Ofcom cloud market referral aims to breed healthier competition

This month I contributed to a feature in Comms Dealer magazine – CMA investigates public cloud market.

In this blog, I delve a little deeper into the subject.

I share my response to the Ofcom cloud market referral, why competition is vital and how customers tend to take the biggest hit in a stifled market. I also touch on our role as a channel, to add value in the cloud market.

You can find out more about the Ofcom cloud market referral on their website.

What’s your reaction to the Ofcom cloud market referral to the Competition and Markets Authority?

About time too!

It’s been infuriating to observe such incredible market growth in a space without control, or recognition that it needs to be controlled, until now.

Is there a strong case for the Ofcom cloud market referral?

Ofcom’s duty concerns the welfare of consumers, so their case is clear.

The fact that over 80% of the cloud market is controlled by two players demonstrates that without question, there’s a need for change.

Every market needs effective competition, otherwise, that market becomes distorted by extreme pricing and lack of choice. In these scenarios, customers take the hit.

The UK cloud economy is huge. A stifled market means a handful of big players stand to shape the market how they want. On the flip side of that, customers face skewed pricing, lack of choice and limited product innovation.

Is competition working well in the cloud space at the moment?

The cloud economy is booming, but if we take a helicopter view of the market, it’s dominated by two main players. Despite this, there are a surprising number of smaller cloud providers out there doing an impressive job.

What would continued market dominance mean for the rest of the market, and the capability for there to be proper competition?

Pricing:

Market domination breeds pricing issues.

Dominant players have the power to dictate pricing to drive colossal profits. This anti-competitive behaviour doesn’t work well for the consumer.

It’s not uncommon for businesses to feel the sharp pain of price hikes as they start to scale. Price gouging and lock-in strategies that make it difficult for businesses to migrate to another solution create a walled garden. When customers find themselves trapped in a situation where they are forced to commercially ‘just make it work’, it feels wrong, in fact, it feels unethical.

Innovation:

The second, arguably more interesting argument, is that competition creates a healthier market, both in terms of innovation and choice.

Competition helps to develop specialism and heightened creativity. This in turn cultivates talent and more ideas.

A homogenised product with a formulaic structure is stifling, both for the broad cloud market and the individual customers who buy the service.

How big an opportunity could this probe prove to be for the channel’s cloud service providers? 

The channel has a role to play in providing a layer of capability, specialism, professionalism, advice and professional services. Our channel can add real value in the cloud market.

Resellers that sit in that telecom space can gain a lot. It’s not just about opportunity, it’s becoming a requirement to move into the IT space.

The channel’s real value to its customers is being a trusted partner. It’s being someone who your customer turns to and says ‘I’ve got a problem, or idea, how do I go about delivering this?’

That’s where the best channel players really exist – when they are able to become that trusted partner.

Is the Ofcom cloud market referral coming too late?

How many other markets exist where the dominance is this significant?

Despite the concentration of a few major players, there are a lot of smaller cloud providers who provide brilliant alternatives to customers.

Providers in any market tend to consider their place; they have a clear view of their target market and have a unique selling point. It could be argued that hyperscalers are delivering a product suited for the mass market – customers with vanilla needs.

Smaller providers tend to have more flexibility and can afford to approach individual scenarios with creativity. They can provide a personal touch, interact with the customer, and have the ability to design a solution that’s a neat fit with the customer’s needs.

The market is growing, and while the Ofcom cloud market referral could have happened long before now, there’s still plenty of opportunity and a place for alternative cloud providers, who I’m confident will grow and thrive.

Read the full feature