussels occasion in the present day. 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 assist European Cloud Suppliers.
  • We are going to present cloud choices that meet European authorities sovereign wants in partnership with native trusted expertise suppliers.
  • We acknowledge that European governments are regulating expertise and we are going to adapt to and assist 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 effectively. Now we have greater than 40 years of expertise in Europe, and personally I’m all the time 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 spend money on 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 at the moment are developing 17 datacenter areas in Europe and are quickly increasing our footprint throughout the continent. Since 2020 now we have introduced plans to construct 9 new datacenter areas, in Austria, Belgium, Denmark, Finland, Greece, Italy, Poland, Spain, and Sweden (launched final November). Through the previous two years alone, now we have made investments exceeding $12 billion, making Microsoft one of many largest sources of capital for Europe’s expertise 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.

But it surely’s not simply the massive 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 prospects.

We focus as a substitute on creating cloud and AI applied sciences that may increase all of the elements of manufacturing wanted for financial development. Economists have lengthy acknowledged that elements of manufacturing are the “constructing blocks of the economic system” – they’re what individuals use to supply items and providers. Economists divide the elements of manufacturing into 4 classes: land, labor, capital, and entrepreneurship. Whereas digital applied sciences after all are merchandise in their very own proper, we consider our position 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 development and prosperity.

This position 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 monumental 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 admire {that a} altering world is creating new challenges for Europe (and certainly each a part of the world). A part of it is 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 fulfill this want.

There’s one extra side 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 international locations. It’s not simply that populations are getting older. An excellent 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 many European international locations might want to develop their economies and enhance prosperity whereas adapting to a always shrinking inhabitants of working-age individuals. The implications of this modification are huge and profound. At their core, they imply that development and prosperity will rely in no small half on higher expertise inputs equivalent to cloud providers and synthetic intelligence. Our goal, put merely, is to supply Europe with world-leading, cutting-edge expertise that may function a basis for assembly these financial wants.

There’s a second dimension as effectively. We admire the vital significance of serving not solely Europe’s development, however Europe’s values. We’re grounding our work as an organization in 4 key priorities – assist for inclusive development, the safety of democracy and elementary rights, trusted expertise, 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 assist each a part of the European economic system, but additionally  investments in broad skilling initiatives, so individuals and organizations have the experience wanted to place this expertise to efficient use. Already, now we have reached nearly 9 million Europeans.

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

And we proceed to broaden the work wanted to make sure that individuals can belief the expertise they use – via 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 various cultures, which have contributed a lot to humanity, and which we are able to use new expertise to guard and promote.

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

The European expertise market is after all 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 functions and providers every year. That is projected to develop to €136 billion by 2025, with probably the most important development 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 expertise markets. Our instruments and expertise 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 in the present day.

As well as, now we have labored with almost 50,000 European startups enrolled in our packages to scale up and speed up their development, together with offering greater than $500M in expertise advantages and assist during the last two years. Our 11 Microsoft Expertise Facilities throughout Europe are serving to corporations discover inventive expertise options to their enterprise challenges – efforts which have been essential all through Microsoft’s 4 many years presence in Europe and are much more important in the present day. They usually 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 in the present day.[1]

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

Our announcement in the present day is designed not simply to handle current and particular points, however to raise the significance of our work to companion with and assist European Cloud Suppliers. As we glance to the longer term, we consider that altering expertise will create the necessity for a brand new era of managed cloud providers that may typically greatest be offered by trusted native suppliers.

Many shoppers have outsourced IT providers for many years, and these providers in the present day contain knowledge that’s extra delicate than ever for a enterprise and its prospects. Whereas a big tech firm like Microsoft can excel at constructing a public cloud with world 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 every of our priorities due to this fact will likely be to spend money on and higher companion with native cloud suppliers throughout Europe, so we are able to work collectively to supply 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 expertise suppliers.

We acknowledge as an organization that many European governments need extra personalized cloud options for his or her sovereign expertise situations, particularly for public sector and sure vital infrastructure suppliers. More and more, European governments are creating knowledge 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 method that balances the sensitivity, and therefore safety safety, wanted for various knowledge classes with alternatives to mix private and non-private cybersecurity risk detection, innovate sooner, and cut back expertise prices. This additionally displays the scale of various international locations and governments, together with the scale of a authorities’s intelligence company which will want to assume sole and full cybersecurity tasks for knowledge safety.

In brief, there’s a quickly rising pattern throughout Europe that eschews a one-size-fits-all method and as a substitute gives nationwide governments extra alternative and suppleness. As an organization, we’re dedicated to assembly this want. Primarily based particularly on Microsoft’s current expertise defending Ukraine from Russian army 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 how you can deploy digital expertise to guard sovereign wants.

A vital side of our cloud technique is due to this fact to work extra intently and depend on trusted native expertise companions. We acknowledge that some governments could wish to present entry to some delicate workloads and knowledge 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 info flows of the infrastructure supplier. Particularly as a result of nationwide wants and selections differ, native choices and experience are vital.

Over the previous 12 months, now we have moved rapidly to create extra native choices for European governments, partnering in every case with a trusted native cloud expertise firm. For instance, in Could 2021, we introduced a partnership with Leonardo in Italy to supply cyber safety for knowledge and providers for strategic knowledge 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 supply a “Cloud de Confiance” service to fulfill sovereignty necessities in France.

Now we have adopted this with two extra steps throughout 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 firms in regulated environments, personalized infrastructure and cloud computing providers. And in February 2022, SAP and Arvato chosen Microsoft as their cloud expertise 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 expertise corporations in every nation, and we plan to announce additional steps within the months forward.

We acknowledge that European governments are regulating expertise and we are going to adapt to and assist these efforts.

The 2020s are creating a brand new period for expertise. In contrast to the previous couple of many years, we’ve entered an period that’s characterised by each expertise innovation and expertise regulation. Like every firm, there are days after we learn a selected proposal and grimace at what it could contain. However essentially, we consider the tech sector must mature and adapt to, slightly 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 1000’s of startups and SaaS choices from European enterprises. In brief, cloud service suppliers of all sorts should work via how you can greatest meet the obligations of coming regulatory modifications. This isn’t only a European phenomenon; it’s a worldwide problem. Regulatory modifications are coming in a number of authorized fields and from many international locations around the globe. Partially, as a result of democratic governments have waited so lengthy to manage digital expertise, they understandably really feel monumental stress to catch up rapidly. And since the tech sector is so world, no business has ever needed to grapple with so many regulatory modifications 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 expertise than to construct it. And it may be simpler to construct a expertise service than to function it. That is vital for expertise regulation as effectively. We want expertise 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 international locations. 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 have been standing nonetheless. This creates the necessity for extra dialogue and coordination amongst governments than prior 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 side.

The way forward for expertise innovation and regulation would require individuals who can assume creatively. Individuals who assume throughout boundaries. Individuals who can construct bridges, not simply throughout international locations, however throughout mental fields like engineering, laptop 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 are going to want extra individuals steeped within the humanities and social sciences. We might want to make room on the desk for those that symbolize 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 expertise innovation serves individuals. Partially, this may require considerate expertise 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.

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