An Inquiry into Competition in the UK’s Cloud Computing Market Amid Amazon and Microsoft Dominance
The UK’s cloud computing sector is under scrutiny for potential anti-competitive practices, as per media regulator Ofcom. It reported that Amazon and Microsoft collectively dominate 70-80% of the UK’s cloud computing market, while Google, the nearest competitor, holds a 5-10% share.
Ofcom had expressed concerns in April about the lack of competition, making it challenging for businesses to switch providers. Consequently, the matter has been referred to the UK’s Competition and Markets Authority (CMA) for investigation.
Both Amazon and Microsoft have expressed their willingness to cooperate with the CMA during its inquiry. However, Amazon disagreed with Ofcom’s concerns, citing a “fundamental misconception” about the sector.
Cloud computing, broadly defined as online data storage accessible from anywhere, has become integral for businesses and individuals alike. It facilitates data storage, remote software use, music and video streaming, and gaming. Major cloud providers, including Amazon and Microsoft, own vast networks of powerful machines housed in massive data centers worldwide.
In 2022, the UK’s cloud services market was estimated to be worth up to £7.5 billion, serving businesses across the country. Effective competition in this sector is crucial, given the increasing reliance of businesses on cloud services.
The CMA plans to complete its investigation by April 2025 and has the authority to compel companies to alter practices, block acquisitions, or divest parts of their businesses if market integrity is at risk.
Ofcom’s concerns also center on obstacles to switching cloud providers, including fees for transferring data to a rival service. Such fees discourage users from exploring alternative services.
Fergal Farragher, Ofcom’s consumer protection director, emphasized the importance of ensuring the cloud services market benefits UK consumers and businesses. He suggested limiting or eliminating data transfer fees as a potential remedy.
Rival companies like IBM and Oracle should have the opportunity to challenge the dominance of major cloud providers. Microsoft and Amazon have pledged to engage constructively in the CMA’s Cloud Services Market Investigation, emphasizing their commitment to maintaining a competitive UK cloud industry. Amazon highlighted that a small percentage of IT spending is on cloud services and that customers have multiple options for meeting their IT needs.
