The U.K.'s anti-competition regulators have initiated a comprehensive investigation into the towering dominance of Microsoft Corp (NASDAQ: MSFT) and Amazon.Com Inc (NASDAQ: AMZN) in the cloud computing arena.
This move comes as concerns rise over the giants' extensive control and the subsequent impact on market competition and business operations.
Media watchdog Ofcom has escalated its preliminary inquiry to the Competition and Markets Authority (CMA), marking the commencement of an in-depth examination into the matter.
The watchdog has pinpointed specific attributes that complicate the process for British enterprises to alternate between cloud providers or to integrate multiple cloud services. Ofcom has expressed significant apprehensions regarding the market stronghold of Amazon and Microsoft.
The term "hyperscalers" is often associated with behemoths like Amazon Web Services (AWS) and Microsoft Azure, who have carved out a significant niche in cloud computing.
These entities facilitate many essential computing operations online, eliminating the need for on-premise servers. AWS and Azure collectively command 60% to 70% of the cloud expenditure, underscoring their market preeminence.
Egress fees and technical barriers to interoperability are among the primary concerns. These fees and barriers inflate operational costs for businesses and restrict their flexibility to switch or integrate multiple cloud services.
The rapid integration of AI technologies is intrinsically linked to cloud services powered by extensive data centers.
The CMA acknowledges the pivotal role of the cloud space in bolstering a plethora of online services, from social networking platforms to foundational AI models.
The CMA will likely conclude its intensive investigation by April 2025.
Price Actions: MSFT shares traded lower by 0.58% at $317.11 on the last check thursday.