Vapour CEO, Tim Mercer, recently responded to Ofcom's study into UK cloud services and subsequent referral to the Competition and Markets Authority, in an article published in Comms Dealer. If you missed the original, you can read the full piece here.
What's your reaction to this news?
The announcement first hit the headlines back in April 2023, and it’s now six months down the line that we’re learning everything is being formalised to the CMA. This latest development is just process without outcome, in my opinion. According to the Government website, the average CMA investigation takes 18 months, so nothing will change for some time. Whatever the outcome, it feels like very little will happen for at least three years, and by then, the hyperscalers’ share will probably have moved from 70-80%, to 80-90%.
So, while I welcome this attention and any efforts to develop choice in the market — as well as the level of conversation finally being had on the topic — we’d be naïve to think there will be a quick or easy remedy.
Does Ofcom have a strong case?
Yes and no. The Government predominantly uses AWS and Microsoft for its own cloud services. As part of this process, the CMA — a Government department — is therefore now investigating the Government’s own decisions to allow these two massive companies to dominate. I can’t help but worry that this will be a tricky narrative to manage.
In your experience, is competition working well in the cloud space at the moment?
No, as smaller players cannot compete on price. Smaller cloud providers win and retain work based on service levels and the quality of support offered — providing an incredible level of technical expertise that clients can tap into, without the shackles of dealing with a much larger organisation. However, in a market dominated by price, it’s hard for them to stick their head above the parapet and be noticed. The voice of the hyperscalers — particularly these two brands — dominates the media, and the ‘go to’ route to market is therefore almost pre-determined in the eyes of organisations embarking on their cloud journey. There are lots of people in the cloud space communicating hard to open up the playing field, of course, but it isn’t easy.
Should Ofcom's cloud market probe have happened before now?
In my opinion, yes – the state of competition in the market isn’t new.
And should Ofcom be doing more than handing off the case to the CMA?
It’s extremely difficult to answer this question without opening up a controversial conversation, but let’s consider where we currently find ourselves.
The Ofcom website states: “Our duties come from Parliament. Our priority is to look after you, and we sometimes do this by promoting competition among companies we regulate.” So, we have a Government-approved body, advising the Government, to investigate Government-supported companies… I’ll just leave that there.
What follow-on action would you like Ofcom and the CMA to take?
I think there are people far more equipped than me, who can answer that question.
How big an opportunity could this probe prove to be for the channel's cloud service providers?
We have to leverage the opportunity to empower the buyer with knowledge, especially around the hidden costs of cloud, including egress charges and the inability to move simply, for example. We always hear that it’s easier, more cost-effective, more secure, and better for the environment, to be in public cloud. However, in many instances this simply isn’t true.
I am definitely a supporter of the public cloud in so many instances, but I also strongly believe that an organisation’s cloud requirements should be fully explored and understood before the right solution is proposed. And in lots of cases, alternative cloud providers, private or hybrid solutions, will represent a better fit.
Given (AWS) and Microsoft had a combined market share of 70-80% in 2022 – is Ofcom trying to shut the stable door after the horse has bolted?
I can’t help but worry that this is a paper exercise to try and show willing, without an outcome expected. The boundaries should have been set much earlier, and a colossal degree of change would now be required to shake up the market. However, conversation is getting louder, and it’s up to people like us to maintain it.