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

Stefane Fermigier (Abilian) · sf@abilian.com

Draft working paper v0.14, 2026-09-23. This is theory, with a bound a buyer can apply to its prices. Every proposition has 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; the paper explains 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 largest providers earn returns sustained above their cost of capital. This paper asks what a buyer pays for being unable to leave an 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 exit cost under negotiated prices: the rent is the exit cost. The exit cost decomposes into transport, re-integration, downtime, retraining and contractual timing, and an instrument lowers the price only through the component it touches. The component that binds is re-integration, which only another supplier on the same interface reaches: 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.

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 and is silent on rent. Over 2022 to 2026 every price the paper can verify moved with currency, energy, memory or bundled features, so the period identifies a floor on the cost of leaving, 0.4 to 0.9 years of annual spend for a five-year buyer of the flagship office suite depending on whether the 2023 currency step counts, and no rent. Two further results complete the model. 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. That is the exit-cost form of the known results on pass-through under monopoly, with the sign flipping where the hazard decreases. Under a posted price a buyer's investment in portability leaves its price unchanged unless it crosses the margin, so portability is a public good among buyers. The destroyed rent that the companion screening model treats 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.

Pass-through of an exit-cost instrument against the dispersion of exit costs across buyers.

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Cite this paper¶

Fermigier, S. (2026). Exit, Pursued by a Bill: Lock-in Rents and Portability in European Cloud and Software.
Draft working paper v0.14, Abilian Econ Lab.
https://econ.lab.abilian.com/papers/rent-channel/