Anyone with a stake in the UK’s cloud market will be waiting for the CMA’s provisional decisions on its Cloud Services Market Investigation which are expected by the end of October. To recap, the CMA has been looking at data egress fees, technical interoperability, commitment discounts and Microsoft’s software licencing practices. 

But the CMA has not been looking at free cloud credits (unless linked to a discount) which are one of the main causes of the lack of competition in the UK’s cloud market.

The stark reality is that free cloud credits are the single biggest reason small to medium cloud providers cannot compete on a level playing field against the hyper-scale cloud providers. 

Free cloud credits are a recipe for lock-in: they foster early reliance on proprietary platforms and, given the scale of some credits on offer (which can run into hundreds of thousands of dollars over multiple years) encourage smaller and sometimes inexperienced cloud users to over-provision, only to left with a nasty “bill-shock” when the cloud credits expire. 

With so much available for “free”, the cloud user’s price sensitivity is reduced or even eliminated. The UK will never have a competitive and diverse cloud eco-system if the CMA continues to turn a blind eye.

So I have raised my concerns with CMA, and made some suggestions about how cloud credits could be made to be fairer – in doing so reducing the hyper-scale stranglehold on the UK’s cloud market. 

 1. Prohibit Cloud Credits for Dominant Cloud Service Providers

A bold step could be to prohibit CSPs with over 20% market share from offering cloud credits. This would level the playing field, allowing smaller providers to compete on merit rather than financial clout. However, to ensure this approach benefits the entire UK cloud ecosystem, it should be paired with limitations on the amount and duration of cloud credits.

2. Cap Credits at $100,000 for 30 Days

Limiting free credits to $100,000 with a 30-day duration strikes a balance. Cloud services can be tested without overwhelming smaller competitors. The short time frame also reduces the risk of early lock-in, giving customers more freedom to explore alternatives. The hyper-scalers won’t like it, but it’s a crucial step to foster a more competitive environment.

3. Offer Smaller Credits Over a Longer Period

Smaller credits over a longer period – say $10,000 over 120 days – would help smaller Cloud Service Providers by giving them more time to demonstrate their capabilities and build customer relationships. Though this may limit complex testing for some customers, it would encourage a more thoughtful and competitive selection process. 

4. Ban Cloud Credits Entirely

The most drastic option would be to ban cloud credits altogether. This would remove a significant barrier to competition but might push customers to seek credits from offshore providers, complicating enforcement.

Expect the backlash but be bold and take meaningful action

Any limitations on hyper-scale cloud credit offerings will cause a backlash. Microsoft has already taken pre-emptive action against the CMA’s cloud investigation as a whole. I fully expect the hyperscale cloud providers to make a political argument that any restrictions in free cloud credits will inhibit innovation and economic growth in the UK.         

But nothing could be further from the truth. The net result of the hyper-scale cloud credit regime has been a market paralysed through lack of competition, UK Cloud Service Providers struggling to scale and grow, and a whole generation of UK start-ups locked into inappropriate and expensive cloud platforms – all because of the lure of the cloud credit.

The CMA has an opportunity to take affirmative and meaningful action. My personal recommendation is to implement Option 1 – the prohibition of cloud credits for companies with more than 20% market share – along with Option 2, limiting the value and duration of the cloud credits that qualifying CSPs can offer.

The question is, will the CMA seize this moment to level the playing field, or will the hyper-scalers continue to dictate the rules of the game?