Today: Feb 12, 2025

CMA Inquiry group reveals concerns over competition in UK cloud services market

The UK’s £9 billion cloud market is dominated by Amazon and Microsoft, limiting competition, raising prices, and stifling innovation. A new CMA report calls for tougher regulations on the tech giants to break the stranglehold and improve choice for businesses.
Cloud, Finger, Smartphone image | Pixabay
2 weeks ago

In a new report published today, the Competition and Markets Authority (CMA) has revealed troubling insights into the UK’s rapidly expanding cloud services sector. The findings, which are still provisional, suggest that competition within this £9 billion market is not functioning as efficiently as it could, potentially leading to higher costs, fewer choices, lower service quality, and a stunted pace of innovation for businesses across the UK.

Cloud services, such as infrastructure as a service (IaaS) and platform as a service (PaaS), have become the backbone of many industries in the UK. These services empower businesses to scale, innovate, and improve productivity. In 2023 alone, UK businesses and organizations spent £9 billion on cloud services—a figure that has been growing at a remarkable rate of over 30% annually.

But despite the rapid growth and importance of the sector, the CMA’s independent inquiry group has identified several concerns that could impede the long-term benefits of cloud computing for the UK economy.

The CMA’s inquiry group highlighted that the UK cloud market is heavily dominated by two companies: Amazon Web Services (AWS) and Microsoft. Each of these providers controls up to 40% of the market share, with Google holding a distant third place. This duopoly, according to the inquiry group, leaves customers with limited options when it comes to cloud service providers.

“The lack of competition is alarming,” says Kip Meek, the chair of the CMA’s inquiry group. “While cloud services are critical to UK businesses, many of them face a situation where they don’t have the freedom to choose from a diverse range of providers that meet their evolving needs.”

The impact of this concentration is clear: businesses may feel forced to stick with one provider, even if their needs change or their chosen provider no longer offers the best deal. This is where the concept of “lock-in” becomes a problem. Once a company has committed to a cloud provider, it can be extremely difficult and costly to switch providers or adopt a multi-cloud approach.

One of the key findings in the report is the difficulty faced by customers who want to switch between cloud providers. Technical and commercial barriers, such as complex data transfer processes and differing software requirements, make the transition from one provider to another challenging.

This results in businesses remaining tethered to one provider, which in turn limits competition and reinforces the market dominance of AWS and Microsoft.

“The cloud services market is becoming increasingly siloed,” explains Meek. “The barriers to switching providers are putting businesses at a disadvantage, leaving them unable to push for better service or competitive prices.”

Furthermore, these technical and commercial barriers make it harder for smaller competitors to enter the market or expand their offerings. Given the substantial capital investment required to establish a viable cloud service infrastructure, new entrants face considerable challenges.

Microsoft’s stronghold on software

A particularly concerning aspect of the CMA’s provisional findings is the role Microsoft plays in this market. The inquiry group argues that Microsoft’s dominant position in software—particularly its suite of tools like Office 365—makes it harder for AWS and Google to compete effectively in the cloud space.

Many customers who wish to run Microsoft software on the cloud are often locked into using Microsoft’s own Azure cloud platform, further limiting the competitive pressure on the larger providers.

According to the inquiry group, this creates a scenario where Microsoft’s dominance in one area (software) spills over into its cloud services, stifling competition and preventing other providers from challenging its position.

To address these issues, the inquiry group has provisionally recommended that the CMA consider using new powers under the Digital Markets, Competition and Consumers Act 2024 (DMCCA) to investigate whether AWS and Microsoft should be designated as having “Strategic Market Status” (SMS).

This designation would give the CMA the ability to impose stricter regulations and conduct more targeted investigations into the activities of these companies.

The inquiry group believes that such an investigation could improve market conditions by making it easier for businesses to switch providers, ensuring fairer pricing, and encouraging the introduction of new technologies and services into the UK cloud services market.

Meek elaborates: “A more competitive environment would help drive innovation, lower prices, and provide UK businesses with the tools they need to grow.”

What’s next?

The CMA has set a statutory deadline of 4 August 2025 to reach a final decision, but before then, it will consult the public on its provisional findings and recommendations. This consultation process will allow businesses, cloud providers, and other stakeholders to weigh in on the future of cloud services regulation in the UK.

While the CMA’s inquiry group has highlighted some concerning issues, there are areas of the cloud services market that do show potential for growth and improvement. The report suggests that with better regulatory oversight, UK businesses could see benefits in the form of improved cloud offerings, lower costs, and better competition in the years ahead.

The stakes are high, as the cloud services market continues to play a central role in the economic success of businesses across the country. The final decision could shape the future of the digital economy in the UK, helping to ensure that the benefits of cloud technology are more widely distributed and accessible.

For more details, including how to respond to the consultation, the CMA has provided additional information on its official website.

Fabrice Iranzi

Journalist and Project Leader at LionHerald, strong passion in tech and new ideas, serving Digital Company Builders in UK and beyond
E-mail: iranzi@lionherald.com

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