Cloud computing has revolutionised how businesses handle data, offering scalable and flexible solutions. However, some companies are now questioning its cost-effectiveness and other potential drawbacks. The shift from cloud reliance to other models is exemplified by firms like 37signals, who have found significant financial benefits in moving away from the cloud.
As more businesses examine their cloud bills and consider alternative solutions, the industry may be at a crossroads. Is cloud computing still the best option for everyone, or are we witnessing the early stages of a broader move towards repatriation and colocation? The answers could change how businesses approach their IT infrastructure in the years to come.
The Economics of Cloud Computing
Cloud computing has long been praised as a cost-saving solution for businesses, with firms outsourcing their data storage and computing needs to third-party providers. However, some companies, like software firm 37signals, are finding that staying in the cloud is not as economical as they once thought. This year, 37signals will see a profit boost of more than $1 million by pulling out of the cloud.
“To be able to get that with such relatively modest changes to our business is astounding,” says David Heinemeier Hansson, co-owner and chief technology officer of 37signals. In 2022, the company spent $3.2 million on cloud services. Heinemeier Hansson realised that buying hardware and hosting it in a shared data centre would cost significantly less, only $840,000 per year. This revelation has led other firms to reconsider their cloud strategies as well.
The Drawbacks of Cloud Computing
While the cloud offers scalability and flexibility, it also comes with several downsides. For instance, Heinemeier Hansson highlights that the cloud often fails to deliver on promises of increased productivity. “The cloud was pitched as cheaper, easier, and faster,” he says, but in reality, it did not significantly improve productivity for his operations team.
Another major concern is the vulnerability of having so much data controlled by a few large providers. If a major data centre experiences downtime, vast portions of the internet can go offline. Heinemeier Hansson points out that this concentrated control erodes the internet’s originally distributed design.
Cloud Repatriation: A Growing Trend
The trend of moving workloads back from the cloud, known as repatriation, is gaining traction. According to a survey by Citrix, 94% of large US organisations have repatriated some of their data or workloads from the cloud in the past three years. The reasons include unexpected costs, security concerns, and performance issues.
German firm Plitch is one such example. By building its own private data centres, Plitch saved an estimated 30% to 40% in costs after two years. Markus Schaal, the managing director, emphasises that having control over their proprietary R&D data and processing power was crucial for their decision.
Performance issues and limited customisation options were also factors. “Transitioning to a privately-owned infrastructure gave us full control over hardware purchasing, software installation, and networking optimized for our workloads,” Schaal says.
Colocation as an Alternative
Another alternative to cloud computing is colocation. Mark Turner, chief commercial officer at Pulsant, helps companies migrate from the cloud to colocation data centres. In this setup, clients own the IT hardware but house it with another firm for secure and efficient management.
Turner points out that for some firms, especially online software providers, colocation offers significant cost savings. One client, LinkPool, saw their expenses shrink by up to 85% after moving from the cloud to colocation. This cost-saving allows companies to be more competitive in their pricing.
“The cloud is going to continue to be the biggest part of IT infrastructure,” Turner says. “However, there’s a good place for local, physical, secure infrastructure.”
The Flip Side: Benefits of Cloud Computing
Despite the shift towards repatriation and colocation, many businesses still find cloud computing indispensable. Travel giant Expedia, for example, uses the cloud to manage 70 petabytes of travel data and run applications globally. Rajesh Naidu, chief architect at Expedia, explains that the cloud provides a global presence and the ability to deploy solutions closer to the regions where they are needed.
“One of the main things the cloud gives us is resiliency and availability of the infrastructure,” says Naidu. Cloud providers have designed their infrastructures to be highly resilient, allowing companies like Expedia to focus on their core business rather than IT management.
“You can turn things down when you don’t need them,” he adds, advising firms to set policies to manage cloud costs effectively.
Why Some Firms Stick to the Cloud
For companies like Expedia, the cloud’s benefits far outweigh its drawbacks. The cloud allows them to leverage the latest innovations in IT infrastructure without the overhead of maintaining it themselves. This is particularly useful for businesses that need to scale quickly or operate globally.
As Rajesh Naidu points out, cloud providers are experts in running infrastructure, which lets firms focus on their areas of expertise. This division of labour makes sense for companies that require a robust IT backbone to support their operations.
Moreover, the cloud offers benefits like automatic updates, security features, and compliance with international standards, which can be resource-intensive for firms to manage on their own. Therefore, for many firms, staying in the cloud is a strategic decision that aligns with their business goals.
Conclusion
While the cloud remains a critical component of modern IT infrastructure, both cloud repatriation and colocation are gaining traction as viable alternatives. Companies must weigh the costs and benefits to determine the best strategy for their unique needs. In the end, the decision to stay in or exit the cloud will depend on individual business requirements and priorities.
Cloud computing has undeniably reshaped the IT landscape, offering numerous advantages like global reach, scalability, and resiliency. However, the trend towards cloud repatriation and colocation indicates a shift in how firms view their IT strategies. Companies must evaluate the costs and benefits to determine the best fit for their needs.
Ultimately, the decision to stay with cloud solutions, move towards repatriation, or opt for colocation will depend on individual business requirements and priorities. As the industry evolves, the landscape of cloud and IT infrastructure will continue to transform, adapting to the unique needs of each organisation.