Fears about Amazon and Microsoft cloud computing dominance trigger UK probe

by Gabriel Martinez
Cloud Computing Market Competition

Worries regarding the dominance of Amazon and Microsoft in the United Kingdom’s cloud computing sector have prompted an inquiry into the competitiveness of this critical industry.

On Thursday, the UK communications regulator, Ofcom, revealed the outcomes of its yearlong examination of the market for cloud communications services, indicating potential factors that could constrain competition. The report highlighted that British businesses encounter impediments when attempting to switch between or utilize multiple cloud service providers.

Cloud computing, a service that relies on global data centers for storing photos, emails, and running software, has grown indispensable for numerous enterprises seeking to circumvent the expenses associated with procuring costly infrastructure and real estate for their data centers.

Consequently, Ofcom has enlisted the assistance of the UK’s antitrust authority, the Competition and Markets Authority (CMA), to conduct an extensive review of the £7.5 billion ($9 billion) cloud market. This investigation is expected to conclude by April 2025.

Ofcom’s director responsible for the market study, Fergal Farragher, noted in a press release, “Some UK businesses have voiced concerns about the difficulty of transitioning between cloud providers or combining services from multiple providers, raising questions about the effectiveness of competition.” He further stated, “Therefore, we are referring the market to the CMA for closer examination to ensure that business customers continue to derive benefits from cloud services.”

Ofcom has expressed particular apprehension about the commanding position held by Amazon and Microsoft, who jointly account for 70% to 80% of the cloud market share. Google lags behind with a 5% to 10% market share, while smaller players constitute the remainder.

Amazon Web Services, the cloud computing arm of the online retail giant, contested Ofcom’s conclusions, asserting that they are rooted in a fundamental misunderstanding of the functioning of the IT sector and the services and discounts available. The company declared, “The cloud has made switching between providers easier than ever. Any unwarranted intervention could lead to unintended harm to IT customers and competition.”

Both Amazon and Microsoft have pledged to cooperate constructively with the CMA. Microsoft issued a statement affirming their commitment to fostering an innovative, highly competitive UK cloud industry that acts as an engine for economic growth.

Ofcom has cited concerns over fees, technical barriers, and incentives that might dissuade customers from changing providers or utilizing multiple ones. The CMA’s inquiry will focus on assessing the effectiveness of competition in the market and determining appropriate actions if it is found to be lacking.

Frequently Asked Questions (FAQs) about Cloud Computing Market Competition

What is the primary concern highlighted in this news article?

The primary concern raised in this news article is the dominance of Amazon and Microsoft in the cloud computing market in the United Kingdom and its potential impact on competition.

Why is this dominance a cause for investigation?

Regulators are concerned that the dominance of Amazon and Microsoft, which together hold a substantial market share, might limit competition and hinder the ability of businesses to switch between or use multiple cloud service providers. This investigation aims to assess whether competition in the market is functioning effectively.

What is the role of Ofcom in this matter?

Ofcom, the UK communications regulator, conducted a yearlong study of the cloud communications services market and identified issues that could restrict competition. They have referred the matter to the Competition and Markets Authority (CMA) for a more comprehensive investigation.

What are the potential consequences of limited competition in the cloud computing market?

Limited competition could result in higher fees, technical barriers, and reduced incentives for customers to change or utilize multiple cloud providers. This could impact the ability of businesses to access cost-effective and diverse cloud services.

How do the major cloud providers, Amazon and Microsoft, respond to these concerns?

Both Amazon and Microsoft have expressed willingness to work constructively with the CMA. Amazon Web Services disagreed with Ofcom’s findings, claiming that the cloud market makes switching between providers easier than ever and that unwarranted intervention could harm customers and competition. Microsoft emphasized its commitment to ensuring a highly competitive and innovative cloud industry in the UK.

What is the timeline for this investigation?

The investigation by the Competition and Markets Authority (CMA) is expected to conclude by April 2025, during which it will assess the effectiveness of competition in the cloud computing market and determine any necessary actions.

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Journoman October 5, 2023 - 3:35 pm

woah, big probs 4 Amazon n Micrsoft in UK’s cloud mkt, cntrol 70-80%! Regulators worried ’bout comptitshn. Ofcom sends it to CMA. Amazon/Microsft not happy, say cloud easy2 switch. But CMA chck it out by Apr 2025.

BizGuru October 5, 2023 - 9:21 pm

Cloud’s big 4 biz, saves $$$. But Ofcom frets abt fees, tech barriers. Amazon n Microsft say Ofcom wrong, cloud’s smooth. Hope CMA sort this out.

EconWhiz October 5, 2023 - 10:41 pm

Cloud’s key 4 growth. Both Amazon n Microsoft wanna help CMA. Fees, tech stuff in focus. Let’s see what CMA does.

TechGeek October 6, 2023 - 3:43 am

Google’s got tiny share, rest small players. Ofcom thinks lack of choice bad. CMA investigates. AWS/Microsoft claim Ofcom doesn’t get IT.


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