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The cloud computing sector is concentrated in the hands of a few US Big Tech companies, led by Amazon. When one of them suffers a technical glitch, it resonates widely and serves as a reminder of just how dependent the internet is on them.\u00a0<\/p>\n
What is cloud computing?<\/p>\n
Cloud computing (also known as \u201ccloud services\u201d) is when companies source their computer power, storage and software tools from the data centres of providers, such as Amazon Web Services and Microsoft\u2019s Azure, rather than operating their own servers.<\/p>\n
The \u201ccloud\u201d model allows organisations to pay only for the resources they use on demand. Instead of making the upfront capital investments and ongoing maintenance required to run servers in-house, customers typically pay monthly fees.<\/p>\n
Cloud computing<\/a> has become even more important with the artificial intelligence boom, as the technology powering chatbots such as OpenAI\u2019s ChatGPT is too large and complex to run locally. Amazon has said <\/a>it will invest about $100bn in AI this year as it builds up its data infrastructure. <\/p>\n What are the main companies that provide it? AWS is the world\u2019s largest cloud computing and storage provider, followed by Microsoft (through Azure) and Google (a distant third through its Google Cloud). Between them, they control about two-thirds of the global \u201cinfrastructure as a service\u201d market, the size of which Gartner estimated was worth nearly $172bn last year.\u00a0<\/p>\n It is a profitable business. For Amazon, AWS is now considered \u201cthe real crown jewel\u201d of the company\u2019s operations, the FT\u2019s Lex wrote<\/a> in July, generating nearly 60 per cent of the company\u2019s operating profit last year. <\/p>\n Analysts have forecasted that the division will report more than $126bn in revenue this fiscal year. Lex, based on a back-of-the-envelope calculation, estimated that the business was worth about $1.4tn, or over 57 per cent of Amazon\u2019s entire enterprise value.\u00a0\u00a0<\/p>\n What happens when \u2018the cloud\u2019 goes down? An outage <\/a>at AWS in October hit services at a range of groups, from social media platform Snapchat to Lloyds Bank and OpenAI\u2019s ChatGPT. Customers around the world had trouble accessing websites.\u00a0<\/p>\n AWS blamed the issues on faults at its data centre hub in northern Virginia. Problems with an Amazon database service known as DynamoDB left systems unable to match website names with the numerical IP addresses needed to load apps and web pages.\u00a0<\/p>\n Highlighting the risks to critical infrastructure of cloud disruptions, the outage affected the London Stock Exchange Group\u2019s data services and the website of the UK tax authority HM Revenue & Customs.\u00a0<\/p>\n Does the industry have a vulnerability to outages?\u00a0 Although cloud service outages happen periodically, analysts say the main challenge around them is not an inherent technological vulnerability but the fact that the market is controlled by just a few big players. This means that when one provider suffers an issue, the impact on business and the economy is felt widely.<\/p>\n Cori Crider, executive director of the Future of Tech Institute, a think-tank, noted: \u201cBillions of dollars\u2019 worth of damage can be done overnight in a single shutdown. The plug can be pulled on vital sectors of the economy.\u201d\u00a0<\/p>\n Max von Thun of the Open Markets Institute, writing <\/a>in the FT in May, said that cloud\u00a0computing \u201cnow resembles a public utility\u201d. He highlighted the risk of concentration, noting that centralised infrastructure was \u201chighly susceptible to espionage, sabotage, human error and natural disasters\u201d. \u00a0<\/p>\n What do regulators say about the industry? The UK\u2019s Competition and Markets Authority in 2023 opened a market investigation into the country\u2019s cloud services market. In July<\/a>, an independent panel of the CMA found that the UK cloud market \u201cis not working well\u201d and recommended the agency impose conduct requirements on Microsoft and Amazon to boost competition. <\/p>\n The CMA will now consider whether to open a probe into Microsoft and Amazon with a view to handing them so-called strategic market status, which would result in certain conduct requirements, using its new digital powers that came into force this year.\u00a0<\/p>\n<\/p>\n<\/p>\n<\/p>\n<\/p>\n