UK cloud firms are calling for urgent regulatory action ahead of the Competition and Markets Authority decision on whether to designate Microsoft and AWS, the two largest providers, with Strategic Market Status.

A new survey from the industry advocacy group Open Cloud Coalition (OCC) found that over 70% of cloud providers believe regulatory intervention is urgent or extremely urgent, with three-quarters agreeing that dominant providers are likely to further entrench their position without swift action. 

Already, the majority of UK cloud firms (82%) report experiencing barriers when competing with top-tier operators, citing practices like restrictive software licensing, bundling, interoperability limitations, and committed-spend discounts.

These concerns were echoed by cloud customers, with the OCC finding that almost 65% believe it is “very important” for regulators to improve competition and reduce lock-in in the cloud market. When asked about the consequences of a consolidated market, 68% of buyers expect higher costs, while nearly two-thirds anticipate reduced flexibility for their organisations. 

According to the OCC, high switching costs and limited interoperability already make it difficult for customers to move workloads or adopt multi-cloud strategies, reinforcing dependence on the biggest providers such as AWS and Microsoft, and further raising barriers to competition.

The trade body said that an SMS designation would allow the CMA to impose targeted conduct requirements on firms with entrenched market power, but warned that a delay to the regulator’s decision risks further market concentration and would make future intervention more costly and less effective.

“The cloud market is no longer working as it should,” said Nicky Stewart, senior advisor to the Open Cloud Coalition.

“Without urgent and effective intervention, dominant providers will continue to lock customers in and consolidate their power, to the detriment of competition, innovation and the UK’s digital economy.”

The CMA is expected to decide by the end of this month whether to proceed with SMS investigations into AWS and Microsoft following its Cloud Services Market Investigation, which identified significant barriers to entry for smaller providers.

Among those were restrictive software licensing and technical barriers to switching that locked cloud customers into their initial choices, with the regulator also noting that the capital requirements made it harder for alternative suppliers to enter the market.

The CMA’s provisional report also found that Microsoft was using its position in software to make it difficult for AWS and Google, the third largest provider, to compete for customers who wanted to use Microsoft software on the cloud, a claim rejected by the tech giant.

In one example, the OCC claims that a member found that while their own offering was 17% cheaper than Azure for non-SQL workloads, it became 15% more expensive for SQL due to Microsoft’s licensing conditions.

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The OCC previously set out a series of recommendations based on the CMA’s findings, including prohibiting discriminatory licensing, promoting cloud‑neutral procurement, restricting cross‑product bundling, and limiting the use of free training as a commercial incentive, all aimed at reducing barriers to competition and improving customer choice.

“Dominant hyperscalers are using a playbook of restrictive licensing and predatory credits to pull up the ladder on competition,” said Mark Boost, CEO at multi-cloud provider Civo. 

“The CMA must move decisively with SMS designation; any delay only gives these giants more time to entrench their position at the expense of UK innovation.”