Computing musical chairs sees workloads leave the cloud
For several years now there has been much talk of businesses fleeing the cloud to once again build up on-premise computing resources. The problem is, unlike cloud providers who are happy to trumpet their growth to all and sundry, individual businesses rarely discuss their internal IT strategies in detail – and that’s just publicly traded one, privately held businesses tend to not speak at all.
As a result, apart from a few high-profile cases such as 37signals it is hard to know what the scale of so-called ‘cloud repatriation’ actually is. How many swallows do a summer make?
The theory is that a combination of high-running costs, concern about compliance and a general desire to control their own data has seen businesses on the cutting edge perform a reverse ferret, cutting and running from the virtual infrastructure that they led us into.
Thanks to analysts IDC we now have some numbers that suggest the phenomenon is, in fact, real. Businesses building out their own infrastructure are doing so following cost overruns, performance and latency issues, security and compliance concerns and complexity in management.
Cost overruns appeared frequently in IDC’s figures: according to its Cloud Pulse 4Q 2023 survey, ”close to half of cloud buyers spent more on cloud than they expected in 2023, with 59% anticipating similar overruns in 2024”.
Overall, users have found that “reality of cloud adoption does not always align with their expectations,” IDC’s Daniel Saroff wrote. However, it is not a full-scale retreat: according to the Server and Storage Workloads Survey, “only 8-9% of companies plan full workload repatriation”.
The news comes at a particularly interesting time as we have just seen quarterly results for the three leading cloud providers, Amazon, Microsoft and Google.
Both Amazon and Google’s parent company Alphabet saw share rally after publishing positive results that singled-out significant growth in cloud.
Google Cloud Platform, the smallest of the big three, saw particularly dramatic growth, reporting quarterly revenue at $11.35 billion (approx. €10.45 billion), up nearly 35% from $8.41 billion (approx. €7.74 billion) a year ago.
Amazon also got a share price fillip, with Amazon Web Services sales growing by 12% during the last quarter compared to a year ago. Its total cloud sales of: $27.4 billion (approx. €25.23 billion) did come in slightly lower than the predicted $27.5 billion (approx. €25.32 billion), but nonetheless represents a turnaround on last year when sales declined as customer businesses attempted to cut costs.
Microsoft also saw growth in its Azure cloud platform, hitting 33%, but the company warned that it expected year-on-year growth for Azure to slow to 31% to 32%.
This continued growth on cloud may seem to contradict the trend for repatriation, but it appears that even the cloud providers themselves are talking about it.
Indeed, in September The Register reported that Amazon told the UK’s Competition & Markets Authority that repatriation was a threat to its business, saying: “building a data centre requires significant effort, so the fact that customers are doing it highlights the level of flexibility that they have and the attractiveness of moving back to on-premises”. Of course, the line spun by a business to a competition watchdog needs to be taken with a grain of salt.
Notably, IDC’s Saroff wrote that “most organisations repatriate specific elements of their workloads, such as production data, backup processes, and compute resources”.
The likely truth is that what lies behind cloud repatriation is not so much abandonment of cloud strategy but a finessing of it.
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