Google has issued a rare rebuke against one of its biggest tech rivals after it accused Microsoft of ‘significantly impeding customer choice’ in the UK cloud market.
The search engine giant said Microsoft’s software licensing practices impose restrictions which “risk irreversibly tilting the market in Microsoft’s favour at a pivotal moment” and that “technical barriers are amplifying the effects of these practices.”
Google said that Microsoft’s licensing restrictions prevent it and others from competing for most of this addressable market, adding: “urgent and timely action is necessary to address Microsoft’s practices.”
Google’s diatribe was backed up with comments by Amazon’s AWS, which said there is “a history of cloud providers and customers being unhappy with Microsoft’s conduct,” adding that Microsoft’s “conduct is artificially imposed and could be easily fixed.”
The remarks were made as part of the UK competition watchdog’s probe into the business practices of the biggest players in the cloud market.
The three biggest cloud market players, Google Microsoft and Amazon’s AWS, were invited to give evidence at hearings setup by the Competition and Markets Authority, which is set to publish its findings on the cloud services market early next year.
Google said that it agreed with the CMA’s views on the broader market dynamics, and in particular, the significant market power held by AWS and Microsoft. The California-based business said it agreed with the CMA’s emerging thinking as to how competition for the supply of cloud infrastructure services operates and that AWS and Microsoft are by far the most powerful players.
For their part, Microsoft and AWS, which together control more than two-thirds of the UK cloud market, both said they rejected the watchdog’s thinking in testimony published by the CMA.
Microsoft said it “believes the CMA’s emerging views on the competitive landscape and market outcomes disregard real world evidence that the market is highly dynamic and rapidly evolving.”
“Customer satisfaction is high, that there is fierce competition between cloud service providers which drives down prices, and market participants are investing heavily in AI capabilities to stay relevant and competitive,” Microsoft added.
Microsoft said licence fees for its software do not materially raise costs for its competitors, adding that the available evidence indicates that AWS and Google have ample margin to compete with its Azure platform. But Google claimed that it is more expensive to run Microsoft workloads on Google than it is on Azure.
All three providers said they did not view the presence of committed spend agreements — in which customers commits to spend a minimum amount across the cloud provider’s services over a period of years — preclude it from competing effectively for business, while Microsoft said exit charges “is not a significant issue” for customers.
AWS said that overall, all the potential remedies offered by the CMA to improve market competition “would be limiting customer choice.”
The remarks come amid a period of increasing regulatory scrutiny of the world’s biggest cloud providers. In October 2023, the CMA expressed concerns that dominant players like Amazon and Microsoft unfairly disincentivise customers from using smaller providers, while media regulator Ofcom said it was concerned about high exit fees charged by cloud providers as well as interoperability barriers that have been artificially raised to make it hard to switch providers.
According to an Ofcom study published last year, the UK cloud market is dominated by three main players, with Amazon and Microsoft each accounting for around 30-40% of total revenues and Google representing around 10%.
However, the UK government has signalled its openness to proposals to build more data centres in the UK as it eyes opportunities to accelerate growth in the British economy. Last week the government designated data centres ‘critical national infrastructure’, the first such designation in nearly a decade, which places data centres on a par with water, energy and emergency services systems and will mean businesses sector can now expect greater government support in recovering from and anticipating critical incidents.
AWS has already signalled its desire to cement its position in UK’s public cloud infrastructure market, last week committing to deploy as much as £8bn over the next five years in building, operating, and maintaining data centres.
