Just how serious a problem is cloud provider lock-in to buyers? We hear a lot about it, often in connection with justifying “multi-cloud” or the practice of using multiple cloud providers rather than one. Cloud software vendors like Red Hat and VMware often cite the need for multi-cloud and the desire to avoid lock-in as a reason to use their software rather than the web service features of cloud providers themselves. I’ve been digging through my conversations for 2022 as part of my year-end process, and here’s what I found.
Let’s start with an easy question; do users take specific steps to avoid cloud provider lock-in? Only 29% of enterprises told me they did. Of the remainder, roughly half said they were “concerned about” or “planning to reduce” provider lock-in risk, and the rest said they had only “heard” or “thought” about it.
Of the 29% who said they took specific steps to limit lock-in risk, half said they designed their cloud components to be “as portable as possible”, a quarter said they used cloud-portable technology (Red Hat and VMware, primarily), and a quarter said they used multi-cloud. The smaller the company, the more likely they were to say that they tried to be as portable as possible, meaning they weren’t really doing much. The largest enterprises were likely to adopt both cloud-portable software and multi-cloud, though the biggest driver of multi-cloud in this group was a desire to get optimum coverage and pricing over a global geography.
There’s some indication that, over the last three years, the population of cloud users who took specific steps to avoid lock-in was shifting slightly toward multi-cloud as a strategy, but the biggest shift was that more companies were leaving and entering the group (keeping that 29% figure unexpectedly stable). There are strong indications that as companies get more committed to the cloud (note that means the hybrid cloud front-end model), they are more likely to want to focus on a single cloud provider whose cloud tools/services meet their needs. Likewise, enterprises who are raising their reliance on the cloud and at the same time trying to control costs may adopt multi-cloud to divide applications among providers based on cost.
I’ve tried running my model on the data, and it’s telling me that the long-term trend is going to be away from specific measures to avoid lock-in. One factor is that about two-thirds of users in 2022 said that the cost of cloud services was “substantially the same” across the major providers, which is up from their views of every past year since 2017. Another factor is that small enterprises and mid-sized businesses represent a big piece of the untapped cloud opportunity, and these prospective users don’t have the skill or staff to support any complicated development or operations. But neither of these are the biggest factor.
The number one reason why users are gradually moving away from provider lock-in fears is the increased complexity of hybrid cloud application goals, combined with the growing cloud provider trend toward “PaaS-or-SaaS-like integrated offerings.
At the risk of oversimplification, the cloud customer base can be divided into two groups, the big and tech-literate players and everyone else. It’s largely been the former group who have driven the cloud up to now, and this group of customers has the skill needed to support cloud-portable platform tools, multi-cloud, and custom development techniques to improve portability. The fact that more of the latter group are starting to use the cloud is enough to change the lock-in picture by itself, because that group has little interest in managing any of the avoidance options.
That less-literate group isn’t the only group that’s avoiding complexity, though. Over 80% of the bigger cloud users I talked with told me that they were trying to reduce their development and operations complexity, particularly with respect to multi-cloud. If we focus on users who went to multi-cloud primarily or exclusively to reduce lock-in, over half say they’re “re-evaluating” their multi-cloud decision. Obviously there are other reasons to do multi-cloud, but that’s still an interesting observation.
Multi-cloud issues include both development and operations complexity, but development complexity alone is apparently a factor even with tech-literate cloud users. There are a lot of cloud tools; the average literate cloud user says there are “dozens” to be evaluated and almost a dozen are used, on the average, by this group. All of these cloud users say that their cloud provider(s) are moving toward a more integrated “suite” approach, and more than half think that their provider(s) are developing what’s essentially a PaaS targeted at an application set. A few say they’ve heard that at least one of their providers (Amazon is almost always the one named) is starting to create vertical-market or horizontal-market SaaS by augmenting collections of their web service tools. Every one of these cloud-literate users say they’d be interested in reviewing a PaaS/SaaS offering, particularly for new applications.
A final point on the lock-in story comes from growing user awareness that “moving to the cloud” isn’t the goal. Those who have tried it report that application costs go up noticeably. Some enterprises have done some limited redevelopment of applications to make them more cloud-aware, but a large majority say that even if you rewrite an application for the cloud, it’s not going to be cheaper to run than the original data center application. That means that the hybrid front/back-end model is becoming the norm, and since most enterprise applications weren’t developed for that split, new development of the front-end piece is required. You can see why, for most enterprises, anything that makes that easier is valuable, and it’s easier to build hybrids from a single cloud provider, forgetting both portability and lock-in. As before, though, I need to emphasize that there are reasons for creating portable or multi-cloud applications beyond the lock-in justification.
I think that cloud providers are seeing the shifts I’ve noted here, just as they’ve seen that cloud adoption growth is slowing a bit. The big driver is that while you’re not hearing public cloud providers dismiss the popular (but totally incorrect) notion that everything will move to the cloud, they’re privately aware that the true cloud value proposition is the hybrid cloud and that they need to get on that bandwagon. Part of the reason is that both IBM and Oracle are (at the sales level, at least) pushing the hybrid model, and IBM has been very aggressive in positioning that model even to Wall Street.
Cloud providers might be heartened by news that users were less interested in preventing lock-in, but I think that if they look deeper at the reasoning behind the shift, they could find something to be concerned by. If lock-in isn’t a meaningful risk to buyers, then they’re likely to pay close attention to all the cloud providers’ features and prices before making a choice, which would surely make the sales cycle longer. In addition, any dissatisfaction with a cloud provider in any application could result in having the user move everything to a competitor rather than just moving the offending application. The combination of these two forces could make it harder for cloud providers to gain market share, and to avoid price competition that would reduce profits. That, in the long term, is probably where the greatest threat to cloud revenue growth can be expected to develop.