Tech giants’ dominance of cloud industry ‘damaging competition’
The dominance of Microsoft and Amazon over the cloud computing industry is damaging competition, a regulatory panel has concluded.
The Competition and Markets Authority said that the American technology companies’ impact on the cloud market was exacerbated by factors such as barriers to customers switching away from their services. Microsoft was also singled out because of licensing terms that the panel said adversely affected Amazon Web Services and Google.
The regulator said that it would consider next year whether to give Amazon and Microsoft so-called “strategic market status”, which would give it additional powers to intervene to boost competition.
An independent panel of the authority found that the cloud services market was “not working well” and that Microsoft and Amazon Web Services each had a market share of between 30 and 40 per cent in areas such as online information processing, storage and networking. Google has a share of between 5 and 10 per cent.
The CMA said in January that Microsoft was using its dominance in enterprise software, such as Windows Server and Microsoft 365, to limit competition by charging high licensing fees when its services were used on rival cloud platforms to its own.
Cloud computing is the term for services such as storage, software, processing and analytics provided over the internet. This provides access to shared computing resources on demand so that customers do not need to own the underlying hardware and software.
UK customers spent £10.5 billion on cloud services in 2024, and spending has grown by nearly 30 per cent each year since 2020 as people and organisations rely increasingly on cloud rather than on-premises or “traditional” IT.
The CMA said it was “vital that competition works well in these markets to support innovation, investment and improved productivity”.
The industry has been scrutinised by regulators on both sides of the Atlantic.
In Europe, Microsoft agreed a €20 million deal last year to settle a complaint about its licensing practices, averting an investigation and a potential fine.
On Wednesday Microsoft said that strong business demand for artificial intelligence tools in its Azure cloudcomputing unit had led to quarterly earnings much better than forecast.
The CMA found Amazon and Microsoft “hold significant unilateral market power in the cloud services markets’’ allowing them to “earn returns above the cost of their capital over a sustained period” and that these “levels of concentration are likely to endure”.
“It is harder for alternative cloud suppliers to enter and grow in these markets and customers face a limited choice of suppliers and products,” it said. “This harm is exacerbated by the features arising from technical and commercial barriers to switching.”
Customers find themselves locked into an initial choice of provider “which may not reflect their evolving needs and limits their ability to exercise choice of cloud provider”.
Microsoft said: “The panel’s most recent publication misses the mark again . . . Its recommendations fail to cover Google, one of the fastest-growing cloud market participants.”
Amazon said that “clear evidence of robust competition” had been disregarded.
“The action proposed is unwarranted and undermines the substantial investment and innovation that have already benefited hundreds of thousands of UK businesses,” it said.
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