Tech giants Amazon and Microsoft have come under fire as media regulator Ofcom said it would refer the cloud market to the UK competition watchdog after uncovering what it called “concerning practices” by key market players during an investigation.
Ofcom said it was calling in the Competition and Markets Authority because it was “particularly concerned about the practices of Amazon and Microsoft because of their market position” which it said were “already causing harm” to customers. Amazon Web Services (AWS) and Microsoft have a combined share of the cloud market in the UK of up to 70%, the regulator said.
Charging customers to leave the cloud, restrictions on operating different providers simultaneously and offering discounts to move all cloud services to one provider were among the issues raised during the probe, which Ofcom said made it harder for customers to switch providers and inhibited the ability of rival cloud businesses to compete.
Ofcom director Fergal Farragher said he had “uncovered some concerning practices, including by some of the biggest tech firms in the world.
“High barriers to switching are already harming competition in what is a fast-growing market. We think more in-depth scrutiny is needed.”
The size of the UK’s cloud market has ballooned in recent years, with spending on cloud services set to rise to 45% of global business IT spend by 2026, up from less than 17% in 2021, according to one estimate cited by Ofcom. As much as £20.1 billion was spent on the cloud infrastructure in the public sector alone last year, according to a study by GlobalData.
It comes after Microsoft announced it was putting its Azure cloud service prices up by 11% in Europe, in a move which some said the firm could get away with because the costs of switching to a rival are higher.
Bert Jacobs, professor of computer security at Radboud University in Nijmegen, told the Dutch financial newspaper Het Financieele Dagblad: “If you team up with parties like Microsoft, you’re digging a hole you’ll never get out of.
“Moving to a competitor is practically impossible if you adjust your entire IT system to software from Microsoft and all your data is stored in the cloud at that company.”
Francisco Mingorance, Secretary General at cloud services trade body CISPE, said: “More and more customers, competitors and regulators are waking up to the ways in which Microsoft continues to distort fair competition in the cloud.
“Based on the mounting evidence it is important that both national and EU authorities open formal investigations into Microsoft’s unfair software licencing practices as an urgent competition issue.”
An AWS spokesperson said: “These are interim findings and AWS will continue to work with Ofcom ahead of the publication of its final report. At AWS, we design our cloud services to give customers the freedom to build the solution that is right for them, with the technology of their choice.”
A Microsoft spokesperson said: “We look forward to continuing our engagement with Ofcom on their cloud services market study. We remain committed to ensuring the UK cloud industry stays highly competitive, and to supporting the transformative potential of cloud technologies to help accelerate growth across the UK economy.”
