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The CMA has sharply criticized the exclusion of the public sector from antitrust user research in the UK cloud services market

Posted on by darion

The Competition and Markets Authority (CMA) has come under fire for banning public sector clients from participating in the research phase of its antitrust investigation into Amazon Web Services (AWS) and Microsoft.

The UK competition authority is in the middle of an 18-month investigation into the UK market for cloud infrastructure services after communications regulator Ofcom raised concerns about the competitive practices of AWS and Microsoft in the sector.

As previously reported by Computer Weekly, the CMA published working papers and a report on user research conducted by Jigsaw on May 23 to provide cloud services market stakeholders with insight into the progress of the investigation.

The report is 116 pages long and, according to its authors, has been developed to “deepen the CMA’s understanding of the decision-making processes of UK cloud customers regarding the selection of public cloud infrastructure services, their multi-cloud and switching behavior and the future use of these services.”

To achieve this, the CMA asked AWS, Microsoft, Google, IBM and Oracle to provide Jigsaw with the names of “medium and large UK public cloud customers” so that it could interview “key decision makers” at the company to better understand their cloud purchasing strategies.

“The CMA initially randomly selected approximately 700 sample companies to screen and recruit a target group of 60 respondents,” the Jigsaw report said. “This included 140 companies randomly selected from each of these suppliers.

“Some contact persons were subsequently excluded by the CMA before recruitment began because they were already involved in providing information to the CMA as part of the market research. The CMA also took the decision to exclude public sector organizations.

Raised eyebrows

The decision raised eyebrows among stakeholders in the UK cloud services market due to the heavy use of Amazon and Microsoft cloud technologies in the public sector.

Speaking to Computer Weekly, Mark Boost, CEO of UK cloud services provider Civo, said the CMA made a mistake in choosing not to survey public sector cloud users in this study.

“It would be a mistake to leave public sector organizations out of this review, especially given all the investment that hyperscale providers are currently making in the public sector,” he said.

“There are many legitimate concerns in the industry that a monopoly is being created in this space. We’ve seen government departments forced to enter into multi-year contracts for big tech services before, and none of this seems to encourage a competitive playing field.”

Nicky Stewart, former head of ICT in the UK government’s Cabinet Office, told Computer Weekly that the CMA’s decision not to allow public sector bodies to take part in user research seemed strange.

“The public sector is one of, if not the largest consumers of public cloud services in the UK,” she said. “It also does not make sense in the context of the CMA’s Competition Landscape document, which makes several observations on public sector procurement, including noting stakeholder concerns about public sector procurement practices.”

Data centers in the UK

Since both companies opened their first data center regions in the UK in late 2016, the use of AWS and Microsoft cloud technologies in the public sector has increased significantly.

Shortly thereafter, in January 2017, the UK government announced that its long-standing central government-led, cloud-first mandate would be changed to make the policy a “public cloud first” edict.

Following these events, the amount of UK government IT spending allocated to Microsoft and Amazon has increased, further helped by the introduction of preferential pricing arrangements that enable public sector IT buyers to benefit from discounted prices for both companies’ cloud products and services.

The CMA is among the public sector bodies that have participated in the AWS Preferential Price Discount Program and benefited from discounts on spending on Amazon cloud services.

Incidentally, the use of engaged spend rebate schemes and their impact on competition in the UK cloud services market is the focus of the CMA antitrust investigation.

This situation resulted in conflict of interest concerns being raised with the CMA, despite assurances that the teams responsible for procuring services for the body and the teams responsible for overseeing its investigative work were separate.

Conflict of interest concerns resurfaced earlier this month when it emerged that the CMA had signed a new deal with AWS under which the company would double its spending with Amazon over the next three years and continue to benefit from discounted prices for its services.

Computer Weekly contacted the CMA to explain its decision to exclude public sector organizations from user research, but the body declined to comment.

It previously noted that it would publish additional working papers and user studies in the coming months, on top of the first tranche, which was withdrawn on May 23, and also committed to publishing an “interim decision” to determine what the final outcome of the inquiry into the competitiveness of the UK services market will be in the cloud.

A source with practical knowledge of the CMA investigation said the authorities “chose to collect evidence from public sector bodies in a different way” rather than relying on commissioned research, but refrained from disclosing the other methods.

It is understood that public sector input into the study could be published in the autumn as part of a package of materials supporting the CMA’s initial assessment.

But as things stand, Owen Sayers, an independent security architect and data protection specialist who works mainly in the law enforcement side of the private sector, said the scope of the CMA’s review of the cloud services market appears “terribly small”.

This follows Ofcom’s previous position that software-as-a-service providers and users were considered to be outside the scope of the investigation.

Moreover, the Jigsaw study also excludes any company that claims to use the public cloud for more than 50% of its customer service activities.

“This will exclude a huge group of SMEs (small and medium-sized enterprises) and other UK-based service providers who have chosen to use these platforms as a (means of) meeting the requirements of their customers,” Sayers said.

“As things currently stand, it appears that the CMA is particularly looking at the use of the cloud by private sector companies and organizations who use it to replace internal IT and who may peripherally also use it to serve customers – but only where it is less than their own internal IT use.”