AWS, Azure, Google in Antitrust Probe
These hyperscalers have already cornered over two-thirds of the cloud services market
When three tech behemoths corner more than 60% of a market, antitrust regulators are bound to take notice. And so it was that the Competition and Markets Authority (CMA) of the UK is launching an investigation into Amazon, Azure and Google Cloud Platform.
And what are they looking for? To see if these big tech companies are doing anything below the radar that makes it tough for enterprises to switch to other players or even use multiple providers. Market watchers wonder why it took CMA so long as Britain’s watchdog for telecom, posts and broadcasting had started a market study into the UK cloud services market.
In fact, we read reports some months ago that the antitrust body had indicated that Ofcom, the telecom watchdog, had already identified some escalation-worthy issues in the $9 billion cloud services market in the UK. Looks like the CMA has finally decided to act and explore whether there is a cause for concern over anti-competition issues.
CMA chief executive Sarah Cardell noted that enterprises are now completely reliant on cloud services, which makes competition 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,” she said in a widely reported statement.
Not surprising as they control 90% of the UK market
This news comes barely days after the publication of a report from Synergy Research that the 2022 infrastructure revenues for cloud stood at $237 billion with cloud services adding another $307 billion to this number. Of this, the top three cloud providers accounted for 65% of the global market, a scenario that continued into the first quarter of 2023 as well.
During this period, AWS took away 32% of the market followed by 23% for Microsoft Azure and 10% for Google Cloud Platform. The next twenty providers on this list carved out about 26% of the remaining with the likes of Oracle, Snowflake, MongoDB, Huawei and a few Chinese telecom service providers getting high growth rates, the report said.
The probe initiated by the CMA could result in more of the same across Europe, as has been the case with antitrust cases against the Big Tech companies in the past. Given that the three big hyperscalers – Amazon’s AWS, Microsoft Azure and Google Cloud Platform – control 90% of the cloud revenues in Britain,
The CMA is now probing whether these companies are engaging in anti-competitive practices that lock customers into their ecosystems. That Ofcom’s half-way report focuses more on AWS and Azure does not mean that Google is off the hook. It just means that both these entities control more than 80% of the market between them.
Exit fees and committed spend discounts in focus
The issue at hand relates to exit fees that the cloud companies charge for moving data off their cloud instances to other locations – including those of a rival. This makes it prohibitive for businesses to change providers, largely because there is no interoperability between the various players that makes each service design their products differently from others.
More than the expenses, moving such data becomes a herculean exercise even for the cloud service provider as its set of systems and processes seldom match those of the other provider. Remember the big battle around charging cables for smartphones that got solved finally when Apple finally adopted the USB-C cables? Or the challenges one faced early on while transferring data between iOS and Android?
The CMA believes that the three hyperscalers are doing exactly the same and given the massive volumes of data getting stored on the cloud, making it that much more tough for companies to shift over to a new provider. CMA is also probing the committed spend discounts that vendors offer to make their customers stick on and make them spend more.
Ofcom also noted that it had come across software licensing practices of Microsoft where it could be using its dominance in the realm to make it tougher for enterprises to run its applications on rival cloud instances. Similar probes are already on against Microsoft in the EU based on complaints filed by several third-party providers.
Of course, the two companies in the antitrust crosshairs have readily agreed to work with the regulators to fix things. Not that they have a choice!
