With Amazon and Microsoft estimated to hold a combined 70-80 per cent cloud market share in the UK, the investigation aims to consider what can be done to improve the supply of cloud services for businesses.
Such services are rapidly being adopted by organisations, allowing for realisation of benefits such as scalability, added security, and remote access to computing resources on demand, and over networks.
However, a report by Ofcom has found that Microsoft and Amazon have been utilising tactics to prevent customers from switching to other providers, preventing them from truly aligning cloud capabilities with specific business needs.
Such measures are cited to include charging for switching to other providers, implementing barriers to prevent software interoperability, and offering discounts to firms in return for exclusive use of one cloud environment.
Two-thirds of small businesses plan to cut cloud spending — With cloud costs expected to increase by 10% this year, SMEs plan to cut the amount of data they store in the cloud or slash spending on cloud services.
“Businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, and it’s not clear that competition is working well,” said Ofcom policy director, Fergal Farragher.
“We’re referring the market to the CMA for further scrutiny, to make sure business customers continue to benefit from cloud services.”
Sarah Cardell, chief executive at the CMA, commented: “This is a £7.5bn market that underpins a whole host of online services – from social media to AI foundation models.
“Many businesses now completely rely on cloud services, making effective competition in this market essential.”
In response, a Microsoft spokesperson told The Telegraph: “We are committed to ensuring the UK cloud industry remains innovative, highly competitive and an accelerator for growth across the economy.
“We will engage constructively with the CMA as they conduct their Cloud Services Market Investigation.”
An AWS spokesperson told the FT: “We disagree with Ofcom’s findings and believe they are based on a fundamental misconception of how the IT sector functions, and the services and discounts on offer.
“Any unwarranted intervention could lead to unintended harm to IT customers and competition. AWS will work constructively with the CMA.”
Ofcom had asked the CMA to take over investigation the business practices of big tech in the UK cloud space, back in April.
Possible legal measures
Alex Haffner, competition partner at UK law firm Fladgate, believes the choice to to ask the CMA to open a market-wide investigation, on Ofcom’s part, is interesting in that it “suggests that the regulators perceive there to be structural issues with the cloud computing market that need broader investigation and consideration”.
Haffner continued: “It is also a sensible approach given the wide ranging impact that the cloud computing market has on many different industries and the broader economy, and fits with the CMA’s stated desire to target effective competition in digital markets.
“That Amazon and Microsoft are the largest players on this market raises the stakes somewhat, although compared with recent skirmishes with Microsoft in particular, the fact that a market investigation can take 18-24 months overall means that this one will likely take on a more considered path.”
Government arms Big Tech competition watchdog — Digital markets unit of competition regulator could fine Big Tech companies that abuse market position up to 10% of global turnover.
How to avoid vendor lock-in
To ensure that cloud services remain compatible with other systems, staying in line with evolving requirements, Sridhar Iyengar, managing director for Zoho Europe, advises: “Businesses should carefully evaluate their vendor partners to understand factors such as flexibility, long-term strategy and integrations to ensure cloud platforms align with their needs.
“A multi-cloud approach remains popular, particularly among large enterprises, and it is important for cloud providers to recognise the need for flexibility by not tying customers down to long contracts and offering features such as API connections to third-party applications.
“This can greatly boost customer experience for the end user and enable them to run their businesses without friction, with apps working together harmoniously.”
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Advantages of a multi-cloud strategy — Multi-cloud, using more than one hosting provider simultaneously, keeps you nimble when it comes to usage pricing and helps avoid being too indebted to a single vendor.
