The UK's Competition and Markets Authority has raised significant concerns over Microsoft's dominance in the cloud computing sector, particularly highlighting the company's software licensing practices. An investigation revealed that Microsoft's licensing terms are restricting competition, adversely affecting rivals such as Amazon Web Services and Google. The CMA's inquiry found that both Microsoft and AWS each hold up to 40% of the UK cloud market, creating a highly concentrated environment that hampers smaller competitors.
The CMA's report specifically criticized Microsoft's licensing strategies, stating they disproportionately affect competitors like Amazon and Google, thereby harming market competitiveness. The authority is considering designating both Microsoft and AWS with Strategic Market Status , which would subject them to bespoke interventions aimed at boosting market competition. However, such a probe wouldn't begin until 2026.
In response to the CMA's findings, Microsoft and AWS have pushed back, claiming that the cloud market remains vibrant and competitive. They warned that overregulation could harm UK business investment and innovation. Microsoft emphasized the dynamic nature of the cloud services industry and argued that the CMA's conclusions do not accurately reflect the competitive landscape.
Despite the regulatory scrutiny, Microsoft reported a record-breaking $75 billion in annual Azure cloud revenue, marking a 39% increase in its latest quarter. This achievement underscores the company's strong position in the cloud market, even as it faces criticism from the CMA. The overall revenue also rose 18% to $76.4 billion, helping Microsoft become the world’s second $4 trillion company.
The CMA's investigation and subsequent report reflect a growing global concern over the competitive dynamics of the cloud computing industry. As major tech companies continue to expand their cloud services, regulatory bodies are increasingly scrutinizing their practices to ensure a level playing field. The outcome of the CMA's considerations regarding SMS designation will be pivotal in shaping the future competitive landscape of the cloud market.
