I hadn;t seen this study untile now. Cloud services market study, Final report. from Ofcom.
Some things I took away.
"‘Cloud computing’ is the provision of remote access to computing resources (such as compute, storage and networking) on demand and over a network. "
"Cloud infrastructure provides the foundation for how software applications are developed and run. This consists of products called infrastructure as a service (IaaS) which includes storage, computing and networking, and platform as a service (PaaS) which includes the software tools needed to build and run applications. The market for cloud infrastructure in the UK was worth £7.0 billion to £7.5 billion in 2022. There are two leading providers of cloud infrastructure services in the UK: Amazon Web Services (AWS) and Microsoft, who had a combined market share of 70% to 80% in 2022.2 Google is their closest competitor with a share of 5% to 10%. Collectively these firms are referred to as the ‘hyperscalers’ and the vast majority of customers use their cloud services in some form. A diverse set of independent software vendors (ISVs) build their products on cloud infrastructure from the hyperscalers, but also compete directly with some of their services."
"Our study has found that competition between cloud providers is mainly focused on attracting new customers when they first move into the cloud. We see evidence of some positive outcomes for customers, including product innovation, discounts and a wide choice of software services from ISVs. However, our view is that competition is being limited by market features that make it more difficult for customers to switch and use multiple suppliers (known as ‘multi-cloud’). "
My comment. A nice example of competition for a market (very intensive) and competition in a market (once you are signed up, not intensive). Regulators, in my view, have to be very careful here. If they try to have more competition in the market e.g. lower switch costs, you might hurt the bargains available in the competition for the market. Futhermore, it turns out that at least some customers can multi-cloud host.
Here are some examples of the benefits of competition for the market.
"1.13. This means competition between the hyperscalers is mainly focused on attracting new customers into their ecosystems when they first move into the cloud. Significant discounts are offered in return for committed spend by larger customers, alongside technical support to help businesses move applications into the cloud.
1.15 There are indications that competition for new customers is leading to some positive outcomes. Providers are investing in their offerings to match product development by their rivals and we see some evidence that they are responding to customer demand for opensource technologies, for example by adopting containers.4 Customers also have access to a diverse range of services from ISVs, including some that meet very specialist use cases, that are developed and run using cloud infrastructure as the foundation."
More interestingly, what does this market actually do?
3.5 Traditional IT infrastructure is made up of data centres, servers, networking hardware, desktop computers and applications. It is usually installed on-premises for private use by an organisation. It is usually connected to a network which includes stored data and applications. Organisations relying on traditional IT infrastructure normally depend on an in-house IT department to install and maintain the infrastructure
3.2 In this market study, we define cloud computing as the provision of remote access to computing resources (compute, storage and networking) on demand and over a network (public internet or a private connection), instead of a personal computer or local server that are not part of the cloud.
3.6 Compared to traditional IT infrastructure, cloud computing offers flexibility and scalability which enables customers to quickly scale up or down the computing resources that support their business. This can allow them to reduce their IT costs, transform capex into opexincrease their innovation potential, enhance their quality of service, and achieve baseline security and resilience. It also offers access to relevant data from any device, anytime and anywhere.
3.7 While cloud computing offers significant benefits, it does have some limitations. Cloud infrastructure is usually owned and managed by the cloud provider, so the customer may have more limited control over their data, applications and services. Furthermore, public cloud computing is completely reliant on internet connection, so if the connection is interrupted, data cannot be accessed.
3.8 The main suppliers of cloud services (all services involved in the provision of cloud computing) in the UK are Amazon Web Services (AWS), Microsoft and Google,51 which offer a broad range of cloud services at scale and are often referred to (in this document and more widely) as the hyperscalers.
The different service models are interesting.
3.15 Cloud services provide access to computing resources on demand, via a network. The customer buys access to the computing resources as a service and typically does not own the underlying hardware and software. There are three key elements to this definition:
a) Computing resources – these include hardware (servers and network equipment) and software (applications) which are used to process workloads65 and store data.
b) On demand – the computing resources are available on a scalable and elastic basis. This typically involves the dynamic provision of virtualised computing resources. Users are often billed for the amount of resource used.
c) Via a network – the transit of data to and from the cloud provider may be over the public internet or a private connection. This allows location-independent access to the cloud.
And here are the models
3.17 Cloud services are typically classified according to their service models: infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS).
3.18 The service models are differentiated by the level of control the customer has over the management and maintenance of the computing resources. IaaS, PaaS and SaaS form a vertical stack, where each layer is notionally built on top of the previous one(s). This is shown in Figure 3.1 below.
3.20 Platform as a service (PaaS) are cloud services that provide access to a virtual environment for customers to develop, test, deploy and run applications. Examples of PaaS products include AWS Elastic Beanstalk, Microsoft Azure DevOps and Google App Engine – which can be used, for example, to build streaming video on demand (SVoD) services
3.21 Software as a service (SaaS) are complete applications hosted in the cloud. In general, most modern consumer and business facing applications are SaaS, including communications services (e.g. Gmail and WhatsApp), broadcasting video on demand (BVoD) services (e.g. BBC iPlayer), productivity software (e.g. Microsoft Office 365 and Google Workspace) and customer relationship management software (e.g. Salesforce Sales Cloud).
The completeness of this is nicely set out
What has been happening to prices? Parat 4.124 is mostly redacted, but some points. First, list and transactions prices seem very different. Second, some data: para 4.128 "For EC2, the average UK list price across instance families fell by almost 30% between 2016 and 2022 (but a large price reduction between 2016 and 2017 means that prices fell by less than 15% between 2017 and 2022)."