Cloud market is highly concentrated says UK competition regulator

Customers spent £10.5bn on cloud services in 2024, with spending growing by nearly 30% each year since 2020 as they rely increasingly on cloud, rather than on-premises or ‘traditional’ IT. 

Microsoft and Amazon are the two largest cloud providers, with Google trailing in third place with up to 10% share, found a CMA investigation. Other providers, including Oracle and IBM, have shares that are even smaller. 

The CMA said that Microsoft and AWS have been generating sustained returns from their cloud services substantially above their cost of capital in cloud services for a number of years. 

The report said market concentration and barriers to entry in the cloud services market have enabled both Microsoft and Amazon “to hold significant unilateral market power in the cloud services markets and to earn returns above the cost of their capital over a sustained period.” 

It also said that technical and commercial barriers lock customers into their initial choice of provider, “which may not reflect their evolving needs and limits their ability to exercise choice of cloud provider.” 

The CMA will now consider whether to open a probe into Microsoft and Amazon with a view to handing them so-called strategic market status in relation to their respective digital activities in cloud services.  

This would enable the CMA to impose targeted and bespoke interventions to address its concerns. However, any SMS probe would not start until 2026.