Adopting a cloud-first principle to IT architectures has been prognosed as one of the leading trends for businesses in 2025. Such “Everything as a Service” (XaaS) models have become ubiquitous but present certain challenges to the free market. Difficult data porting between providers, expensive switching charges and even “vendor lock-ins”, i.e., being stuck with one provider because switching to another is technically complicated or costly, hinder competition – issues that the EU has now chosen to tackle.
The new Data Act provisions are aimed at “data processing services”, i.e., providers of on-demand network access to a shared pool of configurable, scalable, and elastic computing resources that can be rapidly managed. In short, most cloud services! However, with this many criteria, people were quick to point out that clever business models, such as the use of non-scalable resources, may enable circumvention of these new regulations.
The Data Act sets out programmatic obligations to facilitate easy and effective switching.
It obliges vendors to remove all obstacles to terminating contracts, concluding new contracts with a different provider, porting data and digital assets, and unbundling of services to enable the choosing of a different provider for an individual service. Furthermore, these rights must be clearly set out in a written contract with a broad scope of mandatory clauses. These clauses encompass the possibility of switching services within a maximum of 30 days, a maximum notice period for initiation of the switching of two months, specifications of portable data, and various other information obligations. To assist data processing services, the Commission will create a catalogue of standard contract clauses (SCC) that can freely be combined and chosen from, dependent on the use case.
Other market barriers include the - in some cases exorbitant - switching charges imposed by providers. The EU has opted for a transitionary solution: Until 12 January 2027, providers may impose switching charges that do not exceed the direct costs incurred in connection with the switching process. After this date, the switching of services must be provided free of charge. An important exception are early termination penalties, for which customers must be provided with clear information before entering into a contract, if applicable. This has technical implications as well: Going forward, data processing providers will aim for simpler and more uniform data storage solutions that reduce the cost of data porting for the vendor.
To facilitate easier switching, interoperability between data processing services is needed. For this purpose, the Data Act lays down basic requirements. These requirements will be further specified by the EU Commission. These interoperability prerequisites include enhanced portability and functional equivalence while minimising adverse impacts on cyber security and integrity as well as the subsequent inclusion of new features.
Currently, most data processing services do not fulfil the new requirements of the Data Act. With further specification by the Commission and SCCs coming, developments within the Data Act must be monitored closely. So, the question for you is: Are you ready for the Data Act coming into force on 12 September 2025?
- Does your XaaS business qualify as a “data processing service” – and do you want it to do so?
- Are your contractual terms compliant with the myriads of new regulations?
- Is your data structure designed for interoperability or rather exclusivity?
Don’t miss our next article in which we will present the many new business opportunities arising from this new data economy. Stay tuned!
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