European Startups Focus on Rising Cloud Costs

Some European firms are reducing their dependency on the big three or moving some services back to on-premises, to reduce long-term costs.

European technology firms are in for a rough few years, with inflation levels still higher than six percent in key European countries and poor market performance leading to a heavy reduction in the amount of venture capital spending. 

Similar to technology companies in North America, the focus has shifted from growth to profit. Companies by and large have reduced their workforce, and are looking into other cost saving measures to reduce costs and entice future investment. 

One area which hasn’t been touched by a lot of European firms is the cloud budget, which is expected to become more of a burden as cloud providers increase costs in-line or higher than inflation. 

For European companies already suffering from higher energy bills and salaries, the stranglehold Amazon, Microsoft, and Google have on the industry is becoming a continental issue. So much so, that the EU is preparing to reduce the dominance of the three providers and their charges through the European Data Act. 

One of the main ways AWS, Azure, and GCP control the market is through egress fees, which are charges a business receives when they move data out of the cloud provider. These typically range from $0.05 to $0.12 per GB. 

These egress fees keep many small to medium sized businesses (SMEs) tied to the cloud provider, instead of having to pay thousands of dollars in charges. It should be noted that none of the cloud providers charge anything to move data in, and typically offer a large amount of free credits to get customers hooked on more of their products. 

See also: Big Three Launch Sovereign Cloud Efforts

The European Data Act aims to improve data service interoperability through lowering, or the removal of costs associated with moving data between platforms. Other legislation intends to restructure the contracts that AWS, Azure, and GCP have companies sign, which can often tie them into long-term agreements with little to no wiggle room. 

The European Union is still working on the legislation and is consulting with businesses in the industry, including cloud providers, to ensure that it covers all issues while not harming the industry overall. Some worry that the legislation won’t go far enough in protecting EU businesses. 

Others see the same issue with EU’s plans to regulate AI development, in that there is no prominent European cloud provider that can act as a bulwark to US or Chinese dominance. Without it, US cloud providers may be able to avoid this regulation and demand that the EU give concessions. 

While there are plenty of smaller cloud providers in Europe, none match the scale of services that AWS, Azure, and GCP provide. For businesses looking to have a global presence and compete with American providers, the big three are almost a necessity. 

That said, there are signs that some European firms are reducing their dependency on the big three. Some have utilized a multi-cloud strategy, where they use the big three for some cloud tasks and smaller cloud providers for others. Others, like 37signals, are moving some services back to on-premises, to reduce long-term costs. 

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