Last week, U.K. communications watchdog group Ofcom reported that it was investigating cloud infrastructure vendors — paying particular attention to Amazon and Microsoft — for making it too difficult to move workloads from public clouds. This raised a legitimate question about the obstacles to portability.
The report pointed to three things in particular that Ofcom would investigate: egress fees, the payments these companies charge when customers want to move data from their platforms; general restrictions on interoperability and portability; and discounts they use to keep companies with large workloads on their platforms.
Ofcom is investigating whether cloud vendors, especially the largest ones, have been deliberately putting up roadblocks to keep customers from changing vendors, giving consumers fewer options once they’ve committed to a particular seller. That could put smaller competitors at a distinct disadvantage.
Typically, Ofcom looks at consumer issues like the cost of broadband, but it sees cloud computing as a public utility, where pricing has a direct impact on U.K. businesses. The inquiry suggests that U.K. authorities see a possibly deliberate attempt on the part of these companies to keep their customers in the fold.
Of course, every company wants to keep its customers from churning. That in itself is not necessarily a problem, but if these companies are setting up systems to make it difficult for customers to switch, then that becomes an issue for groups like Ofcom. It’s worth noting that the U.S. Federal Trade Commission also announced an inquiry into public cloud vendors last month, asking for public comment on market power and security risks. It joins the EU, which launched an investigation into Microsoft last year.
When we asked Microsoft and Amazon about the report, they both said they are working with Ofcom and are committed to a competitive market in the U.K. Yes, that’s all well and good and exactly what you would expect from the vendors, but do these groups investigating anticompetitive behavior have a point?
It’s a bit more complicated than it might initially appear. Watchdog groups tend to be looking for a binary answer: Are these companies acting in an anticompetitive way or not? But with cloud technology, once you commit to a vendor, there’s a whole bunch of technology required to connect your application and data to the public cloud that’s proprietary to each vendor. Extricating yourself from that is not a simple matter, fees and other obstacles aside.
These technical hurdles are much harder to regulate away than fees, according to Alex Smith, an analyst at Canalys who covers the cloud infrastructure market. “Regulators across the globe, in China, Europe and the U.S., are clearly looking at the power dynamic of Big Tech and impact on economies and innovation,” he said. “In this case, while egress fees may somewhat be a stumbling block to migration, overall it is the technical integration that exists between customer applications and the CSP (cloud service provider) services that creates stickiness.”
Most customers are consuming more than pure compute and storage from these vendors, and that’s where the complication comes in. “It is a large exercise to migrate data onto a CSP platform — hence you see many ecosystem partners that specialize in doing that — and equally a complex task to migrate off it. Overall, I don’t think this is something that can be tackled by regulation, but it is notable that many are investigating,” he said.
Holger Mueller, an analyst at Constellation Research, told TechCrunch+ that while vendors may be charging companies to get the data out, they don’t charge to put it in, and he argues that could offset the egress fees. “It is certainly making it harder for enterprises with the egress cost and that [could] limit competition. The flip side is that the egress charges subsidize the upload (do we say ingress?) of data to the cloud, and everybody likes that,” Mueller said.
But he sees these groups looking into potential anticompetitive practices as useful to ensure that they aren’t using their market power to keep competitors out. “It’s good to see a watchdog doing their job and looking deeper into potentially or likely anticompetitive practices,” he said. “The [last thing that] economies, enterprises and people need are [limitations on] technology advances due to anticompetitive practices by the market leaders. At the same time, regulation can stifle competition as well, so regulators have to strike a balance.”
The migration issues we’re seeing could help system vendors like HP and Dell — which have had a hard time since the cloud began to take precedence over on-prem — by helping companies manage the complexities related to having workloads in multiple places, said Natalya Yezhkova, an analyst at IDC. “I think it is a great opportunity for system vendors, which were caught in a storm of this growth in public clouds and left without a way to target this market,” she said. “And that was a huge threat for them. And the fact that these vendors are adjusting to this new reality by introducing these on-premises [management] services is I think a great move for them, and [it forces] AWS, Microsoft and Google to figure out what to do about this.”
It’s worth noting that most companies are working with multiple cloud vendors at this point to avoid the vendor lock-in that the regulators worry about. That means customers already have options for where to put their workloads, based on the strengths and weaknesses of a particular vendor. The regulators appear to be more concerned with moving existing workloads from one vendor to another — or back on-prem to a private data center, a co-location facility or a hosted private cloud.
As long as there are obstacles to moving, it’s in the best interest of everyone involved to be sure that there a balanced competitive landscape. But the technical hurdles that exist as a part of every cloud vendor’s own way of doing business, regardless of size or type, means that even with the best intentions, regulators could have a hard time coming up with meaningful solutions to the challenges posed by cloud migration. Short of coming up with a standard way of plugging into clouds, it seems that portability will remain an issue.