KFTC acts on Amazon's large share of S.Korea's cloud market

Amazon controls around 70% of South Korea's cloud market, followed by Microsoft in second and Google and Naver Corp. fighting for third place.

The Korea Fair Trade Commission (KFTC) on Wednesday said it will seek measures to improve the market, citing the problems of technology compatibility and data transfer that hinder switching cloud service providers by customers.

The KFTC studied 32 major cloud companies and 3,000 customers, distribution partners and marketplace solution providers that deal with such companies to analyze  domestic conditions for cloud transactions and competition in the sector.

Amazon over the past three years had the biggest share of the Korean cloud market, the study found, with 77.9% in 2019, 70% in 2020 and 62.1% last year.

Microsoft was a distant second with 6.7% in 2019, 9.4% in 2020 and 12% last year.

Google and Naver are battling for third place. Google in 2019 was third with 3.5%, but Naver overtook its American rival with 5.6% in 2020 and 7% last year.

The study also found that 79.9% of cloud customers spent 60% of all related expenses on one provider, meaning transactions were highly dependent on one company rather than several.

The KFTC said customers found it hard to switch to a competing cloud provider or use several services.

Just 14% said they experienced changing cloud providers, meaning the vast majority 86% had not.

The study also found that 55.3% said switching to another provider was possible through time and money spent, while 39.7% called it impossible; 76.7% cited the cost burden and technical limits of data transfer as the biggest reason that made a switch difficult.

Sixty-eight percent said they had no plans to adopt a multi-cloud and 6.6% wanted to but were delayed due to difficulties. The chief problem that prevented a switch was again cost burden and technical constraints of data transfer with 60.3%.

"Interoperability is not guaranteed when switching to a cloud or using more than one cloud, so our study found many restrictions on resetting work processing methods that have already been designed and built or developing new methods," the KFTC said.

On the problem of data transfer, it added, "We discovered the significant cost and time needed to smoothly transfer large quantities of data accumulated in a provider's infrastructure to competitors."

The KFTC said a cloud industry strategy to attract customers is to have a structure of charging no inbound fees for receiving data but receiving outbound charges for transmitting data.

"This fact-finding survey confirmed that the domestic cloud market has a high concentration of large global companies like Amazon and the phenomenon of easily constrained competition due to technological incompatibility and data concentration," it added. "We will set the direction of our monopoly policy by seeking systemic improvements to raise competitive pressure on the cloud market."

Write to Joo-Wan Kim at kjwan@hankyung.com