Levelling the playing field: Could a UK cloud strategy weaken the hold of the hyperscalers?

Open standards – part of the answer?

McLuggage recommends more support for open standards. This is not about controlling what technology people build per se, but about paying more attention to interfaces where data is transferred.

Improved government policy and strategy would allow smaller cloud providers to thrive, because whether such organisations can survive and be cost-effective in the current hyperscale-driven market is “questionable”, claims McLuggage.

With open banking, the Competition and Markets Authority (CMA) forced change through the threat of fines, and the Online Safety Act has placed requirements on social media platforms. Could similar approaches help rein in hyperscaler dominance?

“[Other providers] need to be part of the ecosystem and encouraged. That means putting some influence on the big boys,” McLuggage says. “And it’s good business for hyperscale to have an ecosystem in the UK that is innovative and not just in terms of what they already want to do.”

The likes of AWS won’t simply abandon the UK market, he says, because they are committed, having fought “hard and long” to get their datacentre availability zones into the country.

Nicky Stewart, ex-UKCloud director and former head of ICT strategy delivery in the Cabinet Office, agrees about “rebalancing” with a view to open standards. But she fears the CMA response will only result in “tinkering around the edges”, rather than digging into the bigger picture, which includes, ultimately, whether the increasingly critical cloud sector truly supports national resilience and adaptability, not to mention data sovereignty.

With prime minister Rishi Sunak launching artificial intelligence to benefit healthcare and across government, it could be just in time to reassess cloud. “And every single role I’ve looked at in that [AI launch] is a technical role which requires AWS literacy,” she points out.

For Stewart, it’s almost like “a kind of group-think” going on that is contrary to much of the rest of the world, including France, Germany and Australia, to an extent. As a nation, the UK has “sleepwalked” into this situation, largely with two major cloud providers with proprietary platforms.

“Yet the US and China are facing off over a war in terms of digital sovereignty. And in 10 years, people are going to wake up and smell the coffee.”

With local cloud “pretty much destroyed” – UKCloud itself entered compulsory liquidation in October 2022 – the few other providers still standing often do not want to put their heads over the parapet to complain, instead relying on value-add resales, she adds.

Stewart says the CMA “needs to be bold”.

“Perhaps look at things that it doesn’t think of as in its remit,” she says. “If they just look at, say, the four points or so referred to them, the best they might achieve is to make switching a bit easier, which would only shift market share between three hyperscalers.”

The industry needs to “find its voice”, she says. Remaining cloud providers, and perhaps cloud buyers as well, might join forces to speak up and lobby for more political support, countering the loud voices of those with the deepest pockets, as well as the inertia of many existing trade and business associations.

“Partly, it’s the nature of cloud to be an unhappy bedfellow with either procurement regulations or competition laws that are bureaucratic, long-winded, and so on,” she says. “We need genuine, intelligent debate about possible governance structures that can retain agility and scalability.”

Mark Boost, chief executive and co-founder of cloud-native UK services provider Civo, has the free credit situation in his sights. Hyperscalers dish out credits worth “hundreds of thousands”, he says, “something the smaller challengers just can’t do”, with the knock-on effect of a near-monopoly not just on price and diversity, but a risk to the overall economy when problems occur.

Every cloud provider offers a Kubernetes platform, although much proprietary tech typically sits around the outside, with everyone providing that differently. The Kubernetes part might be interoperable versus a firewall or load balancer service that is bespoke to configure and set up to that cloud provider – limiting the ability to pull permissions and roles automatically into another cloud, he explains.

A model of shared ownership or local partnership of some sort might be worth considering, as long as the consumer still gets the benefits that drive them to opt for the hyperscale solution. After all, they’re strong solutions with their own unique selling points. And truthfully, is business ever truly absolutely fair to every player?

“But certainly put some form of pressure on companies towards open standards, not least for the benefit of the consumer. People should have the freedom to move somewhere else,” says Boost. “Yet I’m not a fan of too much regulation. To some degree, businesses should be free to compete against each other.”

Ian Moyse, an industry veteran of multiple cloud and IT channel partner roles and a fellow of the Institute of Sales Management, broadly agrees: “They’re not going to solve this by regulation.”

He continues: “Ofcom is focusing on AWS, Azure and hosting providers, but if you look at the cloud sector, many systems have the same issues. If you look at Salesforce, for example, you can just switch it on and put your data in, but as soon as you start moving down the path, you have to configure it and you’re going to get third-party add-ons and plug-ins.”

Therefore, this could be less about ingress and egress data and other costs – it’s more about how to get the most benefit from any of these packages, with the multiple technology and technical issues around it, he notes.

“It’s hard to move, so you need to make your decisions,” says Moyse. “If you want to use multiple cloud platforms, you’ve got to start looking at how you abstract yourself from the commitment of that layer, depending on usage and so on.”

That’s partly why IBM spent big on Red Hat, after all, he suggests, getting a level of abstraction from multiple cloud stacks, enabling the locate of compute on a desired platform. Hence Kubernetes containerisation and the like, of course.

“That’s the goal, but you’re not going to get it, in my opinion, from the proprietary vendor because they have a vested interest in you digesting as much of their compute as you can,” notes Moyse.

Ofcom concluded in its report that certain cloud market features restrict multicloud and switching, distorting competition in the UK. In a market worth £7bn to £7.5bn in 2022, AWS and Microsoft took 70% to 80% of UK IaaS and PaaS revenues, it said.

“Our study has found that competition between cloud providers is mainly focused on attracting new customers when they first move into the cloud.”

Potential levers for intervention include addressing data egress fees, price controls, technical interoperability and portability, integrations, transparency, standardisation and interconnectivity, service access, “committed spend” or “complementary equivalence” requirements to level the playing field, the report said.