After Amazon’s cloud services division AWS experienced a major outage, disrupting numerous popular websites and apps for millions of users, concerns persist about the heavy reliance on a small number of companies and the challenges in preventing future outages.
Similar to past incidents like the CrowdStrike and Rogers outages in previous years, Monday’s disruption underscored the extent of economic dependencies on a single company. Services such as Snapchat, Pinterest, Reddit, Spotify, Starbucks app, DoorDash, Grubhub, Lyft, Venmo, Zoom, Netflix, Disney+, Prime Video, WhatsApp, Signal, and U.K. government websites were all impacted.
The outage highlighted the dominance of AWS, which holds a significant share of the global cloud services market, closely followed by Microsoft Azure and Google Cloud. These three companies collectively control over 60% of the cloud market.
Experts suggest that companies achieve market dominance through various means, including early innovation, anti-competitive practices, mergers, and strategic acquisitions. The U.K.’s antitrust regulator raised concerns about AWS’s market dominance, while Amazon faced accusations of maintaining a monopoly in the U.S., leading to a significant settlement.
The concentration of market power in a single entity or a few companies can lead to economic fragility and lack of resilience, according to experts. Some digital companies grow rapidly due to their unique value propositions that attract more users, creating a snowball effect in market dominance.
While oligopolies and monopolies exist in various sectors such as groceries, airlines, and banking in Canada, excessive competition without consumer demand can be detrimental in the long run. Public policy needs to adapt to market dynamics to ensure fair competition and consumer protection.
Companies that establish themselves as comprehensive entities across multiple sectors may leverage financial strategies to undercut competitors and expand their market share. Vertical integration, where companies control various parts of their supply chain, is another strategy for growth and dominance.
Despite inevitable service outages, the focus should be on implementing measures to mitigate catastrophic consequences. Redundancies and backup infrastructure are essential in critical sectors to ensure continuity of services during disruptions.
The need for a Canadian-owned digital infrastructure to shield consumers from vulnerabilities associated with foreign-owned infrastructure is gaining attention. The importance of investing in domestic digital infrastructures to enhance sovereignty and reduce reliance on external entities is increasingly recognized.