World Stock Watch

Cloud Computing Market Under Scrutiny

The UK’s Competition and Markets Authority (CMA) has raised concerns over the lack of competition in the cloud computing market, which is valued at £9 billion ($11.18 billion) and growing at a rate of over 30% year-on-year. The regulator has identified Microsoft and Amazon as the dominant players, with each holding a market share of up to 40% of UK customer spend on cloud services.

Limited Choice for Businesses

Currently, businesses have limited options when it comes to cloud service providers, which can lead to higher costs and reduced innovation. The CMA is concerned that this lack of competition may hinder the growth of the market and stifle innovation.

Key Issues in the Cloud Market

Several factors are contributing to the competition issues in the cloud market, including:

• Egress fees: charges imposed on businesses for transferring data from one cloud to another
• Licensing fees: costs associated with using certain software or technologies
• Volume discounts: discounts offered to businesses that commit to large volumes of cloud services
• Interoperability issues: difficulties in switching between different cloud providers due to compatibility issues

A History of Concerns

The CMA’s investigation into the cloud market began in 2022, when the UK’s telecoms regulator, Ofcom, launched a market study into the dominance of cloud giants Amazon, Microsoft, and Google. Ofcom subsequently referred its cloud review to the CMA to address competition issues in the market.

US Tech Giants Dominate the Market

The cloud infrastructure services market is dominated by US technology giants Amazon and Microsoft. Amazon’s Amazon Web Services (AWS) arm is the largest player, while Microsoft’s Microsoft Azure unit is the second-largest.

Next Steps

The CMA’s provisional findings will inform its decision on whether to launch a full investigation into the cloud market under new digital markets legislation. The regulator is seeking feedback from stakeholders and will make a final decision in the coming months.