Unfair competition? Public companies often pay too much for the cloud

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Public companies in Germany pay up to 120 million euros too much for their cloud services every year. This is the conclusion of a study by the Center for Sustainable Transformation (ZNT) at Quadriga University Berlin. The researchers see the reason for this in the regulatory authorities, which have not taken sufficient action against "unfair licensing on the German cloud market". In addition, the distorted competition makes companies slow and inefficient, explains ZNT Director Torsten Oltmanns.

Provider changes drive up license costs

According to the study, around four out of five public companies in Germany currently use a cloud service. At the same time, around 80 percent of those surveyed expect the associated costs to increase over the next five years. Cloud applications currently account for around a quarter of the IT budget. In around 70% of the companies surveyed, new software licenses were required following a change of cloud provider. The costs for this were between 27 and 120 million euros.

This amount does not include the additional costs incurred by public companies that have not yet been able to switch cloud providers due to restrictive licensing conditions. For 60 percent of those surveyed, switching was not worthwhile for economic reasons. Furthermore, around a quarter consider the license conditions of the service providers to be non-transparent. The companies lack a financial comparison due to strict confidentiality regulations, Oltmanns told Behördenspiegel.

British cartel office recognizes Microsoft's market power

Meanwhile, the ZNT Director refers to the German Federal Cartel Office. It is responsible for controlling the market power of large digital providers that restrict freedom of choice in cloud services and must ensure fair competition in the digital sector. The regulatory authorities in other countries, including Spain, Denmark and the UK, were quicker to investigate cloud providers and their licensing conditions.

As early as 2022, the UK competition regulator announced that it would examine the market for cloud service providers. It published its preliminary findings at the end of January, concluding that there are technical and economic barriers that make it difficult for customers to switch between providers and that they are therefore tied to their original choice. In addition, the authority recognized that Microsoft uses its strong position in the software sector with Office and Teams to make it difficult for competitors to compete.

New federal government to act

The US company's practices also attracted negative attention at European level. For example, the cloud industry association CISPE complained to the EU Commission about Microsoft Azure's contractual clauses, among other things. After the company changed the clauses and covered the legal costs, the association withdrew the complaint. Most recently, Microsoft competitor AWS left the CISPE board after the association decided that only European companies may be represented on the board.

In light of this development, Andreas Mundt, President of the German Federal Cartel Office, has also warned of increasing market concentration among cloud service providers. Meanwhile, ZNT Director Oltmanns believes that politicians have a duty to act. The authority already has the necessary rights, but must now act. "The next federal government should put the Federal Cartel Office in a position to remedy these abuses," he warns. It is about growth, innovation and efficient conditions for companies.

(sfe)