Regulator launches investigation into £7.5bn Cloud market

The Competition and Markets Authority (CMA) has launched an independent market investigation into the £7.5 billion cloud services market in the UK, following referral from Ofcom, to examine and consider whether competition concerns are holding back businesses.

The investigation aims to consider what can be done to improve the supply of these important services for UK customers as they are rapidly adopted by businesses, allowing them to capitalise on benefits such as remote access to computing resources on demand and over a network.

Ofcom has identified a number of features which make it more difficult for customers to switch and use multiple cloud suppliers including egress fees, charges to move data out of the cloud, discounts which may incentivise customers to only use one provider and technical barriers to switching, making it difficult for customers to switch or use multiple providers.

To oversee the investigation and act as decision makers, the CMA has appointed independent panel members to an inquiry group who will publish an issues statement which sets out the proposed focus of the investigation as they attempt to ensure effective competition in digital markets.

Sridhar Iyengar, Managing Director for Zoho Europe, commented: “The adoption of cloud services delivers significant benefits to businesses, including facilitating a shift to new remote and hybrid working models while promoting wealth and skills distribution. However, businesses shouldn’t get tied up in cloud contracts with limited flexibility and fees to disincentivise switching providers, so it is positive to see the CMA conducting a review of the cloud landscape.”

“Businesses should carefully evaluate their vendor partners to understand factors such as flexibility, long-term strategy and integrations to ensure cloud platforms align with their needs. A multi-cloud approach remains popular, particularly among large enterprises, and it is important for cloud providers to recognise the need for flexibility by not tying customers down to long contracts and offering features such as API connections to third-party applications. This can greatly boost customer experience for the end user and enable them to run their businesses without friction, with apps working together harmoniously.”

“Cloud will continue to become more widespread in years to come, driving further economic growth as a result, so it’s important that there are regular reviews from the CMA and other organisations to ensure that the cloud market is being maximised for businesses.”

Josh Boer, Director at tech consultancy VeUP said:“As businesses increasingly make the switch to cloud, it is good to see the CMA paving the way for increased supply and widespread adoption of cloud services for businesses. Over the coming years, it is expected that more businesses will transition to the cloud, taking advantage of cost optimisation as a top priority, while alleviating the concerns of AWS billing and cost management.”

“AWS in particular offers businesses the ability to increase agility, drive down costs and promote innovation, tapping into a suite of tailored services catering to their unique organisational requirements. However, if cloud services provide businesses with cost-related issues, the appeal can significantly decrease meaning providers must address this to allow businesses to optimise the benefits of cloud and navigate market shifts through scalable resources.”

Sarah Cardell, CEO of the CMA, said: “We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny. This is a £7.5bn market that underpins a whole host of online services – from social media to AI foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential.

“Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players – unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.”

“The CMA’s independent inquiry group will now carry out an investigation to determine whether competition in this market is working well and if not, what action should be taken to address any issues it finds.”