IBM-HashiCorp Deal Under UK Antitrust Scrutiny

IBM HashiCorp deal has inspired criticism

The UK government is investigating whether IBM’s acquisition of cloud infrastructure firm HashiCorp will result in a “substantial lessening of competition” within markets in the country.

IBM announced its intention to buy HashiCorp for $6.4 billion in April 2024 to help support its customers’ growing AI-related demands. HashiCorp provides hybrid and multi-cloud lifecycle management products, such as infrastructure as code tool Terraform, which facilitate building and running AI applications.

HashiCorp will operate as a division of IBM Software rather than being brought into Red Hat, IBM’s open-source subsidiary. The deal would help its products reach a larger audience.

U.K. cloud market does not present a level playing field

In October 2023, telecoms regulator Ofcom identified various issues in the U.K. cloud market that present challenges for businesses and consumers, including Amazon and Microsoft’s dominance. Microsoft’s Azure and AWS have between 70% and 80% of the U.K.’s cloud service market share compared to Google Cloud’s 10%.

One of the most pressing concerns is the cost of migrating data from cloud platforms. This cost barrier discourages customers from switching between cloud providers, stifling competition in the sector.

Synopsys and Ansys merger likely to be approved

On December 20, the CMA completed its Phase 1 investigation into the $35 billion acquisition of simulation software company Ansys by chip design software provider Synopsys.

The CMA found that the merger has the potential to substantially lessen competition in the chip design and light simulation market but may still approve it if the two companies submit acceptable mitigations.

Synopsys and Ansys compete in three key sectors. The first is register transfer level power consumption analysis, which assesses a chip’s power demands and usage. The other two are optics and photonics software, both used to design and model light-related products like camera lenses, TV displays, car headlights, and lasers.

Conclusion

The UK government’s investigation into IBM’s acquisition of HashiCorp is a significant development in the country’s cloud market. The deal has sparked concerns about the potential for a “substantial lessening of competition” and the dominance of large players like Amazon and Microsoft.

Meanwhile, the Synopsys-Ansys merger is also under scrutiny, with the CMA investigating whether the deal will lead to a loss of innovation, lower quality software, and/or higher prices for UK businesses and consumers.

FAQs

Q: What is the UK government investigating in relation to IBM’s acquisition of HashiCorp?

A: The UK government is investigating whether the acquisition will result in a “substantial lessening of competition” within markets in the country.

Q: Why is the UK cloud market not a level playing field?

A: The UK cloud market is dominated by a few large players, including Amazon and Microsoft, which has led to a lack of competition and innovation.

Q: What are the concerns about the Synopsys-Ansys merger?

A: The merger has the potential to substantially lessen competition in the chip design and light simulation market, leading to a loss of innovation, lower quality software, and/or higher prices for UK businesses and consumers.

Q: Will the Synopsys-Ansys merger be approved?

A: The CMA is expected to approve the merger if Synopsys and Ansys submit acceptable mitigations to address competition concerns.

Q: What is the significance of the IBM-HashiCorp deal?

A: The deal has sparked concerns about the potential for a “substantial lessening of competition” in the UK cloud market and the dominance of large players like Amazon and Microsoft.

Q: What is the current market share of Google Cloud in the UK cloud market?

A: Google Cloud has a market share of around 10% in the UK cloud market.

Q: What is the expected outcome of the CMA’s investigation into the Synopsys-Ansys merger?

A: The CMA is expected to approve the merger if Synopsys and Ansys submit acceptable mitigations to address competition concerns.