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Amazon and Microsoft’s cloud dominance referred for UK competition probe

Ofcom said it received evidence showing Microsoft makes it less attractive for customers to run its Office productivity apps on cloud infrastructure other than Microsoft Azure.

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Britain’s anti-competition regulators have been tasked with investigating Microsoft and Amazon’s dominance of the cloud computing market.

Media watchdog Ofcom on Thursday referred its inquiry for further investigation, kickstarting the process.

“Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, and it’s not clear that competition is working well,” Fergal Farragher, Ofcom’s director responsible for the market study, said in a statement Thursday.

“So, we’re referring the market to the CMA for further scrutiny, to make sure business customers continue to benefit from cloud services.”

Ofcom is concerned that so-called “hyperscalers” like Amazon Web Services and Microsoft Azure are limiting competition in the cloud computing market. These are companies that allow businesses of all stripes to carry out critical computing tasks — like storage and management of data, delivery of content, analytics and intelligence — over the internet, rather than through servers stored on site, or “on premise.”

AWS and Microsoft Azure are the biggest players in the market. AWS’ cloud solution is primarily targeted at startups, while Microsoft prioritizes big enterprises. AWS and Microsoft Azure account for roughly 60% to 70% of cloud spend, according to an Ofcom estimate. Combined, Amazon, Microsoft and Google generate roughly 81% of revenues in the U.K.’s cloud infrastructure services market, according to Ofcom, which estimates the market to be worth £15 billion ($18.2 billion).

Competing cloud firms including Google, as well as regulators, have flagged up concerns with Microsoft Azure, in particular — namely, allegedly unfair licensing terms that serve to “lock in clients,” keeping them attached to only Microsoft’s technology, making it harder to switch to other providers.

Microsoft’s cloud licensing terms are the subject of a separate inquiry from the European Union. The EU isn’t formally investigating Microsoft’s Azure cloud computing platform but it has been assessing complaints from companies including France’s OVHCloud about Microsoft’s licensing terms.

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