How is that an unreasonable restriction for Google to ensure the work they pay for is usable in the company's products

I doubt it's about competition. Massive portions of Azure are developed completely completely open source, even though there are clear competitors.

Third party licenses, such as Adobe's font parsing, would need to get relicensed or rewritten to have a usable system.

You should listen to Bryan Cantrill's rant on Sun's disastrous attempt at opening up Solaris. This isn't an easy task.

https://youtu.be/-zRN7XLCRhc

This is pure speculation on my part, but would the parts of Azure Microsoft has open sourced be useful to their competitors? I think Google and Amazon would prefer their own ground-up implementations that work well with their systems. Furthermore, becoming a cloud provider takes a lot of infrastructure, so I'd consider it unlikely that a competitor would spring up using Microsoft's software.

Yes, software this essential also always comes with certain (non-technical) processes attached to it. This is usually my argument to corporate for opening up software that is extremely well tailored to our needs. A competitor would have to revamp entire divisions to make proper use out of it.

Funny enough though that not changing your process to fit software but trying it the other way around is the reason most SAP integration projects fail.