The UK’s Competition and Markets Authority (CMA) has launched a Strategic Market Status (SMS) investigation into Microsoft’s business software ecosystem. For organizations responsible for Microsoft Licensing, the investigation raises important questions around customer choice, cloud strategy, interoperability, and future commercial models.

The investigation will assess whether Microsoft holds substantial and entrenched market power across a range of products and services, including Microsoft 365, Office applications, Teams, Copilot, Windows Server, SQL Server, security solutions, Windows 11 and related cloud services.

At this stage, the investigation is exactly that: an investigation. No conclusions have been reached, and no remedies have been imposed.

However, the announcement is significant because it forms part of a broader trend of regulatory scrutiny focused on large technology ecosystems and how they influence competition, customer choice, and software procurement decisions.

Understanding the Investigation

The investigation is being conducted under the UK’s Digital Markets, Competition and Consumers Act (DMCC), which introduced a new framework for regulating organizations considered to hold substantial market power in digital markets.

The CMA has up to nine months to determine whether Microsoft should be designated with Strategic Market Status. If designated, Microsoft could become subject to targeted measures intended to promote competition, improve customer choice, and address areas where regulators believe market power may be limiting competitive outcomes.

Importantly, SMS designation is not a finding of misconduct. Rather, it creates a framework through which the regulator can introduce specific interventions where it believes they are necessary.

This Is Not Happening in Isolation

The announcement follows several years of increasing regulatory attention on major software and cloud providers.

Most notably, the European Commission recently accepted a series of commitments from Microsoft relating to the bundling of Teams with Microsoft 365 and Office 365. Those changes resulted in greater flexibility for customers and additional purchasing options across Europe.

Regulatory scrutiny is not limited to Europe. In the United States, reports indicate that the Federal Trade Commission (FTC) has expanded its own investigation into Microsoft, examining areas including cloud services, AI, cybersecurity, and software bundling. While the scope and regulatory frameworks differ, it reinforces the fact that Microsoft’s software ecosystem is increasingly attracting attention from competition authorities across multiple jurisdictions.

Closer to home, the CMA’s Cloud Services Market Investigation has already highlighted concerns around competition within the cloud market.

In its provisional findings, the CMA stated that Microsoft holds significant market power across products including Windows Server, SQL Server, Windows Desktop, Visual Studio, and Microsoft productivity suites. The regulator also provisionally concluded that Microsoft’s licensing practices may be affecting competition between cloud providers.

The report went further, provisionally finding that Microsoft’s licensing practices have the ability and incentive to partially foreclose competing cloud providers and may be harming competition within UK cloud services markets.

These findings remain provisional and may change before the CMA reaches its final conclusions. Nevertheless, they provide important context for understanding why Microsoft’s broader software ecosystem is now receiving additional scrutiny.

What Could Change?

It would be premature to predict specific outcomes from the investigation.

However, if the CMA ultimately designates Microsoft with Strategic Market Status, potential areas of focus could include:

• Product bundling and packaging approaches
• Interoperability between Microsoft and third-party platforms
• Default settings and product preferences
• Licensing arrangements across different cloud providers
• Customer portability and switching options
• Access to competing AI and collaboration platforms

None of these outcomes are guaranteed, but they reflect the types of concerns regulators have increasingly focused on across digital markets.

For organizations that rely heavily on Microsoft technologies, any future changes could influence procurement strategies, renewal discussions, cloud adoption plans, and long-term technology roadmaps.

What Should Customers Do About Microsoft Licensing Now?

The immediate answer is not to wait for regulators.

Regardless of the outcome, organizations should focus on understanding their current Microsoft position.

Many organizations continue to renew agreements, add subscriptions, and adopt new services without a clear view of what is deployed, what is being used, and where genuine business value is being generated.

That visibility becomes increasingly important during periods of market change.

Whether future regulatory intervention results in new licensing structures, greater flexibility, or increased customer choice, organizations that understand their current estate will be best placed to take advantage of any opportunities that emerge.

This is particularly relevant as Microsoft continues to evolve its cloud, AI, and productivity offerings at a rapid pace.

Looking Ahead

The CMA’s investigation is unlikely to create immediate change for customers.

However, it represents another important milestone in the wider conversation around competition, cloud services, AI platforms, and software ecosystems.

The broader question is no longer simply how organizations approach Microsoft Licensing. It is increasingly about how software ecosystems influence customer choice, cloud strategy, procurement flexibility, and long-term commercial control.

As regulators continue to examine these issues, organizations should pay close attention.

Regardless of the outcome of the CMA investigation, organizations that maintain visibility of their Microsoft Licensing estate, consumption patterns, and contractual commitments will be best positioned to respond to future market changes.

Lucy Baker, Senior Microsoft Consultant

Lucy Baker is a Senior Microsoft Licensing and IT Asset Management Consultant with extensive expertise in license risk remediation, optimisation, and audit defence. Known for delivering tailored, customer-focused solutions, Lucy specialises in Microsoft 365 optimisation, contract negotiation, and ITAM strategy, helping organisations navigate complex licensing environments with innovative thinking and precision.