Killinghall Parish Council – 9 councillors, one clerk, 10 customers – pays £1,100 a yr for a Microsoft ecosystem it by no means deliberate to purchase. The council wished Microsoft Groups. It found that full performance relied on buying Microsoft-hosted electronic mail accounts.
“This requirement was not made sufficiently clear on the outset,” the council notes in its submission to the Competitors and Markets Authority (CMA), “and represents poor worth for cash, limiting our potential to make use of public funds effectively.”
That submission – one among greater than 30 responses to the CMA’s Strategic Market Standing (SMS) investigation into Microsoft’s enterprise software program ecosystem – has landed because the regulator prepares to resolve whether or not to designate Microsoft with SMS beneath the Digital Markets, Competitors and Shoppers Act 2024. That standing would unlock powers to impose binding conduct necessities, mandate interoperability and restructure business preparations throughout a software program property that touches an estimated 20 to 30 million organisational customers within the UK.
The responses, printed alongside the CMA’s invitation to remark, reveal an alignment of opponents, enterprise customers, trade coalitions and public sector our bodies that each one level to the identical structural concern. Specifically, that Microsoft’s integration of productiveness software program, working techniques, id administration, safety, database software program and, more and more, synthetic intelligence (AI) right into a single business stack creates a type of lock-in that the market alone can not self-discipline. Microsoft, for its half, argues the investigation misunderstands a vigorously aggressive market and that AI is making competitors extra intense, not much less.
The collision of those two views – AI as the nice leveller, or AI as the nice lock-in mechanism – is the core stress the CMA should resolve.
The numbers behind the argument
The Open Cloud Coalition (OCC), a 27-member trade physique that spans challenger cloud suppliers and enterprise know-how corporations, places a worth on the established order. Citing analysis by the Social Market Basis, the OCC estimates that Microsoft’s licensing practices value the UK public sector round £60m per yr.
That’s, it says, “over £300m over the course of a Parliament, based mostly solely on a subset of the related software program merchandise”. The coalition’s personal Censuswide survey finds greater than 70% of cloud suppliers view regulatory intervention as pressing, whereas practically 65% of shoppers say swift motion to enhance cloud competitors is “crucial”.
An nameless supplier of AI companies – one among a number of respondents who declined to be named, citing business sensitivity – frames the size otherwise and quotes Gartner estimates that Microsoft 365 holds a 77% share of software-as-a-service (SaaS) enterprise productiveness, whereas £1.9bn was spent by the UK public sector on Microsoft software program licences within the 2024-25 monetary yr alone. “It could be unrealistic to anticipate that this dominant place could possibly be displaced within the close to time period, regardless of the appearance of purposeful alternate options due to AI,” the supplier notes.
The Coalition for Truthful Software program Licensing (CFSL) attracts immediately on the CMA’s personal Cloud Market Investigation, which discovered that Microsoft fees its closest cloud rivals – Amazon Internet Providers (AWS) and Google, designated as “Listed Suppliers” – a better enter worth for Home windows Server and SQL Server than Microsoft’s personal customer-facing worth. CFSL argues that “Microsoft improperly forces prospects of its enterprise software program merchandise into Azure, even when rival cloud companies might higher meet prospects’ wants”.
The browser wars, replayed
A cluster of browser-provider submissions extends the lock-in argument to the person interface layer.
Vivaldi Applied sciences, an impartial browser provider, argues that the excellence between “shopper” and “enterprise” Home windows is synthetic, as Microsoft markets the identical working system for each, and that “Edge is positioned as productiveness infrastructure moderately than merely a browser”.
Wavebox, one other SME browser developer, contends that Microsoft leverages its Home windows OS market energy to steer customers towards Edge and successfully locks out impartial browsers from the beginning of the person journey.
The Browser Alternative Alliance – a coalition of browser suppliers – requires a browser alternative display on Home windows, an finish to OS updates pushing Edge as default, and “one-click” default switching.
Open Internet Advocacy provides a historic dimension. It argues that Microsoft engages in a “persistent sample” of person interface (UI) manipulation, “scare screens” and proprietary hyperlink protocols to coerce customers into Edge.
Mozilla says it “strongly helps the SMS designation of Microsoft in respect of its enterprise software program ecosystem” and provides that “taking this motion and implementing applicable CRs and PCIs could be an essential step in the direction of strengthening competitors and innovation in digital markets”.
Omnissa, a know-how agency, identifies Microsoft’s proprietary “inside loops” inside Microsoft’s ecosystem, and – as AI impacts enterprise software program – “indiscriminate software program bundling [that] will lead to sub-optimal buyer outcomes”.
Cloudflare, a connectivity cloud supplier, stresses the compounding nature of Microsoft’s practices, and argues that unfair business phrases, technical design obstacles and bundling “can create a compounding dynamic that no single follow would obtain alone”.
The Laptop and Communications Business Affiliation (CCIA) factors to market surveys exhibiting that over “85% of primary decision-makers could be extra prepared to change suppliers or undertake multicloud methods if their organisation may switch present software program licences throughout clouds with out extra prices”.
The AI gateway
What elevates this investigation past a replay of the cloud licensing disputes of the previous three years is the position of synthetic intelligence.
The Startup Coalition, which represents greater than 4,000 UK tech startups and scaleups, frames AI because the layer the place the implications of inaction are most acute. “AI shouldn’t be a separate market sitting alongside the ecosystem; it’s being embedded into each layer of it,” the coalition argues. “It’s exactly right here that competitors on benefit is crucial and the CMA has a task to play.”
AI shouldn’t be a separate market sitting alongside the ecosystem; it’s being embedded into each layer of it. It’s exactly right here that competitors on benefit is crucial and the CMA has a task to play The Startup Coalition
One other nameless respondent – this time of AI companies – develops the purpose with technical specificity. Enterprise AI instruments, they clarify, are solely as helpful because the work context they’ll entry – and within the UK enterprise setting, that context sits inside Microsoft 365, Groups, Outlook, SharePoint, OneDrive and Entra ID. “Management over the Microsoft Enterprise Software program Ecosystem quantities to regulate over a strategically essential gateway for enterprise AI applied sciences,” says their response.
Copilot Chat is bundled at no extra value with the overwhelming majority of enterprise Microsoft 365 and Workplace 365 licences – a distribution funnel, the supplier argues, that “might seed utilization of Microsoft’s AI instruments earlier than enterprise prospects think about competing enterprise AI options”. Third-party AI suppliers, against this, face what the submission describes as “inferior API, connector or add-on entry”.
Mosaic Island, a UK-based know-how consultancy with £14.1m in turnover, makes the associated fee tangible. Its 26-employee enterprise now pays for ChatGPT and Microsoft Copilot – a further £3,000 per yr – as a result of “Microsoft-native capabilities comparable to Groups assembly integration are solely obtainable successfully by Copilot”. The consultancy describes Microsoft’s ecosystem as exerting “the gravity draw of the Microsoft black gap in the direction of growing dependence and price”.
Microsoft’s defence
Microsoft’s seven-page submission contests the CMA investigation’s premises at each stage. The corporate argues the CMA is investigating 5 distinct digital actions, all of which face intense competitors. It factors to Google Workspace, macOS, Linux, PostgreSQL and Okta as proof that every layer of the stack is contestable. It notes that Linux now runs greater than two-thirds of buyer cores on Azure and over 90% of public cloud workloads.
On AI, Microsoft’s counter-argument is direct. “AI is dramatically decreasing the obstacles to constructing high-performing enterprise software program,” the corporate argues. “Startups with small groups can immediately construct and deploy subtle AI-powered instruments that compete immediately with established merchandise at scale.”
It cites Gemini’s 900 million month-to-month energetic customers and ChatGPT’s 900 million weekly customers as proof that competitors is prospering. “The emergence of highly effective, broadly adopted AI assistants from well-resourced opponents is basically inconsistent with the proposition that Microsoft may have ‘entrenched’ market energy within the related actions,” it states.
Microsoft additionally factors to its 34,000 UK companions and the £38bn in income its ecosystem contributes to the UK economic system, describing its platform as “open”, with “companions and opponents alike” capable of “construct on, prolong and combine with Microsoft’s merchandise utilizing overtly obtainable instruments and sources”.
The enterprise and public sector floor fact
Virgin Media O2, an enterprise person, reviews concern that “bundling and pre-enabled settings are distinguished options of how Microsoft designs and affords its merchandise”, including that “it could be prudent for the CMA to analyse the influence of Microsoft’s bundling practices on different suppliers and the aggressive procurement course of in the long term, together with the place this considerations the mixing of AI instruments in enterprise software program”.
An nameless massive enterprise respondent describes Microsoft as “elementary to the IT infrastructure of most UK (and world) corporations and public sector organisations, and its practices have impeded and proceed to impede wholesome competitors for varied services and products inside its ecosystem”.
One other nameless massive organisation reviews that “Microsoft’s suite delivers vital advantages in usability, collaboration, safety integration and day-to-day productiveness”, however that “the traits which make Microsoft’s ecosystem engaging can even create obstacles to switching and frictions in mixing and matching rival merchandise”.
This respondent added: “We additionally observe that top adoption charges of embedded Microsoft instruments could make switching unrealistic within the brief time period.”
An impartial researcher, drawing on Freedom of Info information from 24 English native authorities masking three years of procurement, concludes that native authorities are “locked in” by way of frameworks wherein “a rival cloud, analytics or AI supplier by no means reaches a second at which the client is actively selecting, as a result of the Microsoft equal has already been acquired as an extension of what the client is deemed to carry. Competitors is foreclosed not by express exclusion however by the absence of any event on which it may happen.”
The cautionary camp
Not all respondents are satisfied this investigation must be a precedence.
The Motion for an Open Internet (MOW), a non-profit advocacy organisation, argues that “enterprise software program doesn’t seem like the CMA’s highest precedence digital market situation” and that the CMA “has not defined why this has grow to be a precedence”.
MOW factors to unresolved digital promoting instances the place prices to UK households exceed £1,000 per yr, and requires comparative assessments of AWS and Google Cloud if cloud competitors considerations are to be addressed. “Investigating Microsoft’s practices in isolation dangers overlooking fashions by different suppliers,” the organisation warns.
The Info Know-how and Innovation Basis, a Washington-based suppose tank, argues the “enterprise software program” scope is overly broad and that present antitrust legal guidelines are adequate – although its submission seems truncated within the printed file.
The governance lens
Between the pro-intervention and cautionary camps sits a cluster of consultancies and advisory our bodies whose framing centres on governance moderately than competitors legislation.
The central situation shouldn’t be whether or not Microsoft has constructed helpful merchandise. It has. The problem is whether or not UK organisations nonetheless have significant alternative as soon as productiveness, id, safety, collaboration, cloud workflows and AI adoption all sit inside one ecosystem The Change Hive
Jisc, the UK’s digital company for tertiary training, gives a few of the most granular proof within the investigation. Its December 2025 survey of UK training establishments discovered that 74% reported that transferring away from Microsoft, both wholly or partially, was “not a viable possibility”. Some 53% of respondents function completely on Microsoft 365 A5 licences, whereas 62% reported elevated Microsoft spending over the earlier yr.
“The important thing query,” Jisc explains, “is whether or not establishments can train significant alternative between competing suppliers on a commercially and operationally impartial foundation, or whether or not present ecosystem dependencies more and more form future procurement choices.” The company introduces a distinction that runs by a number of governance-camp submissions: the hole between “theoretical availability of alternate options” and “sensible substitutability”.
Third Stage Consulting Group, a supplier-neutral digital transformation advisory, says: “We routinely observe business dynamics that, whereas not essentially express, create significant strain towards Microsoft standardisation.”
It additionally cited: “Stories of double-digit annual will increase on sure Microsoft subscriptions, the current wind-down of long-standing volume-discount programmes for on-line companies, and standardised pricing approaches that cut back negotiation room have all elevated the efficient value of remaining a Microsoft buyer whereas leaving switching simply as tough.”
The Change Hive, a enterprise consultancy, argues: “The central situation shouldn’t be whether or not Microsoft has constructed helpful merchandise. It has. The problem is whether or not UK organisations nonetheless have significant alternative as soon as productiveness, id, safety, collaboration, cloud workflows and AI adoption all sit inside one ecosystem.”
The worldwide shadow
The UK investigation doesn’t exist in a vacuum.
The German Bundeskartellamt designated Microsoft as having “paramount significance for competitors throughout markets” in September 2024, which Scida, a tutorial consortium responding to the CMA, describes as offering “the flexibility to focus on conduct at every layer of the ecosystem whereas capturing cross-market results”.
The European Fee accepted binding commitments from Microsoft in 2025 to unbundle Groups from Workplace 365 and Microsoft 365, but Ingredient – a UK-based encrypted messaging startup that competes with Groups – reviews “no materials change in market situations” since these commitments took impact. “The bundled-versus-unbundled worth differential has not translated into observable switching behaviour,” Ingredient notes.
In the meantime, the Japan Truthful Commerce Fee opened its personal investigation into Microsoft’s licensing practices in March 2026, with a scope that intently mirrors the CMA’s. Within the US, the Federal Commerce Fee and Division of Justice are inspecting the Microsoft-OpenAI partnership.
The OCC attracts a pointy lesson from this worldwide expertise. “Microsoft has an extended historical past of altering the shape, nomenclature, packaging, or pricing structure of its conduct in response to scrutiny whereas preserving a lot of its underlying business impact,” the coalition argues, citing the “Listed Suppliers” terminology, the Versatile Virtualization Profit, the Azure Hybrid Profit, and the E3-to-E5-to-E7 suite escalation ladder as proof of a sample.
The ultimatum
Lloyd’s Market Affiliation (LMA), representing 55 managing brokers at Lloyd’s, captures the structural dilemma dealing with regulated industries.
“Microsoft’s scale and market place imply that corporations have restricted or no potential to barter bespoke contractual phrases or operational preparations,” the LMA states. “Engagement with Microsoft operates on a ‘take it or go away it’ foundation.”
The Startup Coalition distils the urgency. “The only most precious factor the CMA can do for the startup ecosystem is to maneuver shortly. Each month of deliberation is a month wherein the market situations change. A treatment that arrives late arrives weakened.”
Amnesty Worldwide, in a submission that broadens the body past competitors economics, argues that “the identical dominant actors – together with Microsoft – at the moment are exerting management over this rising market” of generative AI, and that “fines on dominant know-how corporations are regularly absorbed as a price of doing enterprise and have carried out little to curb the underlying conduct”.
The human rights organisation requires binding conduct necessities, structural and behavioural treatments – “together with the break-up of dominant corporations” – and human rights influence assessments of all proposed interventions.
2027 resolution
The CMA’s statutory nine-month investigation window locations a ultimate resolution in early 2027. The query for the regulator shouldn’t be merely whether or not Microsoft holds market energy, however whether or not the structure of the DMCCA – designed to intervene at tempo in fast-moving digital markets – can ship treatments that maintain step with the velocity at which AI is being embedded into the enterprise software program layer.
For Killinghall Parish Council, the stakes are £1,100 and the liberty to make use of Groups with out shopping for the remainder of the stack. For the UK’s digital economic system, the stakes are the foundations of engagement for a market the place software program, cloud and AI are collapsing right into a single business quicksand.
