News & Insights

State Lawmakers Should Address Restrictive Software Licensing in New Legislative Sessions

Restrictive licensing impedes digital transformations and hurts taxpayers 

By Steve Lohr, Chief Executive Officer, Evolve Cloud Services

As state lawmakers and governors around the country begin new legislative sessions, many will be seeking ways to improve their states’ IT capabilities, while also protecting taxpayer dollars. 

These policymakers should look no further than finally addressing restrictive software licensing brought on by legacy software companies. In recent years, software companies like Microsoft, Oracle, SAP and others have imposed restrictive software licensing terms on states that have both impeded their digital transformations and put taxpayer dollars at risk. State legislators should take immediate action to address these companies’ bully tactics that hurt their state’s digital infrastructure and the voters they serve. 

Legacy software companies have taken advantage of states – hurting digital transformations and taxpayers alike 

Cloud computing services enable state Chief Information Officers (CIOs) to procure and operate IT systems in a way that improves efficiency, promotes resilience, strengthens cybersecurity, and protects taxpayer dollars. 

Unfortunately, legacy software providers like Microsoft are taking advantage of a lack of healthy market competition and strapping states with restrictive software licensing terms that cause contractual, financial, and technical barriers that limit choices within the cloud. This includes software that CIOs and other state employees rely on everyday, such as productivity applications, operating systems, identity management, and even database software. 

This conduct not only hurts competition, but also puts innovation and cybersecurity at risk. That’s because if a state relies on only one software vendor, they lose the ability to provide checks and balances on their system, potentially putting sensitive information in the hands of hackers. 

In 2019, Microsoft made significant volume licensing changes which limited customers’ ability to bring their previously purchased Microsoft software to any cloud provider other than Azure. As a result of these changes, one of the many products that was greatly affected was Windows Server.  

Ten years ago, customers who purchased a Windows Server license and paid the annual software assurance on that license could run the most current version of Windows Server on any infrastructure of their choosing. Microsoft’s 2019 changes limited this ability. Under the new rule, customers running a previously purchased license on a cloud provider other than Azure or one of Microsoft’s Listed Providers were only able to run up to Windows Server 2019.  

These changes and the risk of more aggressive measures limit the ability of customers, including states, to choose the best cloud for them. 

The lack of competition and innovation threatens taxpayer dollars and undermines what should be an efficient and straightforward procurement process. 

States can take action to protect taxpayers from legacy software companies

The good news is that there are legislative and executive solutions to address these restrictive licensing practices and promotes fiscal responsibility. 

For example, state legislatures can pass laws requiring that any public agency contract for software designed to run on generally available desktop or server hardware may not limit the ability of the agency to install and run software on the hardware of the public agency’s choosing. In 2022, Colorado and Missouri became the first states to codify this important concept, and more than a dozen states are exploring similar legislation in 2023.

Additionally, there has already been promising action on the federal side. The 2022 National Defense Authorization Act adopted a provision ordering the U.S. Government Accountability Office to conduct a review of existing software licensing contracts and cloud adoption at the Department of Defense to examine whether these types of unfair licensing terms have resulted in increased costs. This is a step in the right direction, and one that state policymakers around the country should emulate. 

The permanent solution is adopting the Principles for Fair Software Licensing

More broadly, the Principles for Fair Software Licensing promote transparency and choice when it comes to which software systems states use. By implementing these principles, state policymakers can take important steps towards strengthening their IT systems and protecting taxpayer dollars. State lawmakers and governors should adhere to these principles as they carry out their 2023 agendas. 


As a healthcare software provider, our ability to utilize the cloud provider of our choice impacts more than just our business – it affects the health and well-being of patients everywhere. Restrictive software licensing imposes real-world threats like pricing increases that directly influence how we are able to assist healthcare providers and the patients they serve. We support the Principles of Fair Software Licensing to protect both cloud customers and the communities they serve.

Healthcare Technology Company

Cloud computing has brought low-cost, on-demand IT services to every corner of the economy, raising productivity and innovation levels at enterprises of all sizes. And intense competition and innovation among cloud providers continues to drive costs down while adding new customer capabilities.

But some incumbent IT vendors are imposing restrictive software licenses to limit how customers can take advantage of competing cloud offerings.

NetChoice supports the Principles of Fair Software Licensing as a roadmap to drive innovation, serve customers, and promote competition in IT services.


Frustration, use limitations, threatened audits, and significant additional expenses. That has been our experience with unfair software licensing. Organizations need transparency from their software providers.

We support the work of the Coalition for Fair Software Licensing to protect customers and ensure IT spend is effective and free from surprises.

Global Building Materials Supplier

Unfair software licensing practices in the cloud are a global issue, and CISPE is pleased that the Coalition for Fair Software Licensing is taking the Principles to North America.

Originally launched and jointly conceived by customers and cloud providers in Europe, we encourage customers around the world confronted with unfair software licensing practices to consider the Principles as a powerful framework for positive change.


As start-ups, it is essential that we retain flexibility to use the cloud infrastructures that fit best our aspirations and those of our customers. The Principles of Fair Software Licensing help the next generation of software and service providers to avoid lock in and ensure a fair playing field for all. Seeing their adoption in North America adds weight to this important movement for innovators in Spain and worldwide.

Carlos Mateo Enseñat

President, Asociación Española de Startups (AES), and Promoter of the NUBES Initiative in Spain

Developed in Europe by CIOs and cloud providers, the Principles of Fair Software Licensing are supported by digital organizations in Italy such as Assintel. Assintel welcomes the Coalition for Fair Software Licensing’s embrace of the Principles in North America. Fair licensing of software in the cloud is a global issue for businesses of all sizes. In Italy, our government recognises this challenge and just updated its antitrust bill to put an end to unfair software licensing practices.

Businesses in North America can benefit just as well as those in Italy from a best practice framework for software licensing.

Paola Generali

President, Assintel

As a longtime advocate for open systems and open networks, CCIA supports the competitive ideals reflected in the Principles of Fair Software Licensing for Cloud Customers as the Coalition embarks upon its efforts in North America.

Matt Schruers

President, CCIA

Some legacy software providers are attempting to extend their current on-premise market dominance into the cloud market through aggressive and restrictive contracts, licensing terms, and software audits.

While many promote ‘cloud freedom,’ in actuality they are employing tactics designed to lock out competition and innovation while increasing profits for themselves at the expense of their customers. No longer can legacy software providers be allowed to disguise their predatory practices.

I am proud to align myself with the Coalition for Fair Software Licensing in shining a light on these issues and putting forth actionable solutions.

Craig Guarente

Founder and CEO, Palisade Compliance

Despite the current spotlight on antitrust issues in Washington, behemoth software providers continue to misuse their legacy status and market power to target business customers with predatory audits and trap those customers in restrictive licensing agreements.

Through our practice — dedicated to representing software licensees against these very tactics — we have seen first-hand the real world effects of such licensing practices. Both growing and established companies are routinely kneecapped by unexpected costs, forced to waste immeasurable resources in spurious audit defense, and stymied in their efforts to make the technology changes they believe are necessary for their business.

We support the Principles of Fair Software Licensing and believe they represent an excellent and necessary step towards much needed business consumer relief and will help open the market to smaller providers in the cloud ecosystem.

Arthur S. Beeman & Joel T. Muchmore

Founding Partners, Beeman & Muchmore, LLP

Consumers benefit from a competitive, dynamic information technology marketplace. Competition drives innovation and ensures that customers get the benefit of fair pricing.

Overly restrictive, abusive licensing agreements from IT companies with market power, on the other hand, impose costs on government and corporate customers of reduced innovation and long-term price increases. We support the Principles of Fair Software Licensing and policies that encourage innovation, competition, and licensing practices that give customers the freedom to mix and match solutions from a wide variety of vendors.

This is particularly critical in the market for cyber security solutions since hackers are innovating every day, leveraging new strategies, new tactics, and new technologies to support their illegal campaigns. The only way to defeat nation states and trans-national criminal organizations is for the government to ensure that the IT market for cyber security is as competitive as possible and customers have the freedom to choose.

Cybersecurity Provider

The Alliance for Digital Innovation supports the Coalition for Fair Software Licensing’s efforts to protect customer choice and advocate for access to modern, secure commercial solutions.

As advocates for public sector customers, we think that government mission owners and enterprise information technology and cybersecurity leaders should have access to as many modern commercial solutions as possible.

These solutions are critical components to driving digital innovation and security in the public sector, and ADI supports removing barriers that slow adoption of those solutions, including restrictive licensing practices.

Alliance for Digital Innovation

As an attorney, I have represented enterprise software customers for years and have routinely seen enterprise software companies deploy predatory business practices, including falsely inflating alleged non-compliance gaps, to increase profits and limit customers’ ability to go elsewhere.

These practices produce causal effects throughout the economy including increased prices, as businesses across various sectors are forced to spend resources dealing with these unforeseen issues. I support the work of the Coalition for Fair Software Licensing to help my clients and enhance an economy that provides opportunities to all.

Pam Fulmer

Founder and Partner, Tactical Law Group LLP

We believe licensees should be able to deploy licensed software in a way that best suits their business, including their choice of cloud provider at no additional cost. Having experienced licensing practices inconsistent with the Principles of Fair Software Licensing, we support the Principles and urge others to support both them and the Coalition for Fair Software Licensing.

Insurance Industry Business

Startups, often operating with limited resources, need the freedom to assemble the technology infrastructure that best suits their needs.

Cloud computing infrastructure is central to startup growth, and the Principles of Fair Software Licensing will help maintain accountability, mitigate unnecessary costs, and promote innovation in this environment.

Industry-wide adherence to these principles will level the playing field for startups.


Get Involved

Learn more about joining the Coalition or expressing support for its Principles