The cloud market

The cloud computing industry has reached a point where a few major providers dictate the market. The CMA’s concerns are not unfounded— the three major cloud hyperscalers – AWS, Microsoft, and Google together control a sizable share of the UK’s cloud infrastructure market, benefiting from deep enterprise relationships, extensive service ecosystems, and economies of scale that are difficult to match.  And this is true not just in the UK, but in other major markets, ranging from the European Union to the United States. These advantages create structural challenges for organisations seeking to diversify their cloud strategy, whether they are end-users that rely on cloud service providers or other cloud service providers seeking to compete with the hyperscalers. 

One of the most significant barriers to competition is the cost of switching providers. Many organisations that initially embraced public cloud find themselves facing egress fees, technical dependencies, and licensing restrictions from hyperscalers that make hybrid-cloud adoption by end users more complex and costly than expected. For example, Microsoft’s licensing practices have come under scrutiny, with the argument that it unfairly raises the cost of running Windows workloads on competing platforms. 

If hyperscalers can no longer rely on egress fees and licensing constraints to retain customers, they may need to rethink service deprecation policies, reduce redundant offerings, and provide clearer pricing structures

Yes, hyperscaler dominance isn’t purely a result of anti-competitive behaviour. These companies have earned their positions in part through innovation and strategic investment. AWS revolutionised developer and infrastructure-focused cloud services, making them easily accessible and aligned to their specific operational needs. Microsoft, on the other hand, has leveraged its strong enterprise footprint to make Azure a seamless extension of its software stack. Its offerings are widely deployed and deeply embedded into corporate IT infrastructures. 

The challenge regulators face is determining whether these advantages give hyperscalers the ability to lock-in customers and create an unfair playing field, or if they simply reflect the natural evolution of an industry where scale and efficiency drive competitive success. 

Lessons from open banking 

The banking industry offers a compelling case study in regulatory-driven competition. Open banking policies forced large financial institutions to provide API access to fintech companies, enabling new players to compete with established banks. The result was a surge in innovation, improved customer services, and increased choice, benefiting both startups and traditional financial institutions. 

Could a similar pro-competition model be applied to cloud computing? If regulators push for greater data portability, reduced egress fees, and fairer licensing models, hyperscalers could be forced to compete more on service quality rather than continue to benefit from vendor lock-in mechanisms. This would encourage a more diverse cloud ecosystem, allowing alternative cloud service providers to expand the overall market, while potentially providing end users with more cloud-based options to better utilise their data and applications.  

Yet, there are important differences between banking and cloud computing. Unlike financial institutions, which can adapt through open application programming interface (APIs) and partnership models, cloud providers operate at a scale that requires enormous capital investment in infrastructure, networking, and security. Regulators must be careful not to create unintended consequences— for example, excessive restrictions could reduce the incentive for hyperscalers to invest in next-generation cloud technologies. 

One similarity that does exist between banking and cloud computing is the presence of emerging alternatives in the cloud market that are poised to compete with the hyperscalers. This is where Broadcom’s  acquisition of VMware and the resulting business model adjustments become particularly relevant. 

Striking the right balance between competition and innovation 

Regulating dominant cloud providers is a complex balancing act. If done well, it could promote a healthier, more competitive ecosystem, ensuring that businesses can choose cloud providers based on functionality rather than contractual obligations. If done poorly, it may slow down innovation, increase complexity, and create compliance burdens for all providers. 

It is a balancing act well understood by the CMA, the regulatory body tasked by the UK government with helping drive growth without violating its central mandate of promoting competition and protecting consumers.  

One potential outcome of regulation is that the hyperscalers themselves may be forced to improve. If hyperscalers can no longer rely on egress fees and licensing constraints to retain customers, they may need to rethink service deprecation policies, reduce redundant offerings, and provide clearer pricing structures. In a competitive landscape that values service quality over forced loyalty, businesses could ultimately benefit from more transparency, innovation, and choice. 

Yet, like in the case of financial services, regulation alone will not create more competition in the cloud marketplace. The presence of competitive options and enablers should be a factor when considering regulatory measures. In addition, businesses should take on greater responsibility for cloud architecture decisions, ensuring that vendor flexibility is a key consideration from the outset. Too often, organisations become entrenched in a single-provider cloud model not because of external constraints, but because of internal planning deficiencies. Choosing among private, public, and/or hybrid clouds requires investment in integration, governance, and skill development—regulation can lower barriers, but companies must still take proactive steps to build adaptable, future-proof IT environments. 

A defining moment for a multi-cloud strategy 

The CMA’s scrutiny of the cloud market represents a critical turning point for the cloud computing industry. If regulators successfully lower switching costs, enforce fairer licensing policies, and promote data portability, end users will have more options, and other cloud providers will be better positioned to capitalise on a more competitive market. 

However, success won’t be determined by regulation alone. Regulation can create opportunities, but those opportunities need to be seized within the impacted market. The hyperscalers are not passive players—they will adapt, innovate, and respond to regulatory changes in ways that could preserve their market dominance. Broadcom’s opportunity lies in its ability to clearly articulate the value of various cloud models, simplify adoption, and prove the long-term benefits of its platform for both end-users and other cloud service providers.  

The cloud landscape is evolving, and the next 12 months will determine whether the hyperescalers maintain their stronghold, or if a more competitive and flexible cloud market grows significantly. Either way, the cloud market will not look the same a year from now—and given the enterprise footprint of VMware, Broadcom has a unique chance to shape its future. 

Bola Rotibi is chief of enterprise research at CCS Insight