User Feedback Sought by Regulators on Concerns Over Cloud Services Competition

Research by the UK’s Competition and Markets Authority (CMA) has unearthed apprehensions that commitments formed by cloud users with hyperscalers may curtail their upcoming cloud computing alternatives.

References to public cloud infrastructure services were made to the CMA for a market investigation by Ofcom, the communications regulator. The investigation surrounds concerns that business and technical hurdles such as software licensing terms may make it challenging for UK businesses to either utilize multiple cloud service providers or to interchange between them.

Egress fees, the charges levied by service providers for extracting data from their cloud, and initial discounts are speculated to be contributing to vendor lock-in, regulators suggest.

These factors, inclusive of software licensing issues, have the potential to discourage customers from adopting rival cloud providers, thereby suppressing innovation and restraining competition in the cloud service sector.

The CMA conducted a study with 50 medium to large UK public cloud customers who use the services of top five cloud providers in UK, namely Amazon Web Services, Microsoft Azure, Google Cloud, IBM Cloud, and Oracle Cloud. The study was focused on the customer’s perception of the provider’s infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS).

Private cloud services and software-as-a-service were not included in the study.

It was found that only a few had made a switch between public cloud providers. The motivation to switch was anticipated cost reductions and improved performance promises. Those who undertook the switch reported the process to be more complex and time-consuming than anticipated.

Most participants did not list egress fees as a major concern, despite complaints about the transparency in pricing in this area. Discounts on committed spending might also discourage switching between providers.

It was not commonly perceived that software licensing practices significantly impacted the choice of public cloud provider on their own. For instance, Microsoft users might choose Microsoft Azure since it’s the most user-friendly choice.

On the other hand, technical obstacles like limited code portability, particularly in the realm of PaaS and databases, presented a more formidable hindrance to cloud clients contemplating a multi-cloud strategy or switching cloud service providers.

Survey respondents also voiced concerns that as artificial intelligence melds further into cloud computing services, it will add complexities in switching providers.

The largest concern arising from the survey was a lack of clear pricing in public cloud costs. The findings from this survey will guide further steps in the CMA’s investigation.

In response to queries from Network World, AWS said it was committed to “work constructively with the CMA” through its investigation.

“We believe the CMA will recognize how the increased competition, improved security, and lower costs of IT services introduced by cloud technologies benefits UK companies and the overall economy,” an AWS spokesperson said. “AWS designs cloud services to give customers the freedom to choose the technology that best suits their needs, and the cloud has made switching between providers easier than ever.”

Microsoft, which also said it was ready to work with the CMA, said the cloud services market was already competitive.

“The cloud industry is innovative, highly competitive and an accelerator for growth across the UK economy,” it said. “While Amazon, Google and Microsoft’s cloud offerings all continue to grow at a healthy pace, competition is not limited to these providers, and many other companies have thriving cloud businesses.”

Adrian Bradley, the individual leading the direction towards cloud transformation at KPMG UK, communicated to Network World that he believes the scope of review undertaken by the CMA was not sufficiently broad.

In his opinion, hyperscale cloud, conventional IT, and on-premises settings all have a significant role to play in the cloud strategy of an organisation, and no option should be left unconsidered, stated Bradley.

When it comes to conditions such as discounts for committed spends that are part of contractual agreements, he does not concur with the belief that these are factors causing competition to be compromised.

Bradley clarified that many institutions reap the rewards of the financial incentives these suppliers tend to give upfront, a scenario which may not even be a possibility without these benefits in the realm of digital transformation. He further states that these incentives contribute significantly to the larger UK technology services economy at a macroeconomic level.

The CMA investigation needs to keep pace with a rapidly changing market, concludes Bradley.

For instance, certain big cloud providers have ceased billing clients an egress fee for exiting their storage platform, Bradley points out.

Bradley suggests, “Should the CMA successfully adapt to the subtleties of this already vibrant market, they’ll foster a setting where access to the cloud and emerging technologies is both equitable and efficient.”

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