The recent findings of the UK’s Competition and Markets Authority (CMA) into the cloud computing sector have ignited a fierce debate over the health of competition in one of the technology industry’s most vital arenas. At the center of this scrutiny are two global superpowers: Amazon Web Services (AWS) and Microsoft Azure. The CMA’s final report, delivered by an independent inquiry group, concluded that these companies are impeding open competition in the £9 billion UK cloud services market—a market marked by rapid innovation but also increasing worries over its bottlenecks, pricing structures, and their implications for customers and the future of UK business technology.
The phrase “not working well”—used pointedly by the CMA—captures the regulator’s assessment of how cloud infrastructure currently serves the UK public and private sectors. The final report outlines a litany of issues hampering healthy competition, but focuses with particular emphasis on Microsoft’s substantial market clout, especially through its licensing of critical software products that are near-ubiquitous in enterprise computing. According to the CMA, the ways in which Microsoft charges its rivals, chiefly Amazon and Google, for use of its software creates significant competitive disadvantages, raising costs and reducing customer choice.
This is not a casual assessment. The CMA’s findings are the result of a prolonged and detailed inquiry, with input from independent experts and a review of cloud market dynamics that go far beyond surface-level accusations. The report recommends considering the imposition of “strategic market status” (SMS) for both Microsoft and AWS, unlocking new regulatory tools for targeted and “bespoke interventions.” This status would, in principle, allow the CMA to design rules and requirements specifically to address what it identifies as persistent harms: pricing practices, data portability limitations, interoperability barriers, and other behaviors that may block competitors or raise costs for end users.
Notably, the implementation of SMS for these cloud providers will take some time. The CMA intends to first proceed with proposals to grant strategic market status to Google and Apple with respect to their mobile platforms—a move that reflects a broader UK regulatory push against digital gatekeepers. Any new probe into the cloud market’s dominant players is unlikely to begin before 2026.
Microsoft’s annual results—showing Azure division revenues exceeding $75 billion (about £57 billion)—underscore just how much is at stake for both the industry and the public at large. With stakes this high, the actions of AWS and Microsoft reverberate far beyond their own customer bases, setting standards not only for pricing but also for security, environmental practices, and the very architecture of digital systems.
Such practices, the CMA argues, “reduce competition in cloud services markets” by weakening competitive pressures from AWS and Google. The criticism is not limited to pricing alone; it extends to interoperability and the ease with which customers can move workloads between providers, a fundamental property in ensuring that no single company can “lock in” its users indefinitely.
While Microsoft is far from the only software vendor with complex licensing, the size of its installed base, its combination of software and infrastructure services, and the centrality of products like Windows and Office make its influence far more significant. This horizontal and vertical integration, once hailed as a strength that drives ecosystem innovation, now faces regulatory skepticism on both sides of the Atlantic.
A spokesperson for Microsoft dismissed the CMA’s conclusions, characterizing the findings as out of step with the industry’s reality. “The CMA panel’s most recent publication misses the mark again, ignoring that the cloud market has never been so dynamic and competitive, with record investment and rapid, AI-driven changes,” the spokesperson claimed. Microsoft also pointedly criticized the report for allegedly failing to account for the momentum of Google’s cloud business, which—while smaller than AWS or Azure—is growing by double digits year-on-year. “Microsoft looks forward to working with the digital markets unit toward an outcome that more accurately reflects the current competition in cloud that benefits UK customers.”
AWS’s reaction was even more forceful, arguing that the CMA’s proposed intervention “disregards clear evidence of robust competition in the UK’s IT services industry.” The company emphasized its own investments in the UK market and predicted negative consequences for regulatory overreach: “The action proposed by the inquiry group is unwarranted and undermines the substantial investment and innovation that have already benefited hundreds of thousands of UK businesses. It risks making the UK a global outlier at a time when businesses need regulatory predictability for the UK to maintain international competitiveness.”
In contrast, Google warmly welcomed the CMA’s findings. Chris Lindsay, Vice President of Customer Engineering for Google Cloud (EMEA), framed them as a tipping point for industry reform: “The conclusive finding that restrictive licensing harms cloud customers and competition is a watershed moment for the UK.” Google, which has often framed itself as the underdog in the cloud wars, urged the CMA’s Digital Markets Unit to act quickly, arguing that swift action is necessary to “unleash choice, innovation and economic growth in the UK.”
This reveals the perennial balancing act for competition regulators: interventions must be both robust enough to discipline market power and nimble enough not to dissuade new entrants or slow the adoption of cutting-edge technology. There is no easy answer, especially when the “latest” advancements—such as generative artificial intelligence, quantum computing integration, or fully automated cloud management—require huge capital investments that may only be feasible at the scale of a Microsoft or Amazon.
Critically, such measures could increase switching opportunities for business customers—potentially enabling smaller, more innovative providers to compete on an even playing field. For instance, a portability mandate could make it significantly easier for a UK business to move workloads and data from Azure to AWS or to Google Cloud, or even to a specialized local provider that caters to industry-specific needs.
However, the risks are non-trivial. Overly rigid requirements can backfire, introducing technical complexity or legal uncertainty, and eroding the UK’s attractiveness as a destination for tech investment. The concept of SMS itself is relatively new in UK regulatory discourse and remains largely untested at the scale the CMA is contemplating. Getting the details right—such as how to enforce technical standards or price transparency—will determine whether SMS lives up to its promise or devolves into bureaucratic gridlock.
From a purely market-based perspective, the justification for intervention is straightforward: when a market as critical as cloud infrastructure becomes heavily concentrated, the risks of reduced choice, stifled innovation, and potentially exploitative pricing rise precipitously. The challenge for any jurisdiction—be it the UK, EU, or US—is to ensure that interventions are sensitive to the rapidly evolving technical architecture of the cloud and the genuine need for massive, secure, scalable infrastructure that only a few companies can currently offer at scale.
Furthermore, the rise of generative AI and automation is increasing demand for even more computational resources. This, in turn, makes the dominance of a few providers even more consequential: whoever controls the most advanced cloud infrastructure may also set the pace for future developments in AI, cybersecurity, and even carbon-neutral computing.
But this dominance also rewards scale: hyperscale cloud providers can invest billions in green data centers, security, or AI accelerators—investments that may be out of reach for smaller firms. Any regulatory step should tread carefully to avoid undermining these potential positive externalities.
Strengths of the CMA’s Approach:
Meanwhile, the political dimension is unavoidable. With UK policymakers keen to establish the country as a leader in both digital modernization and digital regulation, their response to the CMA’s report will set a standard that may ripple throughout Europe and beyond. Even if changes take time, the debate over who controls the cloud—and on what terms—has reached a new intensity. The next few years will test whether regulators, industry leaders, and customer advocates can craft a competitive, dynamic, and fair cloud ecosystem that delivers on its potential without stifling the innovation on which the entire digital future depends.
Ultimately, the next chapter of the UK’s—and perhaps the world’s—cloud journey will be written by the regulatory choices made in the months and years to come. Only time will tell whether those choices will foster a market that truly works—for customers, competitors, and the countless businesses that now depend on the cloud’s promise.
Source: inkl Amazon and Microsoft harming competition in cloud computing, finds CMA
The CMA’s Stark Diagnosis: A Market “Not Working Well”
The phrase “not working well”—used pointedly by the CMA—captures the regulator’s assessment of how cloud infrastructure currently serves the UK public and private sectors. The final report outlines a litany of issues hampering healthy competition, but focuses with particular emphasis on Microsoft’s substantial market clout, especially through its licensing of critical software products that are near-ubiquitous in enterprise computing. According to the CMA, the ways in which Microsoft charges its rivals, chiefly Amazon and Google, for use of its software creates significant competitive disadvantages, raising costs and reducing customer choice.This is not a casual assessment. The CMA’s findings are the result of a prolonged and detailed inquiry, with input from independent experts and a review of cloud market dynamics that go far beyond surface-level accusations. The report recommends considering the imposition of “strategic market status” (SMS) for both Microsoft and AWS, unlocking new regulatory tools for targeted and “bespoke interventions.” This status would, in principle, allow the CMA to design rules and requirements specifically to address what it identifies as persistent harms: pricing practices, data portability limitations, interoperability barriers, and other behaviors that may block competitors or raise costs for end users.
Notably, the implementation of SMS for these cloud providers will take some time. The CMA intends to first proceed with proposals to grant strategic market status to Google and Apple with respect to their mobile platforms—a move that reflects a broader UK regulatory push against digital gatekeepers. Any new probe into the cloud market’s dominant players is unlikely to begin before 2026.
Numbers, Market Share, and the Problem of Concentration
The scale of Amazon and Microsoft’s influence in the UK’s cloud ecosystem cannot be overstated. According to the CMA and corroborating industry data, AWS and Microsoft each command up to 40% of the consumer spend in the domestic market. Google trails as a third, far smaller player. This degree of concentration is striking in what is theoretically a vast and highly innovative sector. Compared to more fragmented digital infrastructure markets in earlier decades, the dominance of just two firms raises red flags for consumer advocates and economists alike, who warn of “winner takes all” dynamics that can ultimately stifle the very innovation cloud technology promises to unleash.Microsoft’s annual results—showing Azure division revenues exceeding $75 billion (about £57 billion)—underscore just how much is at stake for both the industry and the public at large. With stakes this high, the actions of AWS and Microsoft reverberate far beyond their own customer bases, setting standards not only for pricing but also for security, environmental practices, and the very architecture of digital systems.
Licensing Practices under Fire
At the core of the CMA’s critique is Microsoft’s approach to software licensing in the cloud. The report concludes that Microsoft’s licensing “adversely impacts the competitiveness of AWS and Google”—especially for customers who run Microsoft software (like Windows Server, SQL Server, or Office 365) on alternative cloud platforms. In essence, Microsoft charges higher fees, or restricts usage of its software, when it is deployed outside of its own Azure cloud environment. This, says the CMA, limits customers’ ability to “shop around” for the best cloud provider, because the price advantage—and often technical compatibility—of running Microsoft workloads is dramatically worse on rival services.Such practices, the CMA argues, “reduce competition in cloud services markets” by weakening competitive pressures from AWS and Google. The criticism is not limited to pricing alone; it extends to interoperability and the ease with which customers can move workloads between providers, a fundamental property in ensuring that no single company can “lock in” its users indefinitely.
While Microsoft is far from the only software vendor with complex licensing, the size of its installed base, its combination of software and infrastructure services, and the centrality of products like Windows and Office make its influence far more significant. This horizontal and vertical integration, once hailed as a strength that drives ecosystem innovation, now faces regulatory skepticism on both sides of the Atlantic.
Responses from the Industry’s Powerhouses
The companies themselves have responded vigorously, seeking to shape the public narrative and regulatory agenda.A spokesperson for Microsoft dismissed the CMA’s conclusions, characterizing the findings as out of step with the industry’s reality. “The CMA panel’s most recent publication misses the mark again, ignoring that the cloud market has never been so dynamic and competitive, with record investment and rapid, AI-driven changes,” the spokesperson claimed. Microsoft also pointedly criticized the report for allegedly failing to account for the momentum of Google’s cloud business, which—while smaller than AWS or Azure—is growing by double digits year-on-year. “Microsoft looks forward to working with the digital markets unit toward an outcome that more accurately reflects the current competition in cloud that benefits UK customers.”
AWS’s reaction was even more forceful, arguing that the CMA’s proposed intervention “disregards clear evidence of robust competition in the UK’s IT services industry.” The company emphasized its own investments in the UK market and predicted negative consequences for regulatory overreach: “The action proposed by the inquiry group is unwarranted and undermines the substantial investment and innovation that have already benefited hundreds of thousands of UK businesses. It risks making the UK a global outlier at a time when businesses need regulatory predictability for the UK to maintain international competitiveness.”
In contrast, Google warmly welcomed the CMA’s findings. Chris Lindsay, Vice President of Customer Engineering for Google Cloud (EMEA), framed them as a tipping point for industry reform: “The conclusive finding that restrictive licensing harms cloud customers and competition is a watershed moment for the UK.” Google, which has often framed itself as the underdog in the cloud wars, urged the CMA’s Digital Markets Unit to act quickly, arguing that swift action is necessary to “unleash choice, innovation and economic growth in the UK.”
Competing Interests and Critical Voices
The wider tech industry, represented by organizations such as the Computer and Communications Industry Association (CCIA), has added its own warnings. While not dismissing the CMA’s concerns, the CCIA cautioned that “overly broad and prescriptive intervention” could inadvertently stifle innovation and investment. Matthew Sinclair, CCIA UK’s Senior Director, warned: “If the CMA goes ahead with these changes, it would undermine the UK’s competitiveness as business users here no longer get access to the latest cloud services.”This reveals the perennial balancing act for competition regulators: interventions must be both robust enough to discipline market power and nimble enough not to dissuade new entrants or slow the adoption of cutting-edge technology. There is no easy answer, especially when the “latest” advancements—such as generative artificial intelligence, quantum computing integration, or fully automated cloud management—require huge capital investments that may only be feasible at the scale of a Microsoft or Amazon.
The Promise—and Pitfalls—of Strategic Market Status
Granting AWS and Microsoft Azure “strategic market status” would bring unique regulatory scrutiny and levers. The proposed status would empower the CMA to impose requirements that go beyond traditional antitrust enforcement, such as mandating how services are bundled, how technical interoperability is achieved, or requiring data portability to a level not typically seen in the industry. These targeted interventions could address the unique challenges presented when a handful of actors control the infrastructure for the entire digital economy.Critically, such measures could increase switching opportunities for business customers—potentially enabling smaller, more innovative providers to compete on an even playing field. For instance, a portability mandate could make it significantly easier for a UK business to move workloads and data from Azure to AWS or to Google Cloud, or even to a specialized local provider that caters to industry-specific needs.
However, the risks are non-trivial. Overly rigid requirements can backfire, introducing technical complexity or legal uncertainty, and eroding the UK’s attractiveness as a destination for tech investment. The concept of SMS itself is relatively new in UK regulatory discourse and remains largely untested at the scale the CMA is contemplating. Getting the details right—such as how to enforce technical standards or price transparency—will determine whether SMS lives up to its promise or devolves into bureaucratic gridlock.
International Context: A Global Cloud Reckoning
The CMA’s concerns echo similar sentiments voiced across Europe and internationally. The European Union is advancing its Digital Markets Act (DMA), which also targets so-called “gatekeeper” platforms for special obligations, and has specifically flagged cloud market concentration as a risk. In the United States, the Federal Trade Commission and Department of Justice have ramped up antitrust investigations into both Amazon and Microsoft, demonstrating a convergence of regulatory anxieties despite different legal traditions.From a purely market-based perspective, the justification for intervention is straightforward: when a market as critical as cloud infrastructure becomes heavily concentrated, the risks of reduced choice, stifled innovation, and potentially exploitative pricing rise precipitously. The challenge for any jurisdiction—be it the UK, EU, or US—is to ensure that interventions are sensitive to the rapidly evolving technical architecture of the cloud and the genuine need for massive, secure, scalable infrastructure that only a few companies can currently offer at scale.
Cloud Competition and Its Impact on UK Businesses
The stakes for UK businesses are particularly acute. The cloud is no longer just the backbone of tech startups or large enterprises; it is the default platform for everything from small retailers' e-commerce operations to critical NHS digital health infrastructure. A lack of genuine competition in cloud services—if left unaddressed—can increase costs for small businesses, slow down digital modernization in the public sector, and restrict innovation by tying customers to proprietary platforms.Furthermore, the rise of generative AI and automation is increasing demand for even more computational resources. This, in turn, makes the dominance of a few providers even more consequential: whoever controls the most advanced cloud infrastructure may also set the pace for future developments in AI, cybersecurity, and even carbon-neutral computing.
But this dominance also rewards scale: hyperscale cloud providers can invest billions in green data centers, security, or AI accelerators—investments that may be out of reach for smaller firms. Any regulatory step should tread carefully to avoid undermining these potential positive externalities.
Critical Analysis: Balancing Competition and Innovation
The CMA’s report lands in an environment fraught with both promise and peril. On the one hand, robust intervention could re-energize a marketplace that—even with rapid growth and continual change—shows troubling signs of ossification at the top. Intervention could lower prices for end users, spur technical innovation, and give smaller providers a fighting chance. On the other hand, overregulation could have unintended consequences, decreasing investment levels and driving away the kinds of capabilities that only a handful of global players can provide.Strengths of the CMA’s Approach:
- In-depth analysis: The report relies on extensive market data and consults a range of independent voices, giving its findings credibility.
- Nuanced recommendations: By proposing “targeted and bespoke” interventions, the CMA acknowledges that cloud markets are not monolithic and require flexible remedies.
- Technology-aware regulation: The focus on interoperability, portability, and software licensing demonstrates an understanding of how cloud markets operate at a technical level.
- Implementation challenges: Defining and enforcing SMS requirements—particularly technical standards for interoperability or data portability—will be complex and potentially contentious.
- Risk of regulatory drag: If rules are too prescriptive, UK businesses could find themselves left behind, unable to take advantage of new cloud features or global best-in-class innovations.
- Global competitiveness: There’s a real risk that heavy-handed UK regulations could disincentivize inward investment or make it difficult for providers to offer consistent services across geographies.
Looking Ahead: What Comes Next?
Though the CMA’s probe will not formally begin before 2026—pending the outcome of digital market interventions against Google and Apple—preparations are already underway. Industry stakeholders, customer advocacy groups, and technology consultants are keenly watching the next steps. For business leaders, the call is to remain vigilant and informed: understanding how licensing terms, technical lock-in, and pricing dynamics may affect their cloud strategies is more crucial than ever.Meanwhile, the political dimension is unavoidable. With UK policymakers keen to establish the country as a leader in both digital modernization and digital regulation, their response to the CMA’s report will set a standard that may ripple throughout Europe and beyond. Even if changes take time, the debate over who controls the cloud—and on what terms—has reached a new intensity. The next few years will test whether regulators, industry leaders, and customer advocates can craft a competitive, dynamic, and fair cloud ecosystem that delivers on its potential without stifling the innovation on which the entire digital future depends.
Conclusion: A Cloud Market at a Crossroads
The UK cloud computing market is facing a decisive moment. With the CMA’s incisive diagnosis and bold recommendations, the conversation around the power of Microsoft and Amazon—and the prospects for true cloud competition—is now unavoidable. For CIOs, developers, entrepreneurs, and regulators alike, the future will hinge on whether interventions can strike the right balance between opening up opportunity and preserving the very investment and scale that have made today’s cloud revolution possible.Ultimately, the next chapter of the UK’s—and perhaps the world’s—cloud journey will be written by the regulatory choices made in the months and years to come. Only time will tell whether those choices will foster a market that truly works—for customers, competitors, and the countless businesses that now depend on the cloud’s promise.
Source: inkl Amazon and Microsoft harming competition in cloud computing, finds CMA
