In a recent article published by Computer Weekly, Civo's CEO, Mark Boost, shared his insights on the ongoing investigation by the UK Competition and Markets Authority (CMA) into the cloud infrastructure services market. The investigation has put major players like Amazon Web Services (AWS) and Microsoft under scrutiny for their business practices, with allegations of using scare tactics to discourage regulatory changes.
The CMA's inquiry, initiated in October 2023 follows findings from Ofcom that revealed potential anti-competitive behavior within the sector. The focus is particularly on whether AWS and Microsoft’s licensing practices and committed spend discounts are stifling competition and limiting customer choice.
Boost emphasized the implications of committed spend discounts, stating, “The way committed spend discounts work is straightforward - the more years an organisation commits to, the greater the savings. This may lead to short-term benefits, but it will always result in long-term costs by locking enterprises into a single provider.”
In the Computer Weekly article, Boost urged the CMA to remain steadfast in its investigation.
“The CMA mustn’t be swayed by the excuses offered by AWS and Microsoft. It should consider measures to limit the excess of these discounts and improve transparency around their terms and conditions.”
Both AWS and Microsoft have suggested that changes to their operations—such as limiting committed spend discounts—could threaten their future investments in the UK. Microsoft has argued that these discounts are essential for fostering price competition, which, in turn, supports significant long-term investment in UK cloud infrastructure. However, Mark Boost cautioned against accepting this narrative, highlighting the need for deeper scrutiny of such practices.
“Despite this, cloud credits were not mentioned once during the most recent hearings. The CMA must urgently look into these practices if they’re to truly address the anti-competitive behaviour that’s holding back the UK’s cloud market.”
Boost expressed his desire for the CMA to expand its investigation into providers' offering free cloud credits, which entices users to initially build applications on their platforms. “Cloud credits work in a similar way to committed spend discounts,” he explained. “An initial offer of free credits is appealing. However, once applications are built and data stored in the hyperscaler’s environment, it’s often prohibitively costly to move to a different provider.”
The investigation also explores whether technical barriers and data egress fees complicate customer transitions between cloud services. AWS has defended its practices, claiming that intervention could lead to higher prices for UK customers and diminish their competitive edge globally. Yet, this stance has faced skepticism, with critics highlighting the potential for these discounts to lock public sector bodies into costly, multi-year contracts.
As the CMA continues its investigation, Mark Boost emphasizes the need for thorough scrutiny of practices that may foster anti-competitive behavior. For more insights and details, read the full article here.