The Competition and Markets Authority (CMA) is examining Microsoft’s role within the business software landscape and its implications for both businesses and public sector entities. As part of this process, the CMA is seeking input on various aspects where it plans to gather further evidence and explore potential actions aimed at enhancing customer choice.
Proposed Strategic Market Status for Microsoft
The CMA has suggested that Microsoft may be designated with strategic market status (SMS) within its business software ecosystem, a process that will involve public consultation prior to any final determination. An indicative roadmap has also been released, detailing potential areas for intervention that could improve outcomes for organisations across the UK.
Key areas identified for further investigation include the way Microsoft bundles its software offerings, as well as initiatives to facilitate easier integration for developers working within Microsoft’s business software ecosystem.
Microsoft’s Dominance in the UK Software Market
Microsoft’s suite of business software—which encompasses Word, Excel, Outlook, PowerPoint, Teams, and increasingly Copilot, alongside its security, server, and operating system products—is used by over a million businesses and public sector organisations in the UK. Approximately 20 million users access these products monthly. Given their critical role in supporting workplace functions, ensuring genuine customer choice and stimulating competition is vital for innovation and productivity.
The landscape of business software is evolving rapidly, driven by advancements in artificial intelligence (AI) and a move towards more autonomous AI functionalities within familiar tools. UK customers stand to gain significantly when they can access top-tier tools and seamlessly integrate software and AI services from a diverse array of suppliers. This flexibility is particularly crucial for government entities and essential organisations that require the ability to select, switch, and combine digital services without becoming overly reliant on a single technology provider. Such resilience is increasingly important for maintaining strategic autonomy.
Investigating Barriers to Competition
The CMA’s findings, which inform the current proposed designation, reveal several key insights:
- Microsoft holds a robust position across five key areas of digital activity, including personal computer operating systems, productivity software suites, security software, server operating systems, and relational database management systems.
- The company’s dominance in the business software sector is reinforced by substantial barriers that customers encounter when attempting to switch providers, thereby limiting their options and reducing competitive pressure on other software developers.
- Commercial practices and advantages in integration further incentivise customers to adopt Microsoft’s products, creating additional hurdles that other developers find challenging to surmount.
A Focus on Innovation and Competition
The CMA has outlined a roadmap that highlights areas where it intends to seek additional evidence and consider possible interventions if Microsoft receives strategic market status. The emphasis is on fostering greater choice and competition, which could lead to reduced costs for businesses and public sector organisations while simultaneously promoting innovation and growth.
Key areas earmarked for further investigation include:
- Evaluating whether customers can freely select the best AI tools and functionalities to meet their requirements, and assessing whether competing AI providers have a fair opportunity to compete with Microsoft’s Copilot.
- Investigating whether Microsoft’s bundling and integration of security products restrict customer choice.
- Determining whether customers have genuine options regarding which cloud platforms to deploy their software licenses on, and analysing how Microsoft’s licensing practices affect those choices.
Commitment to Enhancing Customer Choice
Sarah Cardell, Chief Executive of the CMA, emphasised the importance of business software and cloud services in supporting workplaces throughout the UK, from small enterprises to essential public services. She stated, “The evidence suggests Microsoft has a long-standing and significant presence in the UK’s business software market.”
Cardell further expressed the necessity for organisations to choose products that align with their needs, switch providers when desired, and integrate services from various suppliers. The CMA aims to ensure that businesses can freely choose how they utilise Microsoft’s products alongside alternatives. The consultation on Microsoft’s potential designation as a strategic market leader is now underway, with the CMA’s focus on fostering competition and enhancing consumer choice in the business software domain.
Ongoing Engagement with Cloud Providers
In March, the CMA announced its engagement with a wide array of stakeholders to ensure that Amazon Web Services (AWS) and Microsoft deliver on their commitments to enhance customer choice in the cloud sector. The CMA continues to collaborate closely with both companies, monitoring internal data and product developments while driving significant improvements, such as:
- Connecting their data centres with competitors, beginning with Google.
- Eliminating data transfer fees for customers switching cloud providers and reducing fees for those utilising multiple cloud services.
- Introducing a mechanism that allows competitors and customers to request enhanced interoperability.
- Rolling out AI tools to streamline the technical steps necessary for switching providers.
Despite these advancements, the CMA acknowledges that further work is required to dismantle remaining barriers to switching between cloud providers and utilising multiple cloud services. Efforts will continue to focus on enhancing identity and access management across different clouds and ensuring that cloud architectures can be deployed and migrated seamlessly, without unnecessary obstacles. This approach demonstrates the CMA’s commitment to securing quicker benefits for UK businesses.
As the situation develops, the CMA remains open to the possibility of initiating a full SMS investigation. Further updates will be forthcoming, with an anticipated report scheduled for Spring 2027.
Additional Information for Stakeholders
The CMA’s findings remain provisional and will undergo consultation before a final designation decision is rendered by the statutory deadline in February 2027. It’s important to note that SMS designation does not imply any wrongdoing on Microsoft’s part. Should Microsoft be designated, this could enable the CMA to implement targeted and proportionate interventions aimed at bolstering competition, contingent upon meeting the relevant legal criteria.
The UK’s Digital Markets Competition Regime is designed to be flexible and highly targeted, allowing the CMA to craft bespoke interventions that address specific aspects of how a firm engages in digital activities. This regime includes a participative engagement process that involves a diverse range of stakeholders, from major corporations to challengers and consumer advocacy groups.
For media inquiries, please reach out to the CMA press office via email at press@cma.gov.uk or by telephone at 020 3738 6460 during office hours, which are Monday to Friday, 9am to 5:30pm. For out-of-hours inquiries, please use the out-of-hours number provided.
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