The UK’s cloud computing market faces a competition probe over concerns that Amazon and Microsoft are ruling everything with an iron fist.
Media watchdog Ofcom said the two make up 70-80 per cent of the sector in the UK, while closest rival Google has 5-10 per cent.
Ofcom had said in April it was worried a lack of competition made it difficult for businesses to switch providers.
It has referred the sector to the UK’s Competition and Markets Authority (CMA) to look into the issue.
Amazon and Microsoft told the BBC they would work with the CMA as it conducts its investigation. However, Amazon said it felt Ofcom’s concerns were “based on a fundamental misconception” of the sector.
The services are used by businesses across the UK, and Ofcom estimated that in 2022 the cloud services market in the UK was worth up to £7.5 billion.
CMA chief executive Sarah Cardell said that many businesses now completely rely on cloud services, making effective competition in this market essential.
“Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players – unlocking the full potential of these rapidly evolving digital markets so that people, businesses, and the UK economy can get the maximum benefits.
“The CMA’s independent inquiry group will now carry out an investigation to determine whether competition in this market is working well and if not, what action should be taken to address any issues it finds.”
The CMA said it would conclude its investigation by April 2025. The body has the power to force companies to change practices, block purchases or even sell off parts of their businesses if it feels there is a legitimate threat to the market.
Ofcom’s referral of the cloud services market to the CMA was to make sure the market “is working well for UK consumers and businesses in the future,” he added.
Rivals such as IBM and Oracle should be able to challenge the more dominant players, he said.
A Microsoft spokesperson said: “We are committed to ensuring the UK cloud industry remains innovative, highly competitive and an accelerator for growth across the economy.
“We will engage constructively with the CMA as they conduct their Cloud Services Market Investigation.”
Amazon said it believed Ofcom’s findings were “based on a fundamental misconception” of the sector.
“Only a small percentage of IT spend is in the cloud, and customers can meet their IT needs from any combination of on-premises hardware and software, managed or co-location services, and cloud services,” a spokesperson for the company said.
