Cloud Providers ‘Dump Egress Fees’ — But It’s Not That Simple

The cloud services market has been a battleground in recent years, with tech giants like Microsoft, Google, and Amazon vying for dominance. Competition in the sector is driven mostly by the rising adoption of cloud storage for artificial intelligence (AI) workloads.

By 2032, the cloud services market is projected to hit a valuation of $2 trillion, according to Precedence Research.

To achieve a competitive edge, major players in the industry have been pulling some marketing strings to keep their customers.

One such string is putting an end to egress fees — the charge of transferring data from one cloud provider to another.

Among the key players, Google was the first to announce that Google Cloud Platform (GCP) customers can now egress their data from the platform without being charged. Two months later, AWS followed suit and, just last week, Microsoft announced that it will no longer charge egress fees for Azure customers who wish to move their workload off their platform.

At first glance, it appears as though these new developments leave cloud consumers with more flexibility around moving their data from one cloud provider to another.

However, when we spoke with cloud experts on the matter, they warned that there might be a catch beyond these announcements.

Table of Contents Table of Contents

1. Key Takeaways
2. Why Cloud Hyperscalers are Dumping Egress Fees
3. Egress Fee Waiver is Good — But It Comes with Stipulations
4. Here's What it Means for You: Experts Weigh In
5. The Bottom Line

Show Full Guide

Table of Contents

1. Key Takeaways
2. Why Cloud Hyperscalers are Dumping Egress Fees
3. Egress Fee Waiver is Good — But It Comes with Stipulations
Show Full Guide
4. Here's What it Means for You: Experts Weigh In
5. The Bottom Line

Why Cloud Hyperscalers are Dumping Egress Fees

To put things into perspective, egress fees are charges applied when transferring data out of cloud storage.

Say you’re an Internet of Things (IoT) company and store vast amounts of data from sensors, devices, and machines in the cloud; moving them to another cloud storage shouldn’t incur extra charges, right? Well, with egress fees, it can.

In some cloud providers, these fees are also known as bandwidth or data transfer fees and are different from the fees companies pay for cloud storage and computing.

While the egress fee, depending on the amount of bandwidth being transferred, adds to the cost of cloud computing, the fuss has more to do with the vendor-lockin it creates, stifling healthy competition in the cloud computing market.

Over the years, pressure has been mounting on prominent cloud providers to cut down on restrictive pricing practices, as charging data transfer fees can result in anticompetitive dynamics. The EU, last January, enacted the European Data Act which mandates cloud providers to provide measures that allow customers the freedom to switch seamlessly between different cloud providers.

Last year we reported that Amazon and Microsoft were subject to an independent investigation by the UK’s Competition and Markets Authority (CMA) for making it more difficult for businesses to adopt multi-cloud practices in the country. The US Federal Trade Commission (FTC) also brought all four cloud powerhouses under their watchlist after they were accused of charging what was tagged “junk fees”, an action the FTC perceived as anti-consumers.

Apart from the regulatory pressure, CEO and Co-Founder at Workspot, Amitabh Sinha, told Techopedia in a chat that Google instigated the move to further clear the path for customers who may want to switch from Microsoft and AWS – their main rivals – to GCP.

Sinha said:

“Google preempted the move to get its major rivals, especially MSFT, to remove one of the many barriers to switching for customers. MSFT has mirrored the announcement, however, with a major caveat – customers who are leaving Azure can get free outbound data transfers, provided that those customers completely shut down their Azure environments.”

Given the complexities and level of expertise required for cloud migration, Sinha further stated that the whole egress fee waiver might not really be a deciding factor for businesses that may wish to move their workload off a particular cloud platform.

“Data transfer and the associated cost are a small component of switching cloud providers. Each cloud requires a certain level of expertise and institutional knowledge to operate — customers invested in any cloud cannot easily switch over without advanced planning.”

Chris Opat, SVP of Cloud Operations at Backblaze, in an email to Techopedia, labeled the move an “opportunistic marketing stunt” by legacy cloud providers, suggesting it’s more about compliance with regulations than empowering consumers.

Opat said:

“Often, when a company moves to a competitor, that competitor will pay for all migration fees, including egress. The real price in egress isn’t leaving a platform; it is in using stored data – moving it between cloud services like CDNs, compute providers, and others.

“So the legacy providers are offering to cover something that’s often already paid for and not the key pain point in egress. They likely can’t afford to offer free egress because they understand that their customers are hungry to use tools outside of their platform and want to optimize their cloud spend.”

Egress Fee Waiver is Good — But It Comes with Stipulations

While waiving egress fees is a positive step, cloud providers may have specific conditions attached to the free data transfer or limitations on the volume of data eligible.

For instance AWS, in a blog post, explained that they allow one terabyte of free data transfer out of their cloud storage per month. However, customers who wish to transfer higher than that free limit will need to ask for rates through the support team.

Contrary to initial reports, Google has not fully eliminated egress fees. Instead, they are offering departing customers the chance to apply for Google Cloud Platform (GCP) credits if they transfer their data to another cloud provider or an on-premises data center.

Approval is required for the egress cost credit, and once approved, customers have 60 days to move their data or reapply for the credit.

Just like Google, a closer look at Microsoft’s announcement shows that users who want to move more than 100GB of data per month from Microsoft cloud storage will need to file an approval request and eventually pay a data transfer fee.

Here’s What it Means for You: Experts Weigh In

So, contrary to public opinion, it’s obvious egress fees are not yet totally eliminated on these platforms. Consequently, cloud users need not get too excited but check the terms and conditions that come with egressing data from each of the cloud platforms.

Nonetheless, there are still some positive takeaways from all these:

Reduced Data Migration Costs

Transferring large datasets out of one cloud service to another or on-premises storage would become cheaper. This could remove a financial barrier for businesses facing a must-switch scenario or considering a hybrid cloud approach.

For instance, a company with a 10TB data warehouse hosted on Azure might have to pay tens of thousands of dollars in egress fees to transfer that data out of Azure during a migration. But with lesser egress charges, the migration costs would be substantially lower.

While the above holds water, Jason Van der Schyff, Chief Operating Officer at SoftIron, while sharing his view on this with Techopedia, drew our attention to the fact that it does not really give customers enough flexibility to move things around as they wish.

He said:

“This means that consumers don’t need to think about whether they will be hit with a large exit fee, but it hardly provides a lot of freedom to move around as they choose. Moving data between clouds is incredibly hard, as is maintaining a multi-cloud environment. This is why they need to truly consider how they manage the combination of their on-premises infrastructure and the workloads they run in the public cloud.”

A Win for Multi-Clouders

The ability to transfer data out of one cloud provider reduced egress fees would greatly benefit organizations that rely on hybrid or multi-cloud architectures for their data analytics needs. Many businesses prefer to use best-of-breed tools and services from multiple providers, combining the strengths of different platforms to create robust and efficient data pipelines.

For Sinha, this development will usher in a more dynamic and effective multi-cloud practice for the future.

“This is the start of a multi-cloud future for customers looking to operate cloud environments as a utility. This could lead to lower costs and better features as clouds are forced to compete with lower barriers to switching. Eventually, customers will be able to take advantage of cross-cloud arbitrage on features and costs,” he noted.

A chance for Smaller Cloud Providers to Compete

Since businesses now have some level of flexibility around where and when they want to move their data, there is a chance some of the data could land in the repository of some low-tier cloud providers. This could lead to the adoption of innovative cloud solutions that drive healthier competition in the industry.

The Bottom Line

Egress fee reduction or waiver, as the cloud providers claim, is a positive step towards greater flexibility and cost savings for businesses using cloud services.

However, it’s important to understand the specific terms and limitations that each provider has set.

While the move reduces the financial barriers to migrating data or adopting multi-cloud strategies, customers should be wary of the caveats that come with egress and data transfer limits to avoid unexpected costs.