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CMA launches probe into £7.5bn UK Cloud Services market
Fri, 6th Oct 2023

The Competition and Markets Authority (CMA) has launched an independent investigation into the UK's £7.5 billion cloud services market. The probe, upon referral from Ofcom, seeks to understand if competitive concerns are obstructing businesses. The focus is to optimise the supply of these crucial services, given their rapid adoption by businesses due to their advantages such as on-demand remote access to computing resources over networks.

Ofcom has identified several factors that make it challenging for customers to switch and use multiple cloud suppliers. These include egress fees, charges to move data out, discounts incentivising customers to use only one provider, and technical barriers to switching. The CMA has appointed independent panel members to an inquiry group to oversee the investigation. Their role involves publishing an issues statement which outlines the proposed focus of the investigation, with an aim to enhance competition in digital markets.

Sridhar Iyengar, Managing Director for Zoho Europe, welcomed the investigation, saying, "The adoption of cloud services delivers significant benefits to businesses, including facilitating a shift to new remote and hybrid working models while promoting wealth and skills distribution. However, businesses shouldn’t get tied up in cloud contracts with limited flexibility and fees to disincentivise switching providers. Therefore, it is positive to see the CMA conducting a review of the cloud landscape." Iyengar further emphasised the importance of businesses evaluating their vendor partners to ensure cloud platforms align with their needs.

Iyengar supports the multi-cloud approach, especially among large enterprises, and believes it is vital for cloud providers to offer flexibility, rather than binding customers to long contracts. They should instead provide features such as API connections to third-party applications, which can significantly enhance the customer experience. Iyengar emphasised, "Cloud will continue to become more widespread in years to come, further driving economic growth, so it's important that organisations like the CMA regularly review the cloud market to maximise businesses' potential."

Josh Boer, Director at tech consultancy VeUP, echoed Iyengar's sentiments. He said, "As businesses increasingly make the switch to cloud, it is good to see the CMA paving the way for increased supply and widespread adoption of cloud services for businesses." Boer highlighted that businesses transitioning to the cloud are looking to optimise costs as a top priority, and cloud services providers need to address businesses' cost-related concerns.

Finally, Sarah Cardell, CEO of the CMA, stressed the necessity of effective competition. Cardell stated, "This is a £7.5 billion market that underpins a whole host of online services – from social media to AI foundation models. 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, thereby unlocking the full potential of these rapidly evolving digital markets."