TL;DR

The CMA (Competition and Markets Authority) said on 16 October that Microsoft’s business software ecosystem should be given strategic market status (SMS). That view is provisional, and the regulator is consulting before a final decision due by February 2027. Its draft roadmap includes checking whether customers can pick the AI tools they want and whether competing AI providers face a level playing field against Copilot.

Why Microsoft

The regulator examined five digital activities and found Microsoft strong in each: relational databases, security tools, operating systems for PCs and for servers, and productivity suites. According to the CMA, Microsoft’s software reaches more than a million UK businesses and public bodies and around 20 million users a month, through Word, Excel, Outlook, PowerPoint and Teams, a growing presence for Copilot, and its security and server products.

The provisional findings say that strength rests on how hard it is for customers to switch, which limits choice and weakens the pressure rival developers can apply. Commercial terms and integration advantages add further barriers.

What the CMA might do

If the designation goes ahead, the roadmap lists three areas for further evidence:

• whether buyers are free to pick the AI tools and features they want, and whether alternatives to Copilot get a fair chance to compete
• whether Microsoft’s bundling and integration of security products restricts choice
• whether customers can decide which cloud runs their software licences, and how Microsoft’s licensing affects that

Chief executive Sarah Cardell said organisations “should be able to choose the products that work best for them, switch provider when they want to and combine services from different suppliers.” The CMA stresses that designation does not imply wrongdoing. It would let the regulator consider conduct requirements or pro-competition interventions.

The CMA also reported progress from separate, informal talks on cloud with Microsoft and AWS (Amazon Web Services). Both have begun connecting their data centres to competitors’ networks, Google first, and have scrapped the charges for moving data out when a customer switches provider. A further cloud update is due in spring 2027.

Looking forward

The AI question is the one to watch for UK organisations. It echoes the CMA’s push to get AI assistants onto Google’s choice screens, which we reported in September. In our view, if the CMA presses on Copilot integration, it could make it easier to run a rival assistant alongside Word, Excel and Teams without losing features. The CMA is inviting views on both the proposed designation and the roadmap, so that line of inquiry is open to challenge before the February 2027 decision.