Can regulatory oversight alone unlock cloud competition?
CCS Insight’s chief of enterprise research looks at the Competition and Markets Authority’s plans to regulate public cloud
By
Bola Rotibi
Published: 27 Mar 2025
Cloud computing’s rise is a success story under scrutiny. It has been nothing short of transformative, enabling businesses to scale operations, innovate rapidly and optimise costs. It has become an essential pillar of modern enterprise IT, supporting mission-critical workloads across industries. From finance and healthcare to artificial intelligence (AI) and retail, the cloud is now the undisputed underlying infrastructure for digital transformation.
Yet as public cloud hyperscalers such as Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP) solidify their dominance, concerns over market competition, licensing restrictions and barriers to switching are gaining momentum. The UK’s Competition and Markets Authority (CMA) is taking a closer look at whether the UK cloud market is functioning fairly or whether customers are being locked into specific ecosystems with limited flexibility.
These regulatory discussions are unfolding at a pivotal moment for the cloud market. There is a growing number of IT providers with hybrid and multicloud subscription-based services. Broadcom, for instance, with its acquisition of VMware, has a streamlined portfolio focused on private, public and/or hybrid cloud flexibility. Given VMware’s footprint in enterprise IT, Broadcom is positioning itself as a viable alternative (see VMware Cloud Foundation box) for users seeking to escape cloud hyperscaler lock-in, as well as a useful partner for cloud service providers seeking to compete with the hyperscalers.
The question is whether regulatory oversight alone can truly open the market, or if market forces can further help reduce hyperscaler dominance and end their deep ecosystem entrenchments.
The cloud market
The cloud computing industry has reached a point where a few major providers dictate the market. The CMA’s concerns are not unfounded. The three major cloud hyperscalers – AWS, Microsoft and Google – together control a sizeable share of the UK’s cloud infrastructure market, benefiting from deep enterprise relationships, extensive service ecosystems and economies of scale that are difficult to match. This is true not just in the UK, but in other major markets, ranging from the European Union to the United States.
If hyperscalers can no longer rely on egress fees and licensing constraints to retain customers, they may need to rethink service deprecation policies, reduce redundant offerings, and provide clearer pricing structures
Bola Rotibi, CCS Insight
These advantages create structural challenges for organisations seeking to diversify their cloud strategy, whether they are users that rely on cloud service providers or other cloud service providers seeking to compete with the hyperscalers.
One of the most significant barriers to competition is the cost of switching providers. Many organisations that initially embraced public cloud find themselves facing egress fees, technical dependencies and licensing restrictions from hyperscalers that make hybrid cloud adoption more complex and costly than expected. For example, Microsoft’s licensing practices have come under scrutiny, with the argument that it unfairly raises the cost of running Windows workloads on competing platforms.
Of course, hyperscaler dominance isn’t purely a result of anti-competitive behaviour. These companies have earned their positions in part through innovation and strategic investment.
AWS revolutionised developer and infrastructure-focused cloud services, making them easily accessible and aligned to their specific operational needs. Microsoft, on the other hand, has leveraged its strong enterprise footprint to make Azure a seamless extension of its software stack. Its offerings are widely deployed and deeply embedded into corporate IT infrastructures.
The challenge regulators face is determining whether these advantages give hyperscalers the ability to lock in customers and create an unfair playing field, or if they simply reflect the natural evolution of an industry where scale and efficiency drive competitive success.
Lessons from open banking
The banking industry offers a compelling case study in regulatory-driven competition. Open banking policies forced large financial institutions to provide application programming interface (API) access to fintech companies, enabling new players to compete with established banks. The result was a surge in innovation, improved customer services and increased choice, benefiting both startups and traditional financial institutions.
Regulators must be careful not to create unintended consequences – for example, excessive restrictions could reduce the incentive for hyperscalers to invest in next-generation cloud technologies
Bola Rotibi, CCS Insight
Could a similar pro-competition model be applied to cloud computing? If regulators push for greater data portability, reduced egress fees and fairer licensing models, hyperscalers could be forced to compete more on service quality rather than continue to benefit from supplier lock-in mechanisms. This would encourage a more diverse cloud ecosystem, allowing alternative cloud service providers to expand the overall market, while potentially providing users with more cloud-based options to better utilise their data and applications.
Yet, there are important differences between banking and cloud computing. Unlike financial institutions, which can adapt through open APIs and partnership models, cloud providers operate at a scale that requires enormous capital investment in infrastructure, networking and security. Regulators must be careful not to create unintended consequences – for example, excessive restrictions could reduce the incentive for hyperscalers to invest in next-generation cloud technologies.
One similarity that does exist between banking and cloud computing is the presence of emerging alternatives in the cloud market that are poised to compete with the hyperscalers. This is where Broadcom’s acquisition of VMware and the resulting business model adjustments become particularly relevant.
Why VMware Cloud Foundation offers competitive options
For businesses looking to escape single-supplier cloud dependency, VMware Cloud Foundation (VCF) presents viable options, including private cloud, public cloud, or a combination of both through a hybrid cloud model.
Where hyperscaler cloud platforms promote open ecosystem engagement and standards, they still pivot towards a design strategy that reinforces their own ecosystems. On the other hand, VCF’s architectural principle is based on building for interoperability and offering a consistent, enterprise-grade cloud experience across private and public clouds.
One of VCF’s biggest advantages is its ability to support both virtual machines (VMs) and Kubernetes-based workloads on a single platform. Many enterprises are still running legacy applications that rely on VMs, yet also need to modernise with cloud-native, containerised applications. Instead of forcing businesses to choose between two separate architectures, VCF seamlessly integrates both. It is a perspective that has not escaped Broadcom’s competitors in the market.
A clear acknowledgment of businesses’ reliance on VMs and the slow transition to containerised operations is Red Hat’s launch of OpenShift Virtualisation, a competing unified platform designed to manage both virtual machines and containers, helping accelerate the shift towards modernised, container-based workloads.
Additionally, recent total cost of ownership studies have indicated that VCF delivers 40-52% cost savings compared with bare-metal or alternative cloud-native solutions. This is particularly relevant in an era where businesses are reevaluating cloud costs and looking for ways to optimise spending while maintaining operational flexibility.
Security and compliance are also key considerations. Many regulated industries – including financial services, healthcare and government sectors – require hybrid cloud models to comply with data sovereignty laws. VCF enables organisations to deploy a unified cloud infrastructure while ensuring that sensitive workloads remain under direct control.
As regulatory conversations evolve, VCF’s value proposition as a flexible, secure and cost-effective option for users and an enabler for cloud service providers aligns well with industry needs and even CMA objectives.
Striking the right balance between competition and innovation
Regulating dominant cloud providers is a complex balancing act. If done well, it could promote a healthier, more competitive ecosystem, ensuring that businesses can choose cloud providers based on functionality rather than contractual obligations. If done poorly, it may slow down innovation, increase complexity and create compliance burdens for all providers.
It is a balancing act well understood by the CMA, the regulatory body tasked by the UK government with helping drive growth without violating its central mandate of promoting competition and protecting consumers.
One potential outcome of regulation is that the hyperscalers themselves may be forced to improve. If hyperscalers can no longer rely on egress fees and licensing constraints to retain customers, they may need to rethink service deprecation policies, reduce redundant offerings and provide clearer pricing structures. In a competitive landscape that values service quality over forced loyalty, businesses could ultimately benefit from more transparency, innovation and choice.
Yet, like in the case of financial services, regulation alone will not create more competition in the cloud marketplace. The presence of competitive options and enablers should be a factor when considering regulatory measures. In addition, businesses should take on greater responsibility for cloud architecture decisions, ensuring that supplier flexibility is a key consideration from the outset.
Too often, organisations become entrenched in a single-provider cloud model not because of external constraints, but because of internal planning deficiencies. Choosing among private, public and/or hybrid clouds requires investment in integration, governance and skills development – regulation can lower barriers, but companies must still take proactive steps to build adaptable, future-proof IT environments.
A defining moment for a multicloud strategy
The CMA’s scrutiny of the cloud market represents a critical turning point for the cloud computing industry. If regulators successfully lower switching costs, enforce fairer licensing policies and promote data portability, users will have more options, and other cloud providers will be better positioned to capitalise on a more competitive market.
However, success won’t be determined by regulation alone. Regulation can create opportunities, but those opportunities need to be seized within the impacted market. The hyperscalers are not passive players – they will adapt, innovate and respond to regulatory changes in ways that could preserve their market dominance. Broadcom’s opportunity lies in its ability to clearly articulate the value of various cloud models, simplify adoption and prove the long-term benefits of its platform both for users and other cloud service providers.
The cloud landscape is evolving, and the next 12 months will determine whether the hyperscalers will maintain their stronghold, or if a more competitive and flexible cloud market grows significantly. Either way, the cloud market will not look the same a year from now – and given the enterprise footprint of VMware, Broadcom has a unique chance to shape its future.
