Most cloud providers believe urgent regulatory intervention into the UK market is required because it’s at risk of two hyperscale cloud giants – Microsoft and Amazon Web Services (AWS) – solidifying insurmountable barriers to competition from other organisations.

That’s the result of a survey carried out for cloud advocacy group the Open Cloud Coalition. It found 71.2% of surveyed cloud providers believe regulatory intervention is urgent or extremely urgent, while 74.8% believe dominant providers are likely to further entrench their position without swift regulatory action.

The Competition and Markets Authority’s (CMA’s) decision is expected later this month regarding whether to launch a formal investigations into AWS and Microsoft Azure under the UK’s digital markets regime.

That decision is the result of further deliberation following the CMA’s publication of a report into the cloud market, which was published last July.

The report found that the cloud market in the UK – in which AWS and Azure are the two largest providers in a “highly concentrated” market – has several adverse effects on competition.

These included: market concentration, which makes it difficult for alternative cloud providers to enter and grow; customers being unable to move to new providers as need arises because of lock-in to the initial provider; and Microsoft licensing practices that reduce competition in cloud services.

The CMA will decide at the end of March whether to apply strategic market status (SMS) in relation to AWS and Microsoft’s activities in cloud services. SMS would allow the CMA to “impose targeted and bespoke interventions to address the concerns we have identified”.

The OCC research also found that 82% of cloud providers reported experiencing barriers when competing with dominant players. These respondents cited practices such as restrictive software licensing, bundling, interoperability limitations, and committed-spend discounts.

When asked about the consequences of regulatory delay, 68% of buyers expect higher costs, and nearly two-thirds anticipate reduced flexibility for their organisations.

Nicky Stewart, senior advisor to the Open Cloud Coalition, said: “The cloud market is no longer working as it should. Without urgent and effective intervention, dominant providers will continue to lock customers in and consolidate their power, to the detriment of competition, innovation and the UK’s digital economy.

“The CMA has got to put competition back in a meaningful way,” she added. “G-Cloud 15 recognised they need to put competition back in. There’s still a direct award option, but what they’ve also done for the cloud hosting lots, as opposed to consultancy or SaaS [software as a service], is they’ve made the barriers to entry so high that it’s going to be almost impossible for smaller domestic cloud providers to even get a place on the framework.

“The public sector has got itself locked into the two dominant cloud providers,” said Stewart. “And once you’re locked in, there’s a whole kind of chain of things you need to think about. It’s not just a case of, ‘I want to switch cloud providers’ or ‘I want to diversify my cloud providers’. You need to think about the skills to switch or diversify and the uncertainty about how much it will cost.”

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