Ofcom is worried that the proportion of the cloud computing market share held by "hyperscalers" like Amazon Web Services and Microsoft Azure is reducing competition. A calculation by Ofcom suggests that approximately 60% to 70% of overall cloud expenses are allocated to AWS and Microsoft Azure.
Britain's Competition and Markets Authority have been given the responsibility of examining Microsoft and Amazon's command of the cloud computing sector. On Thursday, Ofcom forwarded its probe for further study to the CMA, initiating the process. Ofcom has identified components that make it difficult for UK firms to move to different cloud suppliers, or make use of a variety of cloud services, and has articulated its "raised interest" in the position of market leaders Amazon and Microsoft.Fergal Farragher, Ofcom's director responsible for the market study, declared in a declaration Thursday, "Some UK businesses have told us they're concerned about it being too difficult to switch or mix and match cloud provider, and it's not clear that competition is working well. So, we're referring the market to the CMA for further analysis, to make sure business customers continue to benefit from cloud services."Ofcom is anxious that large-scale suppliers like Amazon Web Services and Microsoft Azure are restraining competition in the cloud computing sector. These companies make it possible for businesses of all sizes to undertake crucial computing jobs - like storage and management of data, delivery of content, analytics and intelligence - over the web rather than through on-site servers, or "on premise."AWS and Microsoft Azure are the biggest names in the sector. AWS' cloud solution mainly concentrates on startups, while Microsoft centers on large companies. According to Ofcom, AWS and Microsoft Azure account for around 60% to 70% of cloud outlay. Combined, Amazon, Microsoft and Google produce about 81% of revenues in the U.K.'s cloud infrastructure services sector, evaluated to be worth £15 billion ($18.2 billion) by Ofcom.
The CMA welcomed Ofcom's probe referral in a statement, saying that cloud services, which power generative Artificial Intelligence (AI) models such as OpenAI's ChatGPT, Microsoft's Bing Chat and Google's Bard, are a key component of many online services, from social media to AI-driven foundations. Sarah Cardell, CEO of the CMA, expressed the importance of effective competition in the cloud market, noting that many businesses now rely entirely on such services.
Competition in the market should be preserved in order to prevent a disproportionate share of market power from ending up with a few players. This will enable digital markets to develop to their fullest potential, allowing people, businesses, and the UK economy to reap the greatest possible rewards. To this end, the CMA's inquiry group is undertaking an investigation into the market with the aim of determining what action - if any - should be taken by April 2025.
The U.K. regulator Ofcom noted that practices in the cloud industry were of particular concern, pointing out that so-called "egress fees" imposed by cloud vendors Amazon and Microsoft make it harder for businesses to transfer their data between providers or have a multi-cloud strategy. These fees, which are applied when companies want to exit the cloud environment, were criticised by Ofcom. Moreover, the regulator found that technical barriers to interoperability, the capacity for cloud systems to work and exchange data without disruption, had been implemented by cloud operators, making it hard for firms to combine different services from multiple providers or switch providers.
Finally, Ofcom expressed concern over discounts for committed expenditure, or enticements to customers in order to give them some financial relief if they spend a certain amount of money. Whilst such incentives can reduce the costs for clients, they can also encourage organisations to rely solely on one cloud provider for their cloud needs, regardless of which one may be more cost-effective.The worries expressed in relation to Microsoft Azure, in particular, have been raised not only by rival cloud providers, such as Google, but also by regulators, who have criticized the allegedly unfair licensing terms that are supposedly designed not to let customers detach themselves from Microsoft technology and, as a result, make it harder for them to switch to other providers.As a consequence, Microsoft's cloud licensing terms are the target of a separate investigation being carried out by the European Union. The EU is not formally examining Microsoft's Azure cloud computing platform but they are having a look at complaints from companies, for instance OVHCloud of France, regarding Microsoft's licensing terms.
Comments