Can Regulatory Oversight Alone Unlock Cloud Competition?

Cloud computing’s rise is a success story under scrutiny. It has been nothing short of transformative, enabling businesses to scale their operations, innovate rapidly and optimize costs. It has become an essential pillar of modern enterprise IT, supporting mission-critical workloads in many industries. From finance and healthcare to AI and retail, the cloud is now the undisputed underlying infrastructure for digital transformation.

Yet, as public cloud hyperscalers such as Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform solidify their dominance, concerns about market competition, licensing restrictions and barriers to switching are gaining momentum. The UK’s Competition and Markets Authority (CMA) is taking a closer look at whether the UK cloud market is functioning fairly or whether customers are being locked into specific ecosystems with limited flexibility.

These regulatory discussions come at a pivotal moment as Broadcom enters the cloud market owing to its acquisition of VMware. With a streamlined portfolio focused on a flexible approach to private, public and hybrid clouds, Broadcom is positioning itself as a viable alternative for those seeking to avoid hyperscaler lock-in, as well as a useful partner for cloud service providers looking to compete with the hyperscalers. The question is whether regulatory oversight alone can truly open the market, or if market forces can help reduce the dominance of the hyperscale providers and the entrenched positions of their deep ecosystems.

The Cloud Market: Where Competition Meets Constraint

The cloud computing industry has reached a point where a few major providers dictate the market. The CMA’s concerns are not unfounded: three major cloud companies — AWS, Microsoft and Google — together control a sizeable share of the UK’s cloud infrastructure market, benefiting from deep enterprise relationships, extensive service ecosystems and economies of scale that are difficult to match. And this is true in other major markets, ranging from the European Union to the US. These advantages create structural challenges for organizations seeking to diversify their cloud strategy, whether they’re end users or cloud service providers seeking to compete with the hyperscalers.

One of the most significant barriers to competition is the cost of switching providers. Many organizations that initially embraced public clouds find themselves facing data egress fees, technical dependencies and licensing restrictions from hyperscalers that make adoption of hybrid cloud environments more complex and costly than expected. For example, Microsoft’s licensing practices have come under scrutiny, with claims that it unfairly raises the cost of running Windows workloads on competing platforms.

Yet hyperscaler dominance isn’t purely a result of anticompetitive behaviour. These companies have earned their positions in part through innovation and strategic investment. AWS revolutionized developer- and infrastructure-focused cloud services, making them easily accessible and aligned to their specific operational needs. Microsoft has exploited its strong enterprise presence to make Azure a seamless extension of its software stack.

The challenge regulators face is determining whether these advantages give hyperscalers the ability to lock customers in and create an unfair playing field, or if they simply reflect the natural evolution of an industry in which scale and efficiency drive competitive success.

Lessons from Open Banking: Can Cloud Follow Suit?

The banking industry offers an interesting case study in competition driven by regulators. Open banking policies have forced large financial institutions to provide API access to fintech companies, enabling new players to compete with established banks. The result has been a surge in innovation, improved customer services and increased choice, benefitting start-ups and traditional financial institutions.

Could a similar pro-competition model be applied to cloud computing? If regulators push for greater data portability, reduced egress fees and fairer licensing models, hyperscalers could be forced to compete more on service quality rather than continue to benefit from supplier lock-in mechanisms. This would encourage a more diverse cloud ecosystem, allowing alternative cloud service providers to expand the overall market while potentially providing users with more cloud-based options that suit their data and applications.

However, there are important differences between banking and cloud computing. Unlike financial institutions, which can adapt through open APIs and partnership models, cloud providers operate at a scale that requires enormous capital investment in infrastructure, networking and security. Regulators must be careful not to create unintended consequences — for example, excessive restrictions could reduce the incentive for hyperscalers to invest in next-generation cloud technologies.

One similarity between banking and cloud computing is the presence of emerging alternatives. This is where Broadcom’s acquisition of VMware and its resulting adjustments to its business model become particularly relevant.

Why VMware Cloud Foundation Offers Competitive Options

For businesses looking to escape a dependency on a single cloud provider, VMware Cloud Foundation (VCF) presents viable options, including private cloud, public cloud, or a combination of both through a hybrid cloud model. Although hyperscalers’ cloud platforms promote open ecosystem engagement and standards, they still lean toward a design strategy that reinforces their own ecosystems. On the other hand, VCF’s architectural principle is based on building for interoperability and offering a consistent, enterprise-grade cloud experience across private and public clouds.

One of VCF’s biggest advantages is its ability to support both virtual machines (VMs) and Kubernetes-based workloads on a single platform. Many enterprises still run applications that rely on VMs, but also need to modernize with cloud-native, containerized applications. Instead of forcing businesses to choose between two separate architectures, VCF seamlessly integrates both.

It is an approach that has not escaped the notice of Broadcom’s competitors. A clear acknowledgment of businesses’ reliance on VMs and the slow transition to containerized operations can be seen in Red Hat’s launch of OpenShift Virtualization — a competing unified platform designed to manage VMs and containers, helping accelerate the shift toward modernized, container-based workloads.

Additionally, recent total cost of ownership studies indicate that VCF can deliver cost savings of 40% to 52% compared with bare metal or alternative cloud-native solutions. This is particularly relevant in an era where businesses are re-evaluating their cloud costs and looking for ways to optimize spending while maintaining operational flexibility.

Security and compliance are also key considerations. Many regulated industries — including financial services, healthcare and government sectors — require hybrid cloud models to comply with data sovereignty laws. VCF enables organizations to deploy a unified cloud infrastructure while ensuring that sensitive workloads remain under direct control.

As regulatory conversations evolve, VCF’s positioning as a flexible, secure and cost-effective option for users and an enabler for cloud service providers aligns well with industry needs, and even with the objectives of regulators like the CMA.

Striking a Balance between Competition and Innovation

Regulating dominant cloud providers is a complex balancing act. If done well, it could promote a healthier, more competitive ecosystem, ensuring that businesses can choose cloud providers based on functionality rather than contractual obligations. If done poorly, it could slow down innovation, increase complexity and create compliance burdens for all providers.

It’s a balancing act well understood by the CMA, tasked by the UK government with helping to drive growth without violating its central mandate of promoting competition and protecting consumers.

One potential outcome of regulation is that hyperscalers may be forced to improve. If they can no longer rely on data egress fees and licensing constraints to retain customers, they may need to rethink service deprecation policies, reduce redundant offerings and provide clearer pricing structures. In a competitive landscape that values service quality over forced loyalty, businesses could ultimately benefit from more transparency, innovation and choice.

But as in financial services, regulation alone will not create more competition in the cloud marketplace. The presence of competitive options and enablers should be a factor when considering regulatory measures. In addition, businesses should accept greater responsibility for their decisions about cloud architecture, ensuring that supplier flexibility is a key consideration from the outset.

Too often, organizations become entrenched in a single-provider cloud model not because of external constraints, but because of internal planning deficiencies. Choosing between private, public and hybrid clouds requires investments in integration, governance and skills development — regulation can lower barriers, but companies must still take active steps to build adaptable, future-proof IT environments.

A Defining Moment for Multicloud Strategy

The CMA’s scrutiny of the cloud market represents a critical turning point for the cloud computing industry. If regulators lower switching costs, enforce fairer licensing policies and promote data portability, end users will have more options, and other cloud providers will be better positioned to capitalize on a more competitive market.

However, success won’t be determined by regulation alone. Regulation can create opportunities, but those opportunities need to be seized. The hyperscalers are not passive players — they will adapt, innovate and respond to regulatory changes in ways that seek to preserve their market dominance. Broadcom’s opportunity lies in its ability to articulate clearly the value of various cloud models, simplify adoption and prove the long-term benefits of its platform for users and cloud service providers.

The cloud landscape is evolving, and the next 12 months will determine whether the hyperscalers maintain their stronghold or if a more competitive and flexible cloud market grows significantly. Either way, the cloud market will not look the same a year from now — and Broadcom has a unique chance to shape its future.

This article was originally published in Computer Weekly on 27 March 2025.