A cloud market characterised by openness, interoperability, and fairness has to be the aspiration for Europe, but we are currently far from that.
I fear policymakers may feel that efforts to tackle cloud switching through the Data Act and contestability in digital markets through the Digital Markets Act (DMA) may have already set us on a course to achieve this. This is a false sense of security, because the reality is that significant gaps remain.
The Data Act tackles egress fees and some aspects of technical lock-in but it does not deal with unfair licensing practices, committed spend agreements, or cloud credits which limit choice and ultimately innovation.
The issue of unfair licensing practices concerns the actions of certain software companies who charge customers more for using competitors’ clouds to host their software, and is under investigation by competition authorities across Europe.
Committed spend agreements are often touted, particularly in the public sector, as being great value for customers, despite the fact many find themselves having to commit in advance to growing their cloud footprint with that provider to maintain their discounts.
This has implications where the risk of lock-in is concerned, and the same is true of firms who offer free cloud credits to give customers a taste of what their platforms can do.
For any cloud user wishing to pursue a multi-cloud approach to sourcing services, the Data Act will not help to unpick the web of complexity and cost that unfair licensing practices impose on them.
Similarly, the DMA is a tool that would seem to be inappropriate to deal with any of the same issues.
The DMA is designed to tackle gatekeepers intermediating between business users and consumers. Cloud is not a market of this type and – even if it were – the obligations that the DMA might place on any cloud “gatekeeper” would not tackle any of the unfair practices that members of the Open Cloud Coalition experience.
Finally, public procurement, where smaller players struggle to penetrate a system that is stacked in favour of incumbents and those companies with the resources to absorb the bureaucracy and assurance needed to be competitive, is not addressed either by any recent efforts by European policymakers to deal with the cloud market.
There are opportunities on the horizon to deal with these issues: upcoming reform of public procurement rules and a mooted AI & Cloud Development Act, which Mario Draghi at least believed should “level the playing field”.
These could be vehicles to improve the situation. Rather than attempt to frame new ex-ante rules or reopen the DMA, the quickest route to deal with the major anti-competitive practices in the market today is antitrust enforcement.
The European Commission’s Directorate General for Competition and National Competition Authorities have been looking at the cloud market for some time and we think that decisive action is much needed.
Thankfully it seems that some in the European Parliament understand this with proposed amendments to its competition report acknowledging the urgency of addressing anti-competitive practices, such as unfair licensing practices, and urging competition authorities to take swift action.
In the wake of the Paris AI Action Summit, the Commission has talked a lot about Europe grasping the AI opportunity, but it will fail unless it has a healthy and fair market for cloud services to underpin it.
The UK’s Competition and Markets Authority watchdog does seem to be making progress in tackling some of these issues, but Europe needs to make sure that its own house is in order or it will be left behind.
There is much to do but much that can be achieved, if there is the political will to do so and a focus on the issues that really matter.
