The CMA has shared preliminary findings from its deep dive into the UK cloud infrastructure market, and the news isn’t great for competition. Kip Meek, who chairs the CMA’s inquiry group, suggested that the regulator should think about investigating the largest cloud service providers with its new digital market powers. The results hint that businesses could be overpaying for cloud services and may feel stuck with providers that don’t adapt to their changing needs.
In a seven-page report, the CMA highlighted a troubling lack of competition. It estimated that UK customers might be missing out on hundreds of millions of pounds in savings annually because of this. Once a company picks a cloud provider, it gets complicated to switch due to technical and commercial hurdles, which prevents them from exploring better deals or innovative services from other suppliers.
The report pointed out that AWS and Microsoft have enjoyed high profits from their cloud services for many years. Although customers recognize the quality and innovation these services offer, the report argues that a more competitive landscape would lead to fairer prices and enhanced services.
The CMA also criticized Microsoft’s licensing practices, which charge customers extra for using its software on rival clouds. This setup not only affects Microsoft’s competitors like AWS and Google but also narrows market options for consumers. Google even filed a complaint with the European Commission regarding these practices last September.
The report advocates for the CMA to utilize its new powers from the Digital Markets, Competition and Consumers Act set to take effect on January 1, 2025. By designating AWS and Microsoft as having “strategic market status,” the CMA could impose binding requirements to promote healthy competition.
However, the CMA first needs to hold a consultation on its findings, inviting feedback from stakeholders in the cloud market. The final report will come out by August 4, 2025.
AWS responded to the CMA’s findings, arguing that the proposed actions aren’t justified and warning that they could stifle innovation in the long run. They express a wish to collaborate with the CMA as it prepares its final report.
Microsoft, too, seemed to take issue with the report’s focus, suggesting it should prioritize advancements for a future powered by AI, rather than dwell on outdated products. Microsoft’s corporate vice-president noted that the cloud landscape is more dynamic and competitive than ever, attracting significant investment and rapid innovation.
On the other hand, Google Cloud welcomed the CMA’s recognition of restrictive licensing practices and their negative effect on UK cloud customers, emphasizing that such practices could hinder economic growth and innovation.