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In Cloud Computing Last updated: March 27, 2023
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Move your application into the cloud only after reviewing the vendor lock-in clause of the cloud service provider. Keep reading if you do not know what it is and how to avoid it.

The cloud computing model is growing rapidly. Because the model is pretty tempting for IT businesses like mobile app developers, web app developers, Software as a Service company, etc. You do not need to create a robust IT infrastructure within your business. 

You just subscribe to app development infrastructure on the cloud from a managed service provider (MSP). Your task is to develop the product and market and earn revenues. But, the problem arises when the existing cloud provider is not compatible anymore with your app or business model, or user volume. 

Now, you try to move your databases and apps to a different cloud. But the existing provider plays the vendor lock-in card to squeeze money from you. This basic cloud computing revenue model can be your nightmare. But do not worry now, as the following tips will make you a winner.  

What Is Vendor Lock-In in Cloud Computing?


Vendor lock-in, as the phrase suggests, is a situation when you can not switch to a different vendor for certain services without paying a lock-in period fee to the vendor. Also, when you switch vendor services to a different provider, you need to bear the costs of setting up the services. 

In usual businesses, like sourcing raw materials or finished products, it is not much of a concern. Because there is nothing to set up other than searching for an affordable third-party service provider who can deliver products in quality and quantity. 

However, in the cloud computing industry, it is a huge concern. When you migrate your software, web, mobile app, data analytics, server, or other IT projects to the cloud, you use someone else’s infrastructure.

There, you configure your apps, application programming interfaces (APIs), databases, business intelligence (BI) apps, and many other technologically advanced and complex components. Now, for any reason, when you must shift all these to another cloud services provider, the existing vendor may not just simply accept that.

They will ask you to pay a vendor lock-in fee. You are legally bound to do so since you signed the vendor lock-in agreement when you signed up for cloud services from this provider. It is a common tactic of today’s cloud providers.

Vendor lock-in is also possible with containerized application development, testing, and release using Kubernetes.

Why You Must Pay Attention

There are two main concerns about the vendor lock-in concept. If you plan to move out before the vendor lock-in ending date, you pay a huge fee that could otherwise fund your cloud operations for three to five years. The second is the most challenging.

You must set up everything from scratch when shifting to a new cloud infrastructure provider according to their virtualized systems. Here, people talk about cloud migration, but that is not a walk in the park.

Thus, before signing a contract to use cloud services for any IT project, read the contract document carefully, especially the vendor lock-in clause.       

Types of Vendor Lock-In

In the cloud computing sector, vendor lock-in could be of hundred types. It depends on the creativity of the vendor you offer cloud services and how revenue hungry they are. While you can do nothing about it, find some popular vendor lock-in types below here: 

#1. Price-Based Vendor Lock-In

The cloud service provider may charge a hefty implementation fee during the initial setup days. Later, when switching the vendor, you start thinking that the implementation fee investment is a waste if you switch to a new provider.

Some substandard and greedy cloud providers often stop charging you on an actual usage basis. They start charging you monthly to earn maximum profits.    

#2. Vendor Lock-Ins That Holds Data Hostage

When you miss any payment date, do a late renewal, or express your plans to shift to a new cloud vendor, the existing provider may keep your apps and databases hostage. They can revoke your access to your company data and ask you to pay a hefty exit fee.  

#3. Vendor Lock-In for Add-On Features

You did not plan well when choosing a cloud provider vendor five years ago. Now, you see other vendors are offering built-in artificial intelligence (AI) and machine learning (ML) capabilities. You ask your cloud provider about this, and they say you must pay extra fees to get AI and ML services. 

#4. Cloud-Based Vendor Lock-In

Some substandard and small cloud vendors may force you to use native services. They may not integrate with AWS, Google Cloud, or Microsoft Azure. If your new app requires these cloud destinations, then you are in serious trouble.  

#5. Vendor Lock-In Via Digital Contracts

Many deceptive cloud vendors use a web page link as the contract for the cloud service. They can secretly change this web page when you are not paying attention to it. Thus, the initial contract changes to something else that you did not accept.  

#6. Renewal as a Vendor Lock-In


Renewal is one of the most lethal vendor lock-ins. You decided to stay with the existing cloud provider after much consideration. But, the provider is not ready to negotiate the renewal pricing a few months before the expiry of the contract. 

They will send you a renewal pricing a few days before the expiry. Now, you are not in a position to switch your cloud operations to a different service provider.

Some notorious cloud providers may impose different renewal dates for servers, apps, and databases. Thus, you enter a vicious cycle of varying renewal dates and do not get the chance to switch cloud vendors for years.  

Reasons for Vendor Lock-In

The primary reason for vendor lock-in is a steady revenue source for the cloud services providers. Most MSPs for the cloud do not exactly bill you how they advertise. Suppose you get a good discount and set up initially at attractive pricing. Do not expect the same pricing when you go to the cloud vendor to renew your account. 

During renewal, the MSP usually increases the pricing of the services they offer. From this moment, the MSPs profit from your cloud subscription account. Now that you developed many apps and hosted those from the MSP’s platform, they can easily put you in a ransom situation.

If you do not agree to excessively higher pricing during account renewal, you risk losing years of app development and database management work.

Other major motives for vendor lock-in are:

  • Small and substandard cloud vendors create a large customer base using vendor lock-in and sell their stake to larger cloud businesses to earn a huge return on investment (ROI) in a short period.
  • As a cloud subscriber, you did not research the vendor’s capabilities before signing up.   

Disadvantages of Vendor Lock-In

Find below the challenges and drawbacks of vendor lock-in:

#1. A Barrier to Cloud Adoption

Though the cloud computing business is growing, many startups and small and medium businesses pulled out their apps and databases from the cloud. This happened due to the bitter experience of cloud vendor lock-in clauses.

When buddying IT businesses will see that cloud computing is just another front for IT tech giants to siphon money from them; many will turn down cloud over on-site IT infrastructure.

#2. App or Database Issues


If the cloud vendor cannot deliver resources and technology according to the latest advancements in the sector, your apps and databases will not be able to perform as you want them to.

#3. No Stability of Cloud Expenses


In a vendor lock-in contract, the cloud MSP has the full right to change product offerings, pricing plans, fees for outward data transfers, upgrades, AI/ML implementation, BI services, and more.

Thus, you are not sure in which month what bill you will get for the cloud IT infrastructure services. It will prevent you from crucial financial planning in your business.     

How to Avoid Vendor Lock-In

The best tips and ideas to avoid a vendor lock-in situation:

Subscribe to Different Cloud Providers


If your IT business requires different digital assets like mobile apps, web apps, emails, ERP servers, streaming servers, etc., do not host all these in one cloud solution. Use different cloud providers to reduce dependencies on one MSP. 

Develop Portable Apps and Databases

Always use standard and cross-compatible APIs, configurations, SDKs, databases, etc., for the app or database development. Thus, you can easily move your apps and databases from one cloud to another easily.

Read Contract Documents Carefully


Thoroughly read the contract document or hire an expert cloud developer and manager who can understand the contract terms better. If you are okay with the document, ask the vendor for a physically signed contract. Also, avoid contracts that say the vendor can change the billing and service provision terms whenever they want. 

Secure a Better Contract

When discussing your cloud IT infrastructure needs with a vendor, put emphasis on the followings:

  • Renewal fees projection
  • Renewal policies
  • Add-on service fees
  • Cloud upgrades as the industry changes
  • Penalty for being unable to provide cloud resources when scaling up
  • Fee-less exit strategy when the MSP is unable to cater to your needs

Discuss Data Transfer Costs

Most cloud services offer inter-platform data transfers for free. But they will charge you a premium fee if you transfer data to other cloud platforms. MSPs do not like to discuss this. They want to keep it hidden under hundreds of pages of contract literature. 

Finalize a fixed data transfer rate for a longer term if the MSP offers you an option to negotiate. If you are planning big, MSPs will definitely offer you custom solutions. 

Backup Internally


Do not just rely on all these cloud providers. Set up a secondary backup server on-site to not get into a ransom situation.    

Examples of Vendor Lock-In

Find below a few popular instances of vendor lock-in in cloud computing:

#1. Lost Opportunity for Savings

A Google Cloud (c2-standard-4) VM in the US costs approximately $0.25 per hour for 4 core CPUs and 8 GB memory. Its competitor, AWS, offers almost similar features in c6g.xlarge for close to $0.20 per hour. If you are in a vendor lock-in contract with Google Cloud, you can not enjoy the savings offered by AWS. 

#2. Vendor Unable to Provide Services

Datacenter fire in OVHcloud took down several European websites on March 10, 2021. This incident affected several critical websites and apps from government agencies, banks, news outlets, and eCommerce. If you are in a vendor lock-in and do not have any backup, you are in serious trouble.  

#3. Data Transfer Fees


Most cloud service providers charge extremely high fees when transferring data to a third-party platform or your own on-site servers. A secret internal document from AWS in 2019, analyzed by The Information, suggests that AWS charged the following data transfer fees to its customers:

  • Apple: $50 million
  • Pinterest: approximately $30 million
  • Netflix: $20 million

Final Words

So far, you have gone through a detailed discussion on the vendor lock-in concept of the cloud computing industry. Managed services providers of the cloud infrastructure lobby for vendor lock-in to secure a steady flow of revenue. Whether the platform works for you or not, you must pay up top dollars.

If you got too much funding, good luck with the vendor lock-in model. But, if you are a growing IT business and need to carefully use your investment for overhead expenses like IT infrastructure on the cloud, stay away from vendor lock-in. 

Use the above tips to create a planned approach for cloud computing subscriptions. Create a balance between public and private cloud computing instances for different apps and databases. Most importantly, do not put all the apps and databases under one cloud umbrella. 

Find here more challenges and risks in cloud computing.

  • Tamal Das
    Tamal is a freelance writer at Geekflare. After completing his MS in Science, he joined reputed IT consultancy companies to acquire hands-on knowledge of IT technologies and business management. Now, he’s a professional freelance content… read more
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