Amazon Web Services and Microsoft could soon find themselves under investigation by the Competition and Markets Authority, after an independent inquiry group released its provisional findings from its investigation into the UK cloud market. 

The CMA’s independent inquiry group has provisionally found that competition in the UK’s £9 billion cloud services market is not working as well as it could, potentially leading to higher prices, less innovation and reduced service quality.

Cloud services have become vital digital infrastructure, enabling faster innovation and greater productivity for businesses across the UK. In 2023 alone, financial services, retailers, technology start-ups and public sector organisations spent £9 billion on cloud services, with the market growing by more than 30% every year.

In its newly published provisional findings, the inquiry group highlighted that Amazon Web Services (AWS) and Microsoft each command up to 40% of the UK cloud market share. This, coupled with various technical and commercial barriers to switching or using multiple providers, is making it challenging for new entrants to gain a foothold. The inquiry group also identified concerns around Microsoft’s software licensing arrangements and how they may affect the ability of AWS and Google to compete.

With these concerns in mind, the inquiry group is recommending that the CMA board considers using its forthcoming powers under the Digital Markets, Competition and Consumers Act 2024 (DMCCA) to investigate AWS and Microsoft for potential ‘strategic market status’ (SMS) in cloud services.

Kip Meek, Chair of the CMA’s independent inquiry group, commented, “Cloud services underpin most business operations, providing vital infrastructure to businesses and organisations across the UK economy. Our provisional view is that competition in this market is not working as well as it could be. So, we propose that the CMA considers investigating the largest cloud service providers using its new digital markets powers.

“Effective competition in the delivery of these vital services could drive choice, quality and competitive prices – not only helping UK businesses but boosting innovation, productivity, growth and investment across the UK economy.”

How has the industry responded?

Many within the industry are unsurprised by the CMA independent inquiry group’s provisional findings, especially as there has been moves from within the sector itself to open up the cloud market to more competition. This includes the recent launch of the Open Cloud Coalition, which is campaigning to make it easier to transition between cloud environments – something that can be challenging for those currently deeply embedded in AWS or Microsoft’s Azure. 

Paul Mackay, RVP Cloud EMEA & APAC at Cloudera, believed that no matter the outcome of the investigation, it’s unlikely to trigger big moves within the cloud market, noting, “Many organisations will welcome the preliminary findings from the CMA, as technical and financial hurdles have limited customers’ ability to move data from one cloud environment to another and hindered their ability to unlock the potential of cloud. Irrespective of the final verdict, we are unlikely to see a switching frenzy. 

“In reality, we’re more likely to see customers moving subsets of data between clouds rather than full-scale migrations. The regular movement of these smaller subsets means that the hyperscalers will see just as much data entering their clouds as leaving. The challenge for customers will be having the technical capability and skills to securely move data at will. Migrating data between cloud environments will remain a time consuming, costly endeavour, but overcoming this self-imposed lock-in will be a vital next step.”

Dave Friend, Co-Founder and CEO of Wasabi Technologies, agreed with the CMA’s findings, commenting, “The hyperscalers, namely Amazon, Google, and Microsoft, employ what some consider to be anti-competitive practices in the way they bundle and price their cloud services. With respect to data storage in particular, all of them not only charge customers to store data, but they also charge them to retrieve their data. These so-called ‘egress fees’ typically account for nearly half of all data storage costs. To put it another way, it’s free to send data to the hyperscalers, but it is expensive to take it out. Once you have sent data to one of the hyperscalers, it may be prohibitively expensive to move it to another vendor. In the IT industry, this kind of pricing is referred to as ‘vendor lock-in’.

“Another anti-competitive practice is the bundling of commodity services, like storage and compute, with proprietary services offered by the vendors, such as voice recognition, analytics, block-chain, etc. It is not uncommon for a vendor to say, ‘We will sell you our proprietary services, but only if you buy our storage and compute’. They will offer a prix fixe price for a bundle of services that is far less expensive than buying them a la carte.

“In short, the hyperscalers have tried to create walled gardens and they want to discourage customers from piecing together solutions from a variety of vendors. This kind of potentially predatory pricing and bundling makes it difficult for customers to assemble a solution from multiple vendors, choosing best-of-breed services from each vendor. Unfortunately, such anti-competitive business models have a long history in the IT industry.”

Solange Viegas Dos Reis, Chief Legal Officer at OVHcloud, added, “The provisional findings published by the CMA today are an important development for the cloud market. They confirm the existence of significant harmful practices from Big Tech companies in the cloud, limiting users’ freedom of choice and alternative providers’ ability to compete. As the cloud market has never been so concentrated, with the risk to see AI reinforce unfair practices from market leaders, CMA must now ensure these provisional findings translate into concrete and rapid actions in favor of fair competition.

“The measures proposed by CMA are going in the right direction. The designation of certain market leaders as companies with Strategic Market Status should give the CMA sufficient flexibility to address their ever-evolving unfair practices, including new ones implemented in the AI market. The CMA should evaluate the opportunity of extending this designation to other large providers currently engaging in unfair practices in the market.

“The CMA has a unique opportunity to lead the way by being the first competition authority in the world to take actions against Big Tech in the cloud. It must not miss this chance to prove that unfair practices can be stopped and that fair competition in the cloud can be reached.”

According to the inquiry group, removing barriers to switching and allowing a wider range of cloud providers could open the door to greater innovation, lower costs and a more dynamic marketplace. With final rulings expected by August 2025, the CMA’s recommendations – including a fresh look at AWS and Microsoft under the DMCCA – could reshape how the cloud sector evolves in the UK.