Cost, competition and choice: reinvigorating the cloud market for British business

The long-awaited cloud services market investigation from the Competition and Markets Authority (CMA) has been published and is an important milestone in the evolution of the UK’s digital infrastructure as a whole.

For those unaware of the findings, the report was primarily designed to evaluate whether any features of the UK cloud market were impacting competition because of concerns that a lack of competition was pushing up costs and reduced quality of service.

The key findings were telling; AWS and Microsoft were found to hold significant market shares, potentially stifling competition. Technical challenges and costs associated with moving data between providers make it difficult for customers to switch or use multiple providers. Also, Microsoft's software licensing terms may disadvantage customers who prefer alternative cloud platforms, raising competition concerns.

The evolving cloud landscape

The rapid shift to cloud catalysed by the pandemic meant many organisations didn’t have time to refine their digital infrastructure and cloud strategies. The hyperscalers became the default choice. However, businesses have evolved far beyond simply storing data in server rooms. Today, they face diverse requirements driven by both operational needs, regulatory demands and data sovereignty requirements, necessitating a digital infrastructure that can keep pace. To meet the ever-changing needs of businesses, we must cultivate a market that reduces costs and offers a diverse range of tailored solutions, so UK businesses can reach their true potential.

Cloud requirements have changed – so must our approach

While the cloud market has matured, ensuring competition, affordability, and innovation remains crucial. The solution lies in fostering a market that:

• Encourages an open cloud framework: Businesses should have greater control over data localisation, supporting the growth of UK-based service providers who understand local regulatory needs.
• Supports diverse infrastructure needs: Workloads should be deployed where they perform best—latency-sensitive applications on edge computing or local data centres, and compute-heavy tasks on global public cloud infrastructure.
• Stimulates competition while driving innovation: A more balanced market will give businesses access to cost-effective and tailored solutions rather than a one-size-fits-all approach.
• Enables data sovereignty: By investing in sovereign cloud infrastructure, the UK can safeguard businesses, public sector data, and digital innovation, while fostering a resilient and competitive domestic cloud ecosystem.
  
  

What happens now?

The CMA is considering using its new digital markets powers to address these concerns, which could involve designating AWS and Microsoft with "strategic market status," leading to stricter regulations. And we expect to see its final decision by April 2025. However, it is vital that any new restrictions avoid curbing innovation or reducing choice.

Rather, a regulatory framework that promotes a variety of cloud options will allow UK organisations to select the right service that best fits their requirements. This involves bolstering the growth of UK-based infrastructure while allowing organisations to access global services when required. The emphasis should be on establishing clear data governance requirements, while providing flexibility in how organisations achieve compliance with these standards.

A competitive and dynamic cloud market is essential for unlocking the full potential of UK businesses. By fostering choice, lowering costs, and promoting innovation, we can build a stronger, more resilient digital infrastructure that truly serves British businesses.