CMA Warns of Market Failures in Cloud Computing Sector

The UK’s Competition and Markets Authority (CMA) has raised concerns that the cloud computing market is not functioning fairly, citing anti-competitive behavior, high barriers to entry, and a lack of fair competition. The regulator has particularly scrutinized Amazon Web Services (AWS) and Microsoft Azure, which together hold 70-80% of the UK’s cloud infrastructure market, limiting opportunities for smaller providers.

One of the CMA’s primary concerns is high egress fees, which are the costs businesses must pay to transfer their data out of a cloud provider’s platform. These fees make it financially unviable for companies to switch providers, effectively locking them into long-term agreements with major cloud firms. This creates a vendor lock-in situation, where customers cannot easily migrate to competitors.

The CMA also flagged restrictive licensing practices, particularly by Microsoft, which allegedly limits access to its popular software (like Office 365 and Windows Server) on rival cloud platforms. This practice forces businesses to use Microsoft Azure instead of competitors, reducing customer choice and innovation in the market.

Additionally, the CMA found that technical barriers and complex contracts make cloud migration difficult. Many businesses rely on proprietary tools and APIs, making it challenging to switch cloud providers without incurring significant costs and operational disruptions. This further discourages competition and strengthens the hold of dominant players.

Another critical issue is the lack of multi-cloud interoperability, meaning major cloud providers do not fully support seamless integration with other platforms. This forces businesses to rely on single-vendor solutions, further consolidating power within a few dominant companies and stifling innovation in the market.

The CMA’s investigation could lead to regulatory interventions aimed at increasing competition. Potential measures include lowering egress fees, enforcing fair licensing policies, and promoting interoperability to create a more open and competitive cloud market for businesses and consumers.

Ms. S Mohini Ratna - Editor VARINDIA