By C. Perera, JadeTimes News
This year, software firm 37signals anticipates a profit boost of over $1 million from leaving the cloud. "Achieving this with relatively modest business changes is astounding," says co owner and CTO David Heinemeier Hansson. The US company serves millions of users with its online project management and productivity software, including Basecamp and Hey.
Previously, like many companies, 37signals outsourced data storage and computing to a third party cloud services provider. These providers own vast data centers that host data from various firms, accessible over the internet. In 2022, 37signals spent $3.2 million on such services. "Seeing the bill weekly radicalized me," Heinemeier Hansson says. "I thought, 'What are we spending for a week of rentals?' I could buy powerful computers for one week's worth of spending." Consequently, he purchased hardware and now hosts it in a shared data center at a cost of $840,000 per year.
Beyond cost, other factors influenced Heinemeier Hansson's decision. The internet's design is highly resilient, but he noticed this resilience diminishing as more companies relied on the three leading cloud providers. He argues that if a major data center fails, large parts of the web could go offline. Although the cloud was promoted as cheaper, easier, and faster, Heinemeier Hansson did not observe measurable productivity gains, and his operations team size remained unchanged. He acknowledges that while the cloud can quickly connect servers, his company does not need such rapid scalability.
37signals still uses the cloud for experimenting with new products, finding it ideal for short term, intensive computing needs. Heinemeier Hansson recommends the cloud to startups facing uncertainty, advising them to rent rather than purchase computers initially.
The trend of bringing workloads back from the cloud, known as cloud repatriation, is not unique to 37signals. A Citrix survey found that 94% of large US organizations had repatriated data or workloads from the cloud in the past three years, citing reasons such as security concerns, unexpected costs, performance issues, compatibility problems, and service downtime.
Plitch, a company that enables modifications in single player games, saved 30 to 40% in costs by building private data centers and repatriating cloud workloads. Managing director Markus Schaal emphasized the need for strict security over proprietary R&D data and code, and the requirement for processing power beyond the cloud's budgetary constraints. Schaal also cited performance issues and limited customization options in the cloud as factors for the transition.
Mark Turner, chief commercial officer at Pulsant, assists companies in migrating from the cloud to Pulsant's colocation data centers across the UK. In a colocation arrangement, the client owns the IT hardware but houses it with another firm, ensuring security, proper temperature, and power backup. Turner observes a repatriation trend, especially among online software providers whose cloud costs escalate with each additional customer. For example, LinkPool, which facilitates smart contracting using blockchain, significantly reduced costs by switching to colocation.
Despite the repatriation trend, cloud computing remains a massive business with major players like AWS, Microsoft's Azure, and Google Cloud Platform. For companies like Expedia, cloud services are essential. Expedia consolidated 70 petabytes of travel data from its 21 brands in the cloud and runs its applications there, except for legacy software. Rajesh Naidu, chief architect and senior vice president at Expedia, highlights the cloud's global presence, resiliency, and innovation as key benefits. Expedia's cloud center of excellence saved about 10% on cloud costs last year by implementing policies to manage consumption and avoid surprise bills.