Briefly, with (textbook) perfect competition, profit maximising firms will price their goods at marginal cost and produce a socially optimum amount.
A company with a monopoly will sell at a higher price and sell less than the socially optimum amount.
There are also dynamic effects:competition acts as a spur for innovation.
This is the text book argument against monopolies.
Like in many technology fields, you have high fixed costs that are distributed over all of your customers, and economies of scale. It is much cheaper for Google to add 10 000 new servers to their datacentres, compared to starting up a new hosting company, building small datacentres on five continents, and rewriting all the software that Google Cloud offers on top of servers.
So seems plausible that a highly concentrated industry with a few big companies each having >10% market share is more efficient (and can offer lower prices) than a market with thousands of small artisanal hosting companies with <0.1% market share.
2 There are lots of businesses with high fixed costs and low marginal costs - tech is not that different from others in that regard.
3 Tech, does have one key difference - the network effect. In other words, a company's history in building up a large network of customers may matter more than how efficiently it operates today
4 The dynamic effects of concentrated industries (as I mentioned earlier) are complicated. There is no guarantee at all that the result will be optimal.
5 We have nice examples of this in collusive behaviour by the major tech companies in their hiring policies.
6 There are other alternatives to the status quo than, as in your example, of reducing companies to one hundredth of their former size.
But if everyone is essentially running the same strategy, the biggest player will win by force of momentum. (See also the reasoning behind dozens of copycat food delivery startups trying to "growth hack".)
Either way, you end up with a few players dominating the market with their locally optimal resource allocation.
This model is called "dominant firm with competitive fringe."
> That's assuming there aren't artificial barriers put up to prevent competition