CMA concludes cloud market investigation – what’s in the forecast for UK businesses?

The Competition and Markets Authority (CMA) has concluded its market investigation into the supply of public cloud infrastructure services in the UK (cloud services market), which the communications regulator, Ofcom, referred for investigation in October 2023. Having found that competition in the market is not working well, instead of imposing remedies, the CMA intends to address its concerns by exercising its powers under the digital markets competition regime, which came into force on 1 January 2025. The CMA’s approach indicates a shift towards greater scrutiny and regulation of the largest cloud service providers. This presents potential opportunities, but also some risks, for businesses that use cloud services.

In this briefing, we summarise the CMA’s main findings, consider the potential implications for businesses that use cloud services, and outline the steps which such businesses can take to position themselves to benefit from a more competitive UK cloud services market.

What was the cloud services market investigation about?

Cloud services allow remote access, via a network, to computing resources on demand. Many businesses now rely on cloud services, so they’ve become integral for the delivery of many digital services to consumers. With public cloud computing, the infrastructure and services are provided by a third-party and made accessible to the public via the internet.

With Ofcom having already identified potential competition issues in the UK cloud services market, the purpose of the CMA’s investigation was to further examine the market and consider whether there are competition concerns and, if so, what interventions could help ensure effective competition in the market. The focus of the investigation was on issues that could be affecting the ability of customers to switch between cloud providers and making it difficult for rival cloud providers to enter the market.

What were the CMA’s main findings from the investigation?

The CMA identified that competition in the UK cloud services market is weak and that the following main features of the market are having an adverse effect on competition:

• The market is highly concentrated with the two largest providers, Microsoft and Amazon Web Services (AWS), having high market shares. Google has a much smaller market share, and other providers like Oracle and IBM have minimal market shares.
• Less than 1% of customers switch cloud providers and/or use multiple clouds, with most customers being “locked in” to their initial provider due to a combination of:
  
  • Technical barriers eg, lack of interoperability between the services of different cloud providers.
  • Commercial barriers eg, committed spend agreements, volume discounts and egress fees charged to customers to move their data out of the cloud.
• Smaller cloud providers, in particular, are also disadvantaged by the need for substantial investment, the broad product portfolios of the three largest providers and the impact of economies of scale.
• Microsoft’s software licensing practices make it more expensive and restrictive to use its software on non-Azure platforms.
• Whilst AI-related cloud services are growing, AI is not yet reshaping competition in the UK cloud services market.

What could happen next?

The CMA has recommended that it addresses its concerns about the UK cloud services market using its powers under the digital markets competition regime. In the first instance, this would entail commencing investigations into whether to designate Microsoft and/or AWS as having strategic market status (SMS) in relation to their respective digital activities in cloud services. If the CMA decides to commence the SMS investigations and proceed with designation, then it will be able to impose targeted and bespoke interventions to address the concerns which it has identified. The CMA could design such interventions to, for example, increase pricing transparency in the market, improve interoperability between cloud services, and improve the bargaining power of consumers. This could lead to more choice and lower prices for consumers, better service quality and more innovation in the market.

Any interventions that the CMA may impose on Microsoft and/or AWS could have implications for businesses that use their cloud services. It may be necessary for such businesses to review the way they operate.

What should businesses do in response to the CMA’s decision?

The CMA will consider potential SMS designation investigations into Microsoft and AWS in early 2026. To understand the implications of a more competitive UK cloud services market and what these may mean for their activities, businesses should:

• Be aware of the SMS designation process and the CMA’s powers under the digital markets competition regime
• Be ready to provide information, where appropriate, to the CMA during consultations on the SMS designation process
• Stay up-to-date on regulatory developments, including CMA press releases
• Audit the agreements with their existing cloud service providers
• Review their cloud dependencies and strategies
• Identify key focus areas for potential renegotiations
• Explore alternative providers