A New Deal for Europe: Microsoft Unveils Consumption-Based Licensing for Windows Server

Microsoft has announced a significant change to its licensing model for Windows Server in Europe, introducing a new “Cloud-Optimized” option that allows local cloud providers to offer the ubiquitous operating system on a pay-as-you-go basis.² This move, which directly addresses long-standing complaints of anti-competitive behavior, is a major concession aimed at leveling the playing field between Microsoft’s own Azure cloud and its European rivals.¹ ³ ⁴ The change is a direct result of sustained pressure from the trade body Cloud Infrastructure Services Providers in Europe (CISPE) and the looming threat of formal antitrust action from the European Commission.¹

For years, European cloud providers have argued that Microsoft’s licensing terms put them at a severe competitive disadvantage.¹ ³ The core of the complaint centered on the fact that it was significantly more expensive and complicated for customers to run Microsoft software, particularly Windows Server, on a non-Azure cloud.¹ ³ Customers wishing to use their existing Windows Server licenses on a third-party cloud were required to have active Software Assurance (SA) and were subject to restrictive “bring-your-own-license” (BYOL) policies.³ In contrast, running the same workloads on Azure was a seamless, consumption-based experience without these added hurdles and costs.³

CISPE formalized this grievance in a 2022 complaint to the European Commission, accusing Microsoft of leveraging its dominance in productivity and server software to stifle competition in the cloud infrastructure market.¹ ³ The trade body argued that these practices limited customer choice and funneled business towards Azure, harming Europe’s homegrown cloud industry.³

The “Cloud-Optimized” Solution

In a direct response to this pressure, Microsoft is introducing a new path forward.¹ ² The “Cloud-Optimized” option, available to eligible European cloud providers, fundamentally changes how they can offer Windows Server to their customers.² Instead of requiring customers to bring their own complex licenses, providers can now purchase Windows Server Standard and Datacenter editions from Microsoft and offer them to end-users on a flexible, monthly, pay-as-you-go basis, metered by consumption.²

This new model effectively mirrors the way Windows Server is sold on Azure.¹ It eliminates the need for customers to have Software Assurance for their server workloads and removes the financial penalties previously associated with running Microsoft software on a competing cloud.² ⁴ This allows European providers to offer a much simpler and more commercially attractive proposition, enabling them to compete with Microsoft on a more equal footing.¹ ² ⁴

A Concession Under Pressure

This is not an act of sudden generosity from Microsoft.¹ It is a calculated business decision made under the shadow of regulatory scrutiny.¹ The European Commission has been taking a hard look at Microsoft’s cloud licensing practices, and this move is clearly intended to placate regulators and head off a potentially damaging and costly formal investigation.¹ By addressing one of the most significant points of contention raised by CISPE, Microsoft is demonstrating a willingness to adjust its practices, at least in Europe.¹ ⁴

The new option is specifically available to members of the Cloud Solution Provider (CSP) program who are headquartered and have their primary operations within the European Economic Area or Switzerland.² This targeted approach underscores that the change is a direct result of European regulatory pressure and the vocal advocacy of regional providers.¹

Is It Enough to Level the Field?

While the announcement has been welcomed as a positive and significant step, the broader battle over fair software licensing is far from over.¹ The new “Cloud-Optimized” model currently applies only to Windows Server.² It does not yet address similar complaints regarding other dominant Microsoft products, most notably SQL Server and the Microsoft 365 suite, where restrictive licensing terms continue to be a source of frustration for customers and competitors alike.¹ ³

Critics will be watching closely to see if the implementation truly delivers on its promise of fair competition.¹ The exact pricing of the new model will be a critical factor in determining its effectiveness. If the cost to providers is too high, it may not translate into competitive end-user pricing, muting its impact.

Nevertheless, this is a tangible victory for CISPE and its members.¹ It proves that collective action and regulatory pressure can force change, even from the world’s largest software companies.¹ For European businesses, it signals the promise of greater choice and more competitive pricing in the cloud market.¹ ⁴ The new licensing model for Windows Server is a major course correction, but the industry will be watching to see if it represents a genuine change in Microsoft’s philosophy or merely a tactical retreat on a single front in a much larger war.¹

Sources

1. The Register (July 11, 2025) https://www.theregister.com/2025/07/11/microsoft_offers_eu_cloud_providers/
2. Microsoft Partner Blog (July 10, 2025) https://blogs.partner.microsoft.com/partner/new-windows-server-licensing-option-for-european-cloud-providers/
3. CISPE (November 9, 2022) https://cispe.cloud/executive-summary-of-cispe-complaint-against-microsoft/
4. Licensing School (July 11, 2025) https://licensingschool.co.uk/2025/07/11/microsoft-announce-new-licensing-option-for-european-cloud-providers/