The Competition and Markets Authority (CMA) has concluded its two-year investigation into the UK cloud market, determining that competition is not functioning effectively. The dominance of Amazon Web Services (AWS) and Microsoft is seen as stifling choice and innovation, prompting further scrutiny into whether they should be designated with ‘strategic market status’.
AWS and Microsoft collectively control a significant portion of the UK cloud market, with each holding between 30% and 40% of cloud spend. The CMA attributes their stronghold to high switching costs, incompatible architectures, and Microsoft’s software-licensing rules that disadvantage competitors like Google Cloud and AWS. The CMA suggests that designating them with strategic market status could lead to interventions that enhance market competitiveness.
The report also highlights concerns about the UK’s overreliance on US hyperscalers like AWS and Microsoft. This trend raises issues of limited competition and choice, especially in public-sector procurement. While AI-related cloud services are on the rise, the CMA believes they have not yet significantly altered the competitive landscape. Despite differing opinions from Microsoft and AWS, the CMA’s findings could potentially reshape the UK cloud market dynamics, benefiting customers in the long run.
