Google Ends Cloud Switching Fees, Pressuring Amazon and Microsoft

Dina Bass, Bloomberg News

A Google logo outside the Google Cloud data center ahead of its ceremonial opening in Hanau, Germany, on Friday, Oct. 6, 2023. Microsoft Corp., Alphabet Inc.'s Google and ChatGPT maker OpenAI use cloud computing that relies on thousands of chips inside servers in massive data centers across the globe to train AI algorithms called models, analyzing data to help them learn to perform tasks. , Bloomberg

(Bloomberg) -- The cost of switching between cloud-computing providers has long drawn complaints, with the services derided as “roach motels” that let businesses check in but not out.

Now Alphabet Inc.’s Google is taking steps to change that. Effective immediately, the company is eliminating fees levied on customers who want to leave its cloud for a rival service — a policy shift that may pressure competitors Amazon.com Inc. and Microsoft Corp. to do the same.

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The move follows intensifying scrutiny of cloud services by regulators and lawmakers around the world. UK antitrust authorities launched a probe that is looking at such penalties, and the fees emerged as a key issue when the US Federal Trade Commission asked for public comments on a variety of cloud concerns.

Google Vice President Amit Zavery, who helps oversee the cloud business, said switching fees only represent about 2% of the total costs of migrating to a new provider — and don’t deter many clients from moving their data. Things like training and fees paid to the new cloud company are bigger factors, he said. But Google still wanted to respond to the concerns.

“We heard from regulators and customers that this is one of the items, and we wanted to take that off the table,” he said. “We want to, of course, encourage other vendors to do the same.”

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The other reason Google wanted to take this step, Zavery said, is because the company wants regulators to focus on what it considers the bigger issue: Microsoft restrictions that make it harder for customers to choose Google Cloud in some cases. Google, as well as Amazon Web Services and some of their customers, have complained for several years that Microsoft makes it pricier, harder or totally impossible to run flagship Microsoft programs like Windows and Office in rival clouds.

Microsoft has previously acknowledged that some of its products are harder or more costly to run on rival clouds but has been working to address complaints. Though it relaxed some restrictions in 2022, the change didn’t apply to top competitors Amazon, Google and Alibaba Group Holding Ltd.

The European Union is examining the issue of Microsoft bundling products with its cloud services. And Google has spoken with regulators about its concerns, Zavery said. Amazon, meanwhile, has been one of the main backers of industry groups lobbying policymakers to put pressure on Microsoft.

“We want to make sure our opinion, our point of view, is heard — as well as what we hear from customers,” Zavery said. For now, Google remains at risk of getting locked out of potential business, he said. “By the time anything happens, maybe it might be too late.”

--With assistance from Leah Nylen.