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UK Regulator Recommends Investigation of Cloud Computing Market
UK regulator Ofcom has released a report detailing its concerns about the cloud computing market, referring the matter for further investigation.
Concerns about the cloud computing market have been growing in both Europe and the EU. Accusations have been mounting that cloud licensing agreements disadvantage smaller competitors to the industry’s big names.
Ofcom has concluded its initial look at the cloud computing market and recommended that the UK’s Competition and Markets Authority launch a formal investigation of the market, as it explained in its Cloud Service Market Study Interim Report:
There are two leading providers of cloud infrastructure services in the UK: Amazon Web Services (AWS) and Microsoft, who had a combined market share of 60% to 70% in 2021.2 Google is their closest competitor with a share of 5% to 10%. Collectively these firms are referred to as the ‘hyperscalers’ and the vast majority of customers use their cloud services in some form. A diverse set of independent software vendors (ISVs) build their products on cloud infrastructure from the hyperscalers, but also compete directly with some of their services.
At this interim stage of our study we have found some evidence of active competition in cloud infrastructure, especially where providers are competing to attract new customers who are moving to the cloud for the first time. There are indications that this is contributing to benefits for customers, including product innovation, discounts and a wide choice of software services from ISVs.
The regulator took issue with vendor lock-in, which limits customers’ ability to use multi-cloud setups or switch vendors altogether, as well as higher prices that UK customers are paying.
As a result, we are concerned that a significant number of customers, especially those with more complex requirements, may face material barriers to switching and multi-cloud. This could leave some customers ‘locked in’ to one of the leading providers. We expect this will be true of an increasing number of customers as the market matures. We are most concerned in relation to AWS and Microsoft, given their market position and the fact they display some form of all the above behaviours that limit competition.
There are indications these market features are causing harm today, with some existing cloud customers paying more or settling for lower quality services, which in turn can lead to negative impacts for UK consumers. We see evidence of customers already in the cloud facing significant price increases when they come to renew their contracts. We have also heard concerns from some customers about their ability to switch and use multiple providers, which limits their access to the best quality products. High levels of profitability for the market leaders AWS and Microsoft and a gradual increase in market concentration indicate there are limits to the overall level of competition.
Ofcom took special note of growing accusations that Microsoft’s licensing practices put its smaller competitors at a major disadvantage.
We have also heard concerns about Microsoft’s licensing practices in relation to some of the enterprise software services it provides to business customers. These allege that Microsoft sells certain software services in a way that makes it less attractive to use them on rival cloud infrastructure compared to its own called Azure. Microsoft disputes the veracity of the concerns. While the concerns raised stem from a market outside the scope of our study, it is possible they could dampen competition in cloud infrastructure. Ofcom and the CMA will consider the most appropriate way forward on these issues.
Ofcom says it will publish its final report by October 5, 2023, but is recommending that the CMA launch a formal investigation.
UK Regulator Recommends Investigation of Cloud Computing Market
Matt Milano
from WebProNews https://ift.tt/iV6M47W
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