1:43PM, September 13, 2026

Vendor lock-in: A customer is wholly dependent on a single company for their services and cannot switch providers without losing their data, shelling out a disproportionate amount of money, or rebuilding their entire system.

For years, cloud processing companies have been contributing to the vendor lock-in issue by imposing high migration costs and switching fees. The EU Data Act sought to free these customers from their shackles by requiring easier data portability and forcing companies to allow customers to switch at any point. Under the act, if a customer wishes to migrate their data, providers can be forced to retrieve and present any and all relevant customer data, customers are allowed to switch providers at any point, and providers can even be required to handle the switching logistics themselves. 

While the EU Data Act does combat vendor lock-in and brings about market freedom that we have yet to see before, the burden on cloud service providers could prove to be heavier than anticipated. The question arises: does the EU Data Act justly protect customers, or will it potentially cripple European cloud processing providers?

Under Article 23, providers “must remove obstacles that prevent customers from switching to another provider, porting data and digital assets, using multiple providers simultaneously or moving to on-premises infrastructure.” While this provision of the Act has been in effect since Fall 2025, a new provision (Article 29) banning providers from imposing any switching charges altogether will come into effect in January 2027. This provision is designed to combat one of the most predatory methods of customer lock-in. While these provisions will likely vary in enforceability depending on the provider-customer relationship and do not allow customers to evade any contractual obligations for early contract termination, it does provide unprecedented freedom for customers and a much higher risk profile for providers.

Article 29 will require providers to absorb the cost of any additional bandwidth needed for the transition. Providers may still charge the customer any costs needed to facilitate the migration, but the charge cannot exceed the amount spent. This poses an essential question for which European data companies must have an affirmative answer:

[C]ould [our] organisation actually execute [an] exit under stress, with data, continuity, security and costs under control?

There are a multitude of advantages that the Article 29 provision of the Data Act presents for customers. 

The Act could create a more equitable market by preventing super-power tech companies from holding customer data hostage (the vendor lock-in issue). This could increase competition and thus, create better services. Providers will have to continuously improve their products and keep prices reasonable to remain or become market leaders. Customers would be able to more easily switch and divide their data out to providers that better fit their needs based on the amount and type of data requiring cloud processing.

The Act also increases predictability and stability for customers seeking a provider switch. Companies will no longer have to fear large, unexpected bills when carrying out a data migration or shifting cloud processing services in-house. In recent years, about 62% of companies globally exceeded their cloud storage budgets and many cited unpredicted switching fees as the primary culprit. This will also result in more viable exit strategies which will help companies cut costs and increase efficiency during and after a data migration.  

However, the Data Act imposes more obligations and limitations on providers than ever before seen. 

Rather obviously, mid-market European data processing companies lacking scale and flexibility to absorb extraneous costs associated with a complex data migration could be disproportionately impacted without charging switching fees. This could create barriers to entry and potentially cause major market consolidation for “cloud giants.” 

Historically, switching fees are high-margin revenue generators for cloud processing companies. Removing them altogether eliminates a major source of revenue for providers, which leaves them with less funds to allocate towards client relations, research and development, crisis management, and other operational departments. Sedai found that switching fees generate anywhere from 20-30% profit margins for larger data processing companies, which can be substantial. 

Article 29 could undercut brand loyalty and result in higher customer turnover. Switching fees, historically, have been imposed explicitly to discourage customers from switching providers. If all barriers to exit are eliminated for customers, there is much less stopping them from hopping between providers consistently looking for the lowest price.

Article 29 could either create a more level playing field for cloud processing companies and increase overall security surrounding cloud processing services, unfairly benefit cloud-giants and customer turnover, or perhaps a mix of both.

Ultimately, the above are mere predictions, and only time will reveal its ultimate impact on the European cloud processing market. 

Hannah Ruthberg

Hannah Ruthberg graduated from Ball State University in 2024. While there, she obtained degrees in Business Administration and Marketing, and competed on their division one Women’s Gymnastics team. She is currently serving as the 2L Student Bar Association President at the University of North Carolina School of Law, on staff for the Journal of Law and Technology.