Flexibility drives cloud lock-in risk

Vendor lock-in is regularly levied as a criticism of cloud services. But the reality of IT is, there has always been lock-in. Even before cloud, enterprises were locked into hardware, operating systems, database platforms, data centers and network providers. Practically, the lock-in challenge with cloud isn’t that moving from one location or platform is not possible — it’s that the cost of moving can negate the benefit of doing so.

Cloud’s highly flexible model is a driver of lock-in. At the core of the cloud model, there are still data centers, servers and operating systems. Cloud has been revolutionary because of its pricing model, not necessarily because of the core technology. Rather than the buyer being concerned with capacity planning, for example, on-demand consumption allows users to consume the infrastructure they need with no capex, no advanced notification and no prepayment – buyers pay only for what they use, in arrears. The cloud provider is responsible for capacity planning and absorbs the risk of under- or overprovisioning.

Lock-in is more of a threat when using cloud compared with non-cloud infrastructure because of this inherent flexibility. The buyer is free to consume what it needs when it needs it, but the cloud provider is free to make changes as well. The provider could increase prices spontaneously with only a few weeks’ or even days’ notice (although this doesn’t happen in practice today). This would not breach any contract, as the consumer would be made aware of the new price and would not be obliged to consume or pay if they do not think it is fair value.

Realistically, few organizations can just “switch off” their mission-critical workloads because prices have gone up. They are locked into a venue as they always have been, but with cloud they are more beholden to price increases. Because price changes can happen quickly, if organizations decide to migrate to a different provider, they typically have only a few days’ notice to act before the increases take effect — and there are egress fees when exiting an existing cloud service (which can be significant), as well as ingress fees when joining a new service.

The cloud model does expose the buyer to unexpected price increases. However, if cloud providers spontaneously reduce their prices, buyers receive instant cost savings. So far, cloud pricing overall has trended downward — but there are no guarantees this will always be the case. In 2018, Google increased the prices of its Maps API (a cloud service that allows its maps to be integrated into applications) by 1,400%. Developers didn’t have to use the Maps API if they didn’t agree with the price change — but for many, the API had already been integrated into their applications. When the change happened, they had two choices: switch off the app or pay the higher price. In this case, moving to a different maps provider would not be trivial. Developers would need to change the application code to communicate with a new mapping service.

With traditional enterprise-owned (on-premises) and colocation infrastructure, prices may go up — but these do not have such an immediate effect as an on-demand service. Server prices might increase, but this will only be seen at the next server refresh. Existing servers can be “sweated” for longer to delay the impact of price changes (by delaying a server refresh). Colocation costs might increase, but this would take effect at the end of the contract term (not considering fluctuations with consumption-based models). The colo buyer is given more time to decide if migrating out is worthwhile before feeling the effect of an increase, whereas a cloud buyer is effectively forced into an increase; any decisions can happen only after the fact.

While cloud pricing has and continues to trend downward, there are no guarantees for the future. A server in an on-premises or colo facility that has already been paid for is inherently more predictable cost-wise than the future purchase of cloud capacity. A fixed-term, fixed-price colo contract is explicitly more stable than on-demand cloud pricing. Cloud buyers should plan now for their options to move venues if sharp cost increases are anticipated, to avoid the excess costs an unplanned migration typically entails.