Microsoft Faces Imminent Deadline for Azure Local Compliance Amid Licensing Dispute with CISPE

Microsoft is racing against time as it approaches a crucial deadline to deliver a multi-tenant version of Azure Local, a requirement tied to its agreement with the Cloud Infrastructure Service Providers in Europe (CISPE). This development follows a licensing dispute that required Microsoft to enhance Azure Local within nine months to facilitate European cloud providers in offering its applications and services on their infrastructure.

The agreement, reached in July 2024, saw CISPE withdraw its competition complaint before the European Commission, contingent upon Microsoft's compliance with the new licensing terms. However, reports suggest that Microsoft may not meet the upcoming deadline shortly after Easter, as internal sources indicate that the company underestimated the time and resources needed to implement the required changes.

Since a meeting with CISPE representatives last December, progress appears stagnant, with some sources suggesting that transforming Azure Local into a multi-tenant cloud solution is proving to be a complex challenge. Both parties had envisioned a multi-tenant cloud that would allow for the optimal use of CPU and RAM, shared storage, and overlapping addresses, alongside features such as Windows 11-based virtual desktops, free security updates, and a pay-as-you-go SQL Server licensing model.

The European Cloud Observatory has been appointed as an independent body to oversee and assess the development of these enhancements. Observers reported as early as February that Microsoft was falling behind schedule in its development efforts.

If Microsoft fails to fulfill the agreed-upon requirements by the deadline, CISPE has indicated that it may reinstate its competition complaint with the EU Commission, as previously stated in their agreement. This potential development raises concerns about Microsoft's market practices, with CISPE alleging that the tech giant leverages its dominant position to limit choices and raise costs for European cloud customers. They claim that Microsoft has established barriers to ensure its software does not function optimally on competing cloud platforms, thereby distorting digital competition in Europe.

Despite these challenges, Microsoft joined CISPE in January 2025 as a non-voting member, marking it as only the second non-European entity to do so, following AWS. This membership does not grant Microsoft any decision-making power within the organization, as the board is exclusively composed of representatives from European companies.