The two biggest cloud providers – Amazon Web Services (AWS) and Microsoft – have been referred to the UK regulator for anti-competitive practices, while Google’s Vice President Amit Zavery has accused Microsoft of anti-competitive cloud practices.
Amazon and Microsoft are facing a probe by UK regulators over their cloud ‘dominance’. Ofcom, the UK telecoms regulator, has referred the two companies to the UK competition watchdog, the CMA (Competition and Markets Authority), after it became aware of “concerning practices” by the duo. Ofcom said it was “particularly concerned about the practices of Amazon and Microsoft because of their market position” which it said was “already causing harm” to customers. Collectively Microsoft and Amazon Web Services (AWS) have an estimated 70% share of the UK cloud, while Google is a distant third at between 5-10%.
The Ofcom press release specifically calls out the issues of vendor lock-in, with high fees for transferring data out, committed spend discounts and technical restrictions making it difficult for business customers to switch cloud provider or use multiple providers.
“If left unchecked, competition could deteriorate further in a critical digital market for the UK economy.”
Just days before Ofcom’s involvement, in an exclusive interview with Reuters, Google’s Vice President Amit Zavery accused Microsoft of anti-competitive cloud computing practices. He also criticised the company’s recently-announced deals with several European cloud vendors, saying “these do not solve broader concerns about its licensing terms.”
Microsoft’s cloud practices have come under the attention of EU regulators in recent years, however it has so far managed to stave off a formal EU investigation. In May 2022 it announced changes to its licensing policies in an attempt to turn down the heat from smaller rivals which had threatened to launch antitrust complaints against the company (OVHCloud was one such company which lodged a complaint with the European Commission in 2021). See Microsoft makes big changes to licensing policies for European Cloud Providers for our article on this.
“Microsoft definitely has a very anti-competitive posture in cloud. They are leveraging a lot of their dominance in the on-premise business as well as Office 365 and Windows to tie Azure and the rest of cloud services and make it hard for customers to have a choice,” Zavery said.
Zavery also criticised the deals Microsoft has struck with smaller European cloud providers specifically, on the grounds that they only benefit Microsoft. “They’re selectively kind of buying out those ones who complain and not make those terms available to everyone. So that definitely makes it an unfair advantage to Microsoft and ties the people who complained back to Microsoft anyway.”
“Whatever they’re offering, there should be terms across for everybody, not just for one or two they’ve chosen and pick, and that shows you that they have so much market power they can kind of go and do those things individually.”
“My point to the regulators would be that they should look at this holistically, even though one or two vendors might settle doesn’t solve the broader problem. And that’s the problem we need to really resolve, not individual vendors’ problems.”
The fashion and music of the 90s have made a comeback, so why not the legal battles too? This is very reminiscent of the late 90s/early 00s when Microsoft were under heavy scrutiny for their actions in the browser market…which almost led to them being split into separate companies. It’s interesting to see how cyclical technology, and its issues, can be – although this time the battleground is the cloud, rather than the browser.
Microsoft & Amazon both have a strong grasp on the cloud market globally, and that includes the UK. The 3 main issues that Ofcom highlight are all legitimate concerns – I’ve spoken to customers previously where the cost of removing data from a cloud environment has been a blocker when looking at moving between providers. Interestingly, the point around technical interoperability is something that – with their Azure Arc offering – Microsoft could be seen to be addressing…although it means buying more Azure to make it happen.
The worry is that smaller cloud providers are being forced out of the market and, it is certainly true that it’s rare we speak with customers using a cloud other than Amazon, Microsoft, or Google. The 2022 licensing changes from Microsoft purported to address some of the imbalance between Azure and these smaller providers but whether it had any material impact is hard to tell. April 2022 has seen further changes to Microsoft licensing terms in favour of the recently created “CSP-Hoster” partners, bringing them more parity with Microsoft Azure. However, it is too early to know how/if this will change things for customers.
Given how important cloud is to organizations, and that it will only continue to grow for the foreseeable future, having the future of digital transformation in the hands of a few mega tech companies probably isn’t ideal. Yes they innovate and move things forward with great new technologies and innovations – but they should not become the only options.
There is an additional wrinkle for many organizations…what happens when your cloud provider is also one of your major competitors? Given the wide portfolios of Microsoft and Amazon in particular, this scenario may well crop up for more business leaders than you might think.
While now isn’t the time for a neoliberalism v libertarianism v capitalism debate, it seems fair to say that the free market sometimes needs help to remain truly in the best interests of the customers and all market participants.