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Cloud vendor lock-in and egress fees

The set of costs that make switching cloud provider dearer than staying dependent, and that European law has been dismantling since 2023.

Definition

Vendor lock-in is the set of costs that make leaving a cloud provider more expensive than staying dependent on it: rewriting applications built on proprietary interfaces, losing accumulated skills, multi-year discounted commitments, and above all egress fees, the per-gigabyte charges levied when data leaves the platform although bringing it in was free. The asymmetry is deliberate and its economics are well understood, dependence growing mechanically with the volume of data accumulated. The risk consequence is direct: a locked-in company cannot execute its multi-provider continuity plan, however well that document reads, and an unexecutable plan is worth no more than no plan. The law has taken hold of the question, with the European Data Act requiring the phase-out of switching charges and setting migration timeframes, turning a commercial matter into an obligation. An underwriter can therefore now ask, on documentary evidence, whether the advertised exit path is contractually executable.

Example

Regulation (EU) 2023/2854, the Data Act, adopted on 13 December 2023, phases out switching charges for data processing services. Google Cloud announced in January 2024 that it would waive egress fees for customers leaving its platform, and Amazon Web Services announced a comparable measure in March 2024.

Related terms
Also known as

vendor lock-in, frais de sortie, egress fees, réversibilité cloud