Exit, Pursued by a Bill: Lock-in Rents and Portability in European Cloud and Software¶

Stefane Fermigier (Abilian) · sf@abilian.com

Draft working paper v0.12, 2026-09-17. Theory, with a bound a buyer can apply to its own prices. Every proposition carries an appendix proof and an independent numeric cross-check. The empirical record of 2022 to 2026 is used for what it supports, a floor on the cost of leaving, and the paper says why it does not identify the rent.

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Abstract¶

European organisations spend about EUR 400 billion a year on cloud and software services. Fewer than 1% of cloud customers switch provider in a year, while the two largest providers earn returns sustained above their cost of capital. This paper asks what a buyer pays for being unable to leave its incumbent supplier and how portability changes it. In a holdup model with heterogeneous exit costs, the incumbent's markup over the alternative equals the marginal buyer's exit cost under a posted price and each buyer's own exit cost under negotiated prices: the rent is the exit cost. A revealed-preference argument turns a price path and a switching rate into a floor under the exit cost plus the value of staying, under buyer rationality alone; the buyers that leave reveal the mirror-image ceiling. The floor holds whatever moved the price; it says nothing about rent. Over 2022 to 2026 every price the paper can verify moved with currency, energy, memory or bundled features. The period therefore identifies a floor on the cost of leaving, of the order of half a year of annual spend for a five-year buyer of the flagship office suite, and no rent. The exit cost decomposes into transport, re-integration, downtime, retraining and contractual timing. An instrument lowers the price only through the component it touches: egress fees are below 1% of most customers' annual cloud spend, which is why the incumbents could waive them in 2024 without the switching rate moving. Pass-through of a collective exit-cost reduction into a posted price is, to first order, a share set by the slope of the inverse hazard of the exit-cost distribution, with the sign flipping where the hazard decreases. Under a posted price an individual buyer's investment in its own portability changes its price by nothing unless it crosses the margin, so portability is a public good among buyers. The destroyed rent that the companion screening model takes as a free parameter becomes a computable function of the exit-cost distribution.

Keywords: switching costs, exit costs, lock-in, holdup, cloud computing, software pricing, portability, Data Act, procurement, digital sovereignty.

JEL: D42, L13, L14, L51, L86, H57.

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Fermigier, S. (2026). Exit, Pursued by a Bill: Lock-in Rents and Portability in European Cloud and Software.
Draft working paper v0.12, Abilian Econ Lab.
https://econ.lab.abilian.com/papers/rent-channel/