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Market forces cloud vendors to relax data export charges

recent monthsThe three major cloud providers – Amazon, Microsoft and Google – have relaxed egress fees, a tax that cloud companies charge customers to transfer data to another provider. This is one way to retain existing customers, but it’s a bit clunky and doesn’t really build goodwill.

As a number of factors come into play, such as the reality of a multi-cloud world, a tighter regulatory environment and consumer backlash, these companies are starting to realize the error of their ways by lowering these fees, albeit with a lot of caveats and restrictions involving a little friction . For example, there are limits on the types of data you can move, and each requires you to contact the vendor and make a request to get your own data from the cloud. But this is at least a start.

John Dinsdale, principal analyst and managing director at Synergy Research, a company that tracks the cloud infrastructure market, said the change in thinking is actually a recognition of changing market dynamics. “I think this is a natural evolution of the market. As real competition increases, it doesn’t do them any favors for cloud providers to be seen as overly protectionist,” Dinsdale told TechCrunch.

“Giving customers what they want is exactly the right business strategy. In the IT world over the past few years, traditional companies that tried to stick to the old way of doing things have underperformed,” he said.

Jake Graham, CEO and co-founder of Bobsled, a startup that helps customers move data between clouds, said it’s clear we’re moving into a multi-cloud world where the data movement aspect is eliminated. Friction is more important than ever. His role puts him at the forefront of this issue.

“In the original cloud world, the big three cloud vendors were really trying to build something that felt like a walled garden, and as long as you built on top of them, everything was great. But traversing them was really challenging,” Graeher Mu said. “They are starting to get a backlash from enterprise customers who say global businesses are using multiple platforms.” He said charging these fees creates a significant barrier to moving data, making it difficult to share data with customers or even departments within the same company. The same is true within.

Rudina Seseri, founder and managing partner of Glasswing Ventures, said the shift is partly due to regulatory pressure, but it’s not the only reason. “At a high level, the emergence of regulation is a very simple explanation for the sudden change in behavior,” she said. “However, I think it’s also worth pointing out the optics of pre-empting this language switch, and how Google is using it as a marketing tool against Azure. If these companies believe that eliminating export fees is inevitable, then Google certainly has the first-mover advantages, portray itself as a “less restrictive” cloud and attract early customers,” she said.

“Metaphorically, market dynamics are shifting from stick to carrot. Now that the penalty for egress fees is being phased out, cloud customers looking to switch providers will need to be retained through innovation and accessible features,” Seseri said.

Longtime cloud consultant David Linthicum said that while these recent announcements are a pleasant PR move, he warned people to check their bills carefully because egress fees are not the only issue. “It’s a nice surprise, but not necessarily a significant one. Customers have to think through the cost,” Linthicum told TechCrunch. “In other words, what are we paying for the services that we utilize? What are we paying for network fees, egress fees, all the other hidden fees and what people call junk fees from cloud vendors?”

But this may not impact startups as much as larger enterprise customers. “There are more moving parts in the cloud ecosystem than just storage, such as services required for scaling and security, and the largest companies have built stretched infrastructure that can be difficult to loosen,” Seseri said. “However, the startup experience will certainly improve as providers must now rely further on innovative features and improved customer satisfaction to win long-term loyalty.”

Graham, whose main business is helping move data, believes his entire business model is affected by these fees. He said the recent changes were a small but important step, but he also saw it becoming increasingly difficult to determine what is and is not an export fee in the future, which could lead to the eventual elimination of these fees.

This is because migration takes a long time. It’s not a clean break like “I was at AWS and now I’m at GCP.” This is a long process that takes several years, and the data sources that need to be communicated exist in both clouds for some time. At the same time, he said, legacy cloud providers are struggling to get customers to change their minds and come back, an impossible balancing act for these companies.

“You’re going to have this battle between the team that’s concerned with winning back the customer, trying to keep the customer happy, and another team that says, wait a minute, we’ve lost this customer. We should charge them for everything. Why do we Want to give them preferential treatment?”

As data becomes more valuable in the age of artificial intelligence, being able to move data and put it to use becomes increasingly important for everyone. Cloud providers would be much better off getting ahead of this trend rather than erecting barriers that make data movement more difficult. Maybe this is just the beginning of something bigger.

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