The UK’s cloud computing industry is set to undergo a competition inquiry due to concerns that Amazon and Microsoft have a stranglehold on the market. Ofcom, the media regulator, has stated that the pair of tech giants currently account for between 70% to 80% of the market, with their closest rival, Google, holding just 5% to 10%. This lack of competition makes it arduous for businesses to swap out their cloud providers, which has led to concerns from Ofcom that new entrants cannot enter the market.
The market for cloud services in the UK was estimated to be worth up to £7.5 billion in 2022 by Ofcom, as it is a popular solution for UK businesses, but the watchdog is concerned that this reliance on a few big providers could lead to market power being transferred into their hands. The Competition and Markets Authority (CMA) will be conducting the investigation into the industry, with the CMA’s independent inquiry team investigating to determine if competition is functioning correctly and what action should be taken if it is not.
Ofcom’s consumer protection director, Fergal Farragher, stated that cloud computing is “the hidden plumbing that underpins many of the digital services that businesses and consumers use every day”. However, he added that Ofcom had concerns that competition was not working as well as it should be in this area. The fees that providers charge for switching between services are a significant barrier to companies adopting different services, but providers like IBM and Oracle should have the chance to challenge the current market leaders, according to Ofcom.
Amazon and Microsoft criticized Ofcom’s previous report from April, with both pointing out that the issues raised by the regulator were not comprehensive. Amazon argued that the issues raised by Ofcom were based on a misunderstanding of cloud computing, while Microsoft argued that any intervention by the CMA could harm UK businesses. The CMA hopes to complete its investigation into the market by April 2025, with the end goal being a market that functions well for UK consumers and businesses.
In conclusion, this inquiry will show whether market competition in UK cloud computing is working correctly or not and what action should be taken to solve any issues. A lack of competition makes it hard for companies to switch to new providers, as Amazon and Microsoft control the majority of the market, leading to concerns that new entrants cannot enter the market. Fees charged when switching between providers are also a significant barrier, and service providers such as IBM and Oracle should have the chance to challenge the market leaders
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