Latest / The Cloud Business Podcast with Fexingo: AWS, Azure, GCP, and Enterprise Infrastructure / Why Cloud Contracts Now Lock in Data Egress Waivers
Transcript
- Lucas: If these conversations are useful for what you're building or running, we've been hearing from more and more of you that the single biggest line item nobody talks about in cloud contracts is data egress. Today we're talking about egress waivers — how some of the biggest SaaS companies have quietly negotiated away those outbound transfer fees, and what that means for anyone signing a cloud deal this year. Luna: Egress is one of those things that feels like a tax you just have to pay. But apparently, if you have enough leverage, you don't. Lucas: Exactly. And when you hear the numbers, you realize why this matters. Dropbox, back in 2016, was spending something like $75 million a year on AWS — mostly storage and bandwidth. They built their own infrastructure to get off AWS, partly because of egress costs. But more recently, companies have taken a different route: they just ask for the egress to be waived. Luna: And the hyperscalers say yes? Lucas: More and more, yes — especially on deals over $50 million in annual commit. AWS, Azure, and GCP all have what are essentially 'egress waiver' provisions buried in their enterprise agreements. You don't see them in the standard pricing pages. You have to negotiate for them. But they're real. And they're becoming more common as competition heats up. Luna: I want to get into the mechanics of how these waivers work, but first — since a lot of you are cloud operators or architects — if today's episode gives you one concrete term to bring to your next negotiation, that's exactly why we do this ad-free. Listener support at buy me a coffee dot com slash fexingo keeps it that way. No pressure, just if you found the last few episodes useful. Lucas: Appreciate that, Luna. Yeah, it genuinely helps. So — the mechanics. A typical egress waiver isn't a blanket 'all data out is free.' It's usually structured as a credit against your monthly bill for data transferred out of the cloud to the internet or to on-premises. The waiver often applies only to data going to specific destinations — for instance, to a CDN partner or to a customer's own data center. And it's almost always tied to hitting your committed spend. Luna: So it's a carrot to get you to commit more, not a gift. Lucas: Right. You commit to $100 million over three years, and the provider says 'we'll waive up to, say, 10% of that in egress fees.' But here's the thing: egress can easily be 5 to 15 percent of your total cloud bill. So a waiver can be worth millions. Zoom, for example, reportedly got AWS to waive egress fees as part of their deal back in 2020 when their usage exploded. That was a huge savings. Luna: And it's not just the mega-clouds. I've seen mid-size SaaS companies with $10 million annual cloud spend get a partial waiver by threatening to move to a competitor or to build their own edge. Lucas: That's the key leverage: the threat of multi-cloud or repatriation. If you can show you're willing to architect for portability, the hyperscaler would rather give you the egress than lose the compute and storage revenue. Egress is almost pure margin for them — it costs them very little to provide. So they can afford to discount it to keep the overall deal. Luna: But there's a flip side. If you're a smaller company buying cloud directly from a reseller or on a pay as you go basis, you're probably paying full egress rates. Those can be like $0.09 per gigabyte for the first 10 TB on AWS. That adds up fast if you're serving a lot of video or hosting a data-intensive app. Lucas: It does. And that's where the regulatory angle comes in. The FTC has been looking into cloud egress fees as a potential barrier to competition and switching. In 2024, they held a session on exactly this. And in Europe, the Data Act is pushing for more transparency and lower switching costs — egress fees are a big part of that. Luna: So the writing is on the wall. Egress may become cheaper by default, but right now, it's still a negotiation lever. Lucas: Exactly. And one concrete case I want to highlight: a mid-size analytics company I spoke with — about $30 million annual cloud spend on Azure — they were paying about $3 million a year in egress. Their contract was up for renewal, and they hired a cloud cost consultant. The consultant found that 70% of their egress went to a single CDN partner. They went to Microsoft and said 'we want an egress waiver for traffic to that CDN, or we'll move our data to AWS and use CloudFront, which is cheaper for us anyway.' Microsoft came back with a 50% egress discount. That saved them $1.5 million a year. Luna: So the smart move is to analyze your egress patterns before you negotiate. Don't just ask for a blanket waiver — know exactly where your data is going and what the alternatives cost. Lucas: Right. And the hyperscalers are actually getting more proactive about this. Google Cloud, for instance, has been offering free egress for customers who want to switch away from AWS or Azure — it's part of their 'no-cost migration' program. And AWS recently introduced 'Data Transfer Free Tier' for some services, though it's still limited. Luna: It feels like the industry is slowly moving toward a model where egress is a cost of doing business, not a profit center. But it's going to take more competitive pressure. Lucas: Which is exactly what we're seeing. With the rise of AI workloads, companies are generating and moving more data than ever. And they're getting savvier. I think within two to three years, an egress waiver will be a standard clause in any enterprise cloud contract above a certain threshold. Luna: What's that threshold today? If I'm a VP of Engineering at a $500 million company, what number should I have in mind? Lucas: Ballpark: if you're spending more than $10 million a year on a single cloud provider, you have a real shot at getting some form of egress relief. At $50 million plus, you can likely get a meaningful waiver. Below that, you may need to bundle with other terms — like committing to a longer term or using more of their premium services. Luna: One thing I've noticed: the waiver language is often tied to 'reasonable usage.' So you need to make sure you're not getting capped on the amount of waived egress, or that the cap is high enough for your growth. Lucas: Great point. Some contracts say things like 'up to 20% of committed monthly spend' or 'up to 500 TB per month.' If you're growing fast, that cap could bite you. You want to negotiate either no cap or a cap that scales with your commit. Luna: And watch out for destination restrictions. Some waivers only apply to traffic going to specific IP ranges or CDNs. If you start using a new service or region, you might suddenly be paying full freight. Lucas: Right. So the playbook is: first, do an egress audit. Second, understand the competitive landscape. Third, ask specifically for a waiver tied to your biggest traffic flows. Fourth, get the terms in writing, with clear caps and definitions. And fifth, if you're not getting what you want, consider a multi-cloud strategy to create leverage. Luna: That last one is a big commitment. Multi-cloud adds complexity. But for some companies, the savings justify it. Lucas: Absolutely. And it's not just about egress. Multi-cloud can also help with resilience and avoiding lock-in. But egress is often the main financial driver. Luna: So to circle back: egress waivers are real, they're negotiable, and they're becoming more common. If you're signing a cloud contract this year, put it on your list. Lucas: And if you're on a legacy contract, check if you have a renewal coming up. This might be the single most valuable term you can add. I'd love to hear from listeners who have successfully negotiated egress waivers — what worked, what didn't. Luna: We'll put some links in the show notes to resources on egress negotiation. And as always, if this episode saved you even a fraction of what that analytics company saved, consider tossing a couple bucks at buy me a coffee dot com slash fexingo. Helps us keep digging into these topics. Lucas: Alright, next episode we're going to look at how cloud contracts are starting to include 'AI inference SLAs' — uptime guarantees for model serving. That's a whole new can of worms. Until then, keep an eye on your egress bill.