Cloud services are growing as businesses continue to migrate from on-premise to cloud services. According to Ofcom, the market for cloud infrastructure in the UK alone was worth £7-7.5 billion in 2022.
On 17 October, the CMA published an issues statement setting out the proposed scope of its investigation into cloud services. This follows the referral of the market to the CMA by Ofcom in light of its market study. It raised concerns about the ability for UK businesses to switch (and use multiple) cloud suppliers and the prominence of certain key players in the market (AWS, Microsoft and Google), particularly considering the increasing importance of cloud services for banking, streaming, retailing, and communicating.
Both the CMA’s recent report on AI foundation models and Ofcom’s market study both identify cloud services as a cornerstone of recent innovations. The CMA will therefore consider the potential impact of AI on how competition works in the cloud services market.
In particular, the CMA will investigate whether:
- technical barriers inhibit users from switching providers and/or using multiple providers;
- exit fees act as a barrier to switching and/or using multiple providers, contribute to unpredictable costs, and impede competition in the market;
- discounts by existing cloud providers act as barriers to entry and expansion among other providers, also affecting competition in the market; and
- software licensing practices may disincentivise customers from using rival providers.
The issue is complicated by fact there are often intermediary vendors involved for many end corporate users who may not have any direct contractual nexus with the actual cloud provider.
The deadline for responses to the issues statement is 9 November 2023, following which the inquiry group will reach a conclusion by April 2025. We await the outcome of the CMA's investigation but, in the meantime, do get in touch with us if you need help with entering into, renewing or exiting your cloud contracts.
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