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May 23, 2024updated 24 May 2024 10:41am

Market research by CMA reveals anxieties about technical barriers to multi-cloud strategies in UK cloud market

Market research by the CMA also finds software licensing regimes, egress fees and discounts all factor – though in more nuanced ways.

By Greg Noone

Preliminary results from the CMA’s market research into the UK cloud market have revealed significant customer anxieties about technical barriers to multi-cloud strategies. In a series of interviews with users over the past few months as part of its wider investigation into the state of competition in the sector, the watchdog found that fundamental differences in interfaces, authentication methods and development platforms often discouraged consumers from pursuing multi-cloud strategies. Respondents also revealed fears that this dynamic would be cemented if the hyperscale providers – namely, Google Cloud, AWS and Microsoft Azure – began competing in the AI PaaS market.

“For most participants,” said the CMA, “the tendency to reject the idea of multi-cloud or switching provider is based on the view that the benefits of such a strategy are relatively low and the technical barriers standing in the way are relatively high. This view is compounded by the fact that switching or multi-cloud is rarely top of their mind. As a result, participants often have only a hypothetical view of potential benefits, while at the same time fearing both the anticipated and unforeseen challenges that would have to be overcome.”

Cloud computing server racks, intended to illustrate a story about Google petitioning the CMA to investigate Microsoft.
Preliminary results from the CMA’s market research into the state of competition in the UK cloud market reveal respondents anxious about the technical barriers to switching providers or pursuing multi-cloud strategies. (Photo by dotshock / Shutterstock)

CMA finds egress fees and discounting less of a factor in switching

The CMA also found egress fees – the practice wherein a hyperscale cloud firm charges users to transfer their data to a rival provider – were a factor in switching and multi-cloud behaviour among customers, but not dealbreakers. These charges, said the regulator, “were rarely top of mind when participants were asked about their openness to switching cloud provider or using multiple clouds,” though they did disincentize a few respondents. Concerns about the lack of transparency among hyperscale cloud providers on egress fees were also voiced. 

The influence of discounting practices on customers’ switching behaviour was also judged to be more complex than at first sight. Not only that factor often viewed as just one of many that compel a public cloud user to switch or pursue a multi-cloud strategy, but in some cases, the discounting arrangements were so complex that respondents wondered whether it constituted the best way to use their cloud operator’s services in the first place. This phenomenon was more pervasive among larger customers than smaller users, who were more likely to switch based on financial incentives. 

Licensing practices’ influence on multi-cloud and switching nuanced

Software licensing practices’ influence on switching strategies was also nuanced. According to the CMA’s research, this issue was largely relevant to customers of Microsoft Azure, though it did apply to a small number of Google Cloud platform users. Among the former subset of respondents, the influence of licensing practices could not easily be disentangled from how often a consumer used Microsoft’s services across their entire services. 

“The decision to rely on Microsoft’s suite of products and services has often been taken decades before the decision to go with Azure,” said the CMA. “In that sense, participants often struggle to precisely detail why their organisation uses Azure, beyond describing it as a natural choice for both technical and financial reasons.”

Big AI concerns ahead among customers

The findings of the CMA’s market research report should concern cloud customers, said the chief executive of the independent cloud provider Civo. “In my eyes, the cloud industry is broken if businesses consider high egress fees ‘a price worth paying’ if they want to achieve their cloud strategy,” said Mark Boost. “This shouldn’t be an accepted status quo in the cloud space, and it definitely shouldn’t be an accepted way to reach a strategy ‘that makes [the] most sense for their business’.”

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For her part, ex-commercial director for UK Cloud and the former head of ICT strategy delivery for the Cabinet Office Nicky Stewart told Tech Monitor she was encouraged that the CMA’s investigation was proceeding apace. “It’s good to see that the snap general election isn’t slowing down the investigation,” said Stewart. “Some of the working papers have yet to be published and it will be interesting to see if the CMA intends to broaden its investigation beyond the four theories of harm that it has already identified” in the market research report.

Looking ahead, the CMA said respondents also predicted competition between the hyperscalers would intensify as the market for AI PaaS matured. “Concern does also exist,” said the watchdog, “that once an AI solution is chosen, it will be difficult to switch away from, creating another opportunity for cloud providers to potentially lock customers into their cloud offering.”

The hyperscalers respond

As part of its update around the publication of its market research report, the CMA was careful to stipulate that no findings contained within the document constituted its final judgement about the state of competition with the UK cloud market. An updated issues statement, meanwhile, will be published in early June. Hearings will also be convened wherein AWS, Microsoft and Google will also be invited to respond to the CMA’s ongoing investigation.

Tech Monitor reached out to all three firms for their response to the CMA’s market research. A spokesperson from Microsoft told this publication that it considered the UK cloud market to be “highly competitive” and innovative. They added that competition in the sector is not limited to hyperscale providers and Microsoft would “provide written responses to the CMA’s working papers and stand ready to answer any questions the CMA have.” A spokesperson from AWS also said that it will continue to work “constructively” with the regulator throughout its investigation. “We believe the CMA will recognise,” they added, “how the increased competition, improved security, and lower costs of IT services introduced by cloud technologies benefit UK companies and the overall economy.”

Read more: Google lobbies CMA to investigate Microsoft for cloud abuses

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