Microsoft and Google are at war again

Microsoft and Google are back to their old tricks. This week, the software giant accused Google of being behind what it calls “shadow campaigns” to undermine and discredit Microsoft’s cloud business. Microsoft let the world know that Google is behind a new Open Cloud Coalition lobbying group just hours before it was officially announced.

“It is designed to discredit Microsoft with competition authorities, and policymakers and mislead the public,” Microsoft deputy general counsel Rima Alaily writes in a scathing blog post. “Google has gone to great lengths to obfuscate its involvement, funding, and control, most notably by recruiting a handful of European cloud providers, to serve as the public face of the new organization.”

This new group has been formed after Google failed to derail a settlement between Microsoft and the trade group Cloud Infrastructure Services Providers in Europe (CISPE) earlier this year. CISPE agreed to withdraw its 2022 EU complaint about unfair licensing contracts for Azure after Microsoft agreed to allow European cloud providers to offer Microsoft’s apps and services on local cloud infrastructure. Microsoft alleges that Google offered CISPE members millions of dollars in cash and credits to reject Microsoft’s settlement.

At the heart of the issue is Google’s contention that Microsoft is using anticompetitive practices to lock customers into Azure, forcing companies to pay extra to use Windows Server on rival cloud providers. This is key when companies move to the cloud and want to migrate their on-premises Windows Server licenses. Microsoft has incentives to move those licenses to Azure, but if businesses want to move them to another cloud provider, they have to pay a markup. Naturally, Microsoft disagrees that anything is unfair about this and thinks that if customers have purchased a Windows Server license for use on their own on-premises servers, they shouldn’t get a discount or credit if they want to use it on a rival cloud provider.

Google sees a clear opportunity to shape regulation in its favor. Google is still in a distant third place in cloud, behind Microsoft and Amazon, even after a leadership shakeup more than five years ago. As Google faces more than 20 antitrust investigations over its search, digital advertising, and mobile app store businesses, it’s keen to grow its cloud presence.

The bitter rivalry between Microsoft and Google has been brewing again in recent years after both companies ended a six-year truce on legal battles in 2021. In that same year, Microsoft president Brad Smith criticized Google for not sharing information on the SolarWinds attack and waded into a dispute between Google and the Australian government. Smith even testified at a House Judiciary Committee meeting in 2021 and openly criticized Google’s control over the digital ad industry, prompting an angry response from Google accusing Microsoft of trying “to break the way the open web works in an effort to undercut a rival.”

These disagreements have led to where we are this week, on the precipice of another legal war between Microsoft and Google. The two tech giants have had some big public spats over the years, which resulted in an ecosystem war that affected mutual customers. I spent far too many hours reporting on a feud between Microsoft and Google a decade ago, when the companies disagreed over a YouTube app Microsoft had built for Windows Phone. Back then, Google temporarily cut off Windows Phone users from Google Maps and surprised Microsoft by cutting off Gmail’s Exchange ActiveSync support for Windows Phone. Google also refused to develop Windows apps, undermining Microsoft’s efforts to compete with Android.

Google and Microsoft have also sparred over web browsers, with YouTube engineers secretly adding banners to try and kill off Internet Explorer 6 and Google displaying unsupported browser warnings on its web properties when Microsoft first launched its non-Chromium Edge browser. Google Meet even stopped working in Microsoft’s older Edge browser.

This latest feud over the cloud won’t end in a rosy partnership of Microsoft and Google engineers working together, though. A big part of Microsoft’s business revolves around cloud, and it’s a huge revenue driver for the company — to the tune of $24.1 billion in server and cloud services in the recent quarter alone.

Microsoft won’t be willing to budge on those lucrative server licenses and cloud revenues without a fight, especially as cloud is key to Microsoft’s AI ambitions. After investing more than $13 billion into OpenAI to position Microsoft as a leader in AI, Satya Nadella has made it clear that he wants to use AI to make Google dance and try to take market share away from Google’s search business.

I’d doubt this latest public spat will result in Microsoft creating anti-Google mugs and T-shirts, but it’s going to get increasingly messy as Google pokes holes in Microsoft’s security record and the pair invest billions of dollars to overhaul their software and services with AI. As the competition heats up, it’s clear the gloves are now well and truly off.

Today was the final day for Microsoft to hit its promise of bringing Recall to Windows Insiders by the end of October, and the AI feature is being delayed again. Microsoft says it needs more time to make sure the AI feature is “a secure and trusted experience.” Windows Insiders won’t get access to Recall until December now, meaning it’s unlikely to roll out to Copilot Plus PCs until 2025.

Microsoft had originally planned to introduce Recall with its Copilot Plus PC launch in June, but delayed it over security concerns. Recall was then supposed to appear in Windows Insider testing just weeks after the June Copilot Plus PC launch, but Microsoft went ahead and delayed that roll out to October. Now it’s December because of the overhauls Microsoft has made to Recall to make it a more secure feature that’s an opt-in experience and can be fully uninstalled.

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