Public cloud backwash: going back on-premises

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11 April 2018 | 0

On the face of it in 2018, moving applications, data and processing to the cloud seems like the obvious thing to do. The cloud offers value for money, increased security and access to some of the best infrastructure in the world without the need to build it yourself.

But for a growing coterie of companies, it is becoming common to pull resources back from the cloud rather than to shift them there. Why? The reasons are complex but boil down to the simple observation that no one technology suits everyone 100% of the time, and while public cloud infrastructure is here to stay it is not all things to all people.

“The promise of the cloud is there, but the costs and skills needed are not insignificant or easy to come by. We’re at a point in time where the initial excitement of what was a new business model is wearing off and companies are looking at its strengths and weaknesses,” Matthew AR Sherian, Asystec

Some companies have tried it out and would just rather have certain assets on-premises then in the cloud.

Several instances
“We’ve had several conversations with companies that have bought fully into the services offered by Amazon Web Services (AWS) and for reasons to do with wanting to have ultimate control over their data and their costs, have decided to pull out of public cloud infrastructure,” said Mathew AR Sherian, a solutions architect with Asystec in Dublin.

“Sometimes there are budgetary issues – for example, the size and impact on the operational costs were much higher than they initially planned for. Some companies have a lot of on-premises infrastructure and knowledge and can spread their workloads around a lot more easily than they can in the cloud, as they may only have one or two people who are AWS skilled, compared to 15 or 20 people skilled in VMware.”

The classic argument in favour of cloud-enabled infrastructure is that it allows companies to shift capital expenditure to operational expenditure. Instead of having to spend large sums on technology refreshes on-site they can adopt a pay-as-you-go model and spread their costs out over time. But a problem arises if what a company wants to do in the cloud is complex or ambitious.

“If your operational expenditures are four or five times what your capital expenditure was, then you’re not saving any money in real terms. If it were one or two times higher, then maybe you could amortise it over time, but it’s not going to be cheaper in the long run,” said Sherian.

“There can be concerns around availability and around security threats which continue to persist. We have always advocated going down the hybrid route for multiple reasons, and one of them is that having mission critical workloads run in the cloud is not the best way to go about that because of the uncertainties that the cloud provides, especially if you’re trying to access the cloud over the public internet which is a major threat from a security perspective,” Sachin Sony, Cloud Strategy, Equinix

Broad application
While this trend to pull resources back on-site is more pronounced in the US, the arguments in favour of it apply here as well. “We’re seeing it in manufacturing, financial services and for companies in the health space, data sovereignty is understandably an issue,” said Sherian.

“Don’t get me wrong, the promise of the cloud is there, but the costs and skills needed are not insignificant or easy to come by. We’re at a point in time where the initial excitement of what was a new business model is wearing off and companies are looking at its strengths and weaknesses.”

Ireland is typically quite conservative in its adoption of this kind of new technologies, with a lot of companies waiting to see which workloads are suited to the public cloud and which need to stay closer to home. This is an ongoing process, according to Sachin Sony, senior manager for vertical marketing and cloud strategy at Equinix.

“I think one of the challenges we’ve had was when cloud started growing in popularity, everyone wanted to go towards a cloud-first approach wherein they try to basically convert most of their capital expenditure to operating expenditure by moving most of their infrastructure to the public cloud.”

“And obviously, there are plenty of advantages like lower costs, easy connectivity, the ability to scale up and scale down resources with an OpEx-based model which are very useful. Particularly if you’re a small or mid-sized enterprise looking to grow and you don’t want to commit too much resources into it.”

Critical workloads
However, Sony goes on to say that a key challenge that arises is that often many of the applications that a company might want to run are not perfectly suited to the cloud, especially when it comes to mission critical workloads.

“There can be concerns around availability and around security threats which continue to persist. We have always advocated going down the hybrid route for multiple reasons, and one of them is that having mission critical workloads run in the cloud is not the best way to go about that because of the uncertainties that the cloud provides, especially if you’re trying to access the cloud over the public internet which is a major threat from a security perspective,” he said.

Equinix recommends companies use hybrid architecture, placing non-mission critical workloads in the cloud and keeping other more important applications and data on site.

Our survey of cloud enterprise users in our 60,000 strong commentator network suggested that about 20% of cloud users have moved applications and workloads back from the public cloud in the time that they’ve been using the technology. But that’s completely normal and completely understandable because very often these are workloads which have been used for a project or a test in development, and then they’ve been moved off when the thing goes into production on premise or whatever,” William Fellows, 451 Research

“That way they’re able to scale up and scale down the non-critical mission workload and applications on the cloud, while at the same time may gain a certain level of control over their core mission critical infrastructure by putting it in a private cage within the data centre. That allows them to adhere to all the regulatory and compliance requirements, as well as new data sovereignty policies like the GDPR, which mandates that data is stored in the region,” said Sony.

Adoption rising
That there have been some fairly high-profile companies which have decided on the basis of cost that they can do cloud cheaper themselves is not in dispute. But according to William Fellows, co-founder and research vice president for 451 Research, the cloud is not going anywhere but up in terms of adoption.

“The increased use of cloud is not slowing down in any way, shape or form. We only have to look at the fact that AWS is pulling in $18 billion a year in revenue and is growing at 42% a year. If it keeps going at that rate, it will be as big as its retail parent Amazon.com by the time it is 21 years old in 2027,” he said.

“The absolute dollar value of the cloud market is not huge, so if Amazon is at $18 billion (€14.5 billion), the entire infrastructure as a service market is worth about twice that amount.”

Fellows said that while there are individual cases where people have removed workloads from the cloud, it’s not that many in the grand scale of things.

“A survey we did of cloud enterprise users in our 60,000 strong commentator network suggested that about 20% of cloud users have moved applications and workloads back from the public cloud in the time that they’ve been using the technology,” he said.

“But that’s completely normal and completely understandable because very often these are workloads which have been used for a project or a test in development, and then they’ve been moved off when the thing goes into production on premise or whatever.”

By this logic, a company here and there moving workloads back out of the cloud and on premise is not particularly anything to be concerned about, and certainly does not represent a lack of confidence.

“No. I think anyone that suggested that would be ignoring the overall dynamic of the market. What I will say is that cloud suppliers are facing increasing challenges because of data protection, governance and compliance. Obviously we’ve got GDPR coming down the line and pressure is being increased on service providers to be able to meet the expectations of customers,” said Fellows.

“The vast, vast, vast majority of customers are going the other way… We definitely don’t see this as a common or even a substantial trend within the base of customers that we work with. That’s not to say that there aren’t a few exceptions to that rule, but the exceptions are really customers for whom there’s some real substantial differentiation in focusing on these areas of data centre and infrastructure operations,” Ian Massingham, Amazon

App waves
A further factor at work here is that the first wave of applications that moved to the cloud were cloud native apps – essentially apps that were either web or mobile based and designed in the cloud. The second wave of applications moving to the cloud were and are typically legacy applications.

“It is more complex moving these applications to the cloud as they were originally built for on-premise. As a result, they require higher degrees of storage, different forms of data management and in some instances they are business critical apps requiring excellent connectivity resilience,” said Paul Shanahan, intelligent cloud lead for Microsoft.

“This can pose some challenges for businesses as moving these apps to the cloud requires a more long-term phased hybrid approach.”

According to Microsoft, its Azure platform is designed to facilitate hybrid cloud strategies to allow companies to manage data and applications as they see fit.

“We’ve made significant investments in Azure Stack and partnered with the world’s leading hardware providers to really enhance the intelligent edge for our customers. Not only does this give them the flexibility to traverse on-premise to cloud with ease. It also allows them to harness the intelligence of the Microsoft Azure platform from within the confines of their own environment,” said Shanahan.

“But something that always needs to be considered in these scenarios is that IT professionals need to create viable options for the organisation to manage the lifespan of applications. This may mean eventual tombstoning, or redesign and development of applications so as that the organisation can later gain value from the flexible, scalable nature of cloud computing.”

Not indicative
Needless to say, Amazon Web Services argues strongly that any incidents of companies moving workloads out of the cloud is not indicative of a trend. If anything, said Ian Massingham, lead technical evangelist for the EMEA region for AWS, things are going in the opposite direction.

“The vast, vast, vast majority of customers are going the other way, which is really evidenced of course by the fact that AWS is growing so quickly. We definitely don’t see this as a common or even a substantial trend within the base of customers that we work with. That’s not to say that there aren’t a few exceptions to that rule but the exceptions are really customers for whom there’s some real substantial differentiation in focusing on these areas of data centre and infrastructure operations,” he said.

“And those companies are in a tiny, tiny minority. For most businesses, IT and technology is not the core of their product offering or the core of the service that they provide. If you’re running an airline for example, your business is flying planes, getting people onto those planes and serving them in a way which encourages them to come back again.”

“Of course, you need technology to do that — you need to sell tickets, to manage check-in and to deal with the logistics of moving aircraft around the world but IT is not your core business. The aircraft and the service that’s provided on them are the core areas that you want to focus your assets and your efforts on. And it’s the same in pretty much every sector.”

“It is more complex moving these applications to the cloud as they were originally built for on-premise. As a result, they require higher degrees of storage, different forms of data management and in some instances they are business critical apps requiring excellent connectivity resilience. This can pose some challenges for businesses as moving these apps to the cloud requires a more long-term phased hybrid approach,” Paul Shanahan, Microsoft

Massingham is correct and it is logic like this that has led to the growth of the cloud infrastructure market as a whole.

“We find the vast majority of customers are better served by using the cloud which allows them to offload heavy lifting to an expert provider, benefit from economies of scale, improved security and better agility and focus their efforts on the things that are core to them. But that’s not to say that that’s the case for absolutely everyone. You know, there are still companies for whom technology is the product and in that case there might be an argument for doing that yourself, rather than relying on a provider to provide it to you,” he said.

Adoption cycle
As a delivery model, the cloud has been around for quite some time now. With any new technology, there is an adoption life cycle that starts when early adopters take it on board, then an early minority then the late majority and finally conservative adopters who typically wait until the technology is mature and well established.

With cloud it’s tempting to think it’s so well established that we’re now in the final stage of its adoption as a delivery mechanism. Not so, said Massingham however.

“I wouldn’t say that we’re finished with that phase of adoption because enterprise applications have a long lifespan. The typical enterprise IT application is probably around for 15 years or more. So there are many applications that have been implemented in the last 15 years that have not yet reached the point at which customers are taking decisions about how they’re going to replace them or substantially upgrade them,” he said.

“That’s a common decision point at which customers might choose to replace those apps with subscription-based software services, re-architect or re-platform them and run them in the cloud instead of running them in their own owner-operated infrastructure. So I think growth and transition will continue for a long period of time.”

 

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