Blames customers being locked in by restrictive software licences as the real market issue
Google Cloud announced that customers who wish to stop using Google Cloud and migrate their data to another cloud provider, or on premises, can migrate their data out for free, globally. The magnanimous move comes at a time when the cloud services market comes under increased scrutiny, particularly following UK regulator Ofcom’s referral of the market to that countries Competition and Markets Authority (CMA).
These so-called egress fees potentially discourage customers from switching providers or rolling out multi-cloud solutions. Ofcom found that hyperscalers set these fees higher than other providers. According to Reuters, many cloud providers, including Microsoft’s Azure and Amazon Web Services (AWS), charge customers based on the amount of data transferred when they switch vendors. Given that these two platforms are used by around 70-80% of customers to access cloud services, the regulator thinks there’s a hyperscale problem.
Ofcom was also concerned that technical barriers regarding interoperability and data portability may potentially raise issues for customers who may have to put in “additional effort” in reconfiguring their data and applications to facilitate their use on different clouds. Finally, the regulator highlighted committed spend discounts as a practice that may impact users swapping services.
Google Cloud VP and head of platform Amit Zavery announced Google’s change of heart in a blog post and then railed at what Google thinks are the real issues – software monopolies. “Eliminating data transfer fees for switching cloud providers will make it easier for customers to change their cloud provider; however, it does not solve the fundamental issue that prevents many customers from working with their preferred cloud provider in the first place: restrictive and unfair licensing practices,” he said.
“Certain legacy providers leverage their on-premises software monopolies to create cloud monopolies, using restrictive licensing practices that lock in customers and warp competition,” he added. “The complex web of licensing restrictions includes picking and choosing who their customers can work with and how; charging 5x the cost if customers decide to use certain competitors’ clouds; and limiting interoperability of must-have software with competitors’ cloud infrastructure.”
Zavery surmised this behaviour may impose a “300% cost increase to customers” making data transfer costs not really being the problem.
Clock is ticking
The CMA has consulted and will here further submissions from stakeholders and hearings up to May 2024. Then it will consult further before releasing its provisional decision in September/October 2024. Its final decision is currently set for between February and April 2025. This could include imposition recommendations and remedies on the big cloud players. All eyes now turn to the two market leaders in cloud services.