Amazon Web Services (AWS) is facing criticism for allegedly exaggerating the competitive threat posed by enterprises relocating their workloads back to on-premise data centres.
In a recent statement to the Competition and Markets Authority (CMA) regarding its ongoing investigation into the UK cloud infrastructure sector, AWS highlighted the trend of enterprises seeking to return to on-premise setups as a potential risk to its business. AWS argued that this factor should be considered during the CMA’s examination of possible anti-competitive practices in the cloud infrastructure services market.
AWS contended that the CMA’s investigation focuses too narrowly on cloud services without considering the broader IT services landscape, asserting that any conclusions regarding adverse effects on competition may not hold up to scrutiny. “The market investigation’s narrow focus on cloud services does not contextualise the role of those on-premise services within the IT services market,” AWS noted, as reported in a summary document released by the CMA on September 16, 2024. The tech giant emphasized that there is “intense competition in the cloud market” and that customers have “more choices than ever” regarding where to host their workloads, with cloud services constituting only about 15% of the overall IT services market.
AWS also countered the common perception that once customers migrate to the cloud, they do not return to on-premises solutions. “This perception is not correct,” they stated, suggesting that the CMA’s scope should be expanded. They highlighted how, 10 to 20 years ago, switching between on-premise data centre providers required substantial capital investment and lengthy migrations, whereas today’s cloud market is characterized by fierce competition and greater customer choice.
The cloud giant acknowledged that its business faces competition from enterprises that choose to move their applications back to on-premise IT, even though this process requires considerable effort. The evidence AWS presented indicated that the very act of building a data centre reflects customers’ flexibility and the allure of returning to on-premise solutions.
However, some experts in the cloud industry believe that AWS is overstating the competitive threat from on-premise environments. Owen Sayers, an independent security consultant and enterprise architect with over 20 years of experience, pointed out that by comparing the growth rates of hyperscale data centre developments to those of enterprise-sized builds, one can see flaws in AWS’s argument. “In the UK, significant data centre investments have mostly been driven by social media giants or hyperscalers,” he noted, adding that while AWS is constructing large data facilities, smaller UK providers struggle for business.
Ed Anderson, a distinguished vice-president and analyst at Gartner, echoed this sentiment. He stated that while there are exceptions, instances of enterprises relocating workloads back from the cloud to on-premise systems are rare. “We don’t consider repatriation to be a trend,” he emphasized. Instead, organizations continue to adopt a hybrid approach, utilizing both cloud and on-premises data centres to meet their evolving technology needs.
Anderson predicted growth for both cloud and data centre markets, with cloud growth expected to significantly outpace that of traditional data centres. He remarked on the overall health and expansion of cloud markets, asserting that leading providers like AWS, Microsoft, and Google are well-positioned to take advantage of this growth. Additionally, Lydia Leong, another distinguished vice-president analyst at Gartner, reinforced that while cloud repatriation is not becoming a trend, there is an observed increase in “lift-and-shift” migrations to public cloud services. “There is no broad trend of ‘cloud migration reversal’ – in fact, organizations are increasingly considering lift-and-shift migrations despite their established inefficiencies and historical lack of cost savings.”