Why companies are reconsidering cloud: the shift back to on-premises solutions

Chris Badenhorst

Cloud is more expensive than companies expected. According to a Citrix survey, companies are turning back the cloud clock, repatriating workloads to on-prem solutions because cloud introduces security risks, isn’t performing to expectations, and is adding more zeroes to the bottom line than anticipated. There are already case studies – 37signals, the developers behind Basecamp, have walked away from cloud and other names are following suit – which has, for some, signalled a trend. 

However, the truth lies somewhere in the middle.

Expedia, for example, has remained within the cloud as the company needs the agility and scale it provides to service a global market. The company’s thriving within this architecture because it has a cloud centre of excellence and this has led to savings of around 10% on costs over the past year. It’s a case study in optimisation and setting clearly defined policies and processes that minimise the risks associated with cloud spend while extracting the most possible value. 

There is no point going around the cost of cloud, particularly in the South African context. The US dollar and fluctuating exchange rates make cloud expensive for most organisations, even before they’ve created workloads or opened instances. However, both on-prem and cloud costs are influenced by one increasingly important factor – strategy.

While there is plenty of hype around the concept of cloud repatriation and the headings are as dramatic as those claiming the mainframe has died (it hasn’t), companies need to pause before they walk from cloud. Regardless of the direction you want to take your business, you need a clearly defined strategy that outlines workload demands, costs, efficiencies and use cases. Not all workloads that return to an on-premises implementation will be cost-efficient when compared with their usage in the cloud, and some companies may benefit from a hybrid multi-cloud strategy that gives them the space they need to optimise costs without losing ground. You need to evaluate which workloads are more cost-effective on-prem versus those that are cheaper in the cloud and pay attention to stability. Maintaining stability in the public cloud is not as complex as in on-premise environments so your requirements as a business may lean towards a solution that enhances this, or it may not even be a relevant consideration. 

You also need visibility. The cost conversation is more nuanced than just the cost of workloads. There’s also the cost of governance within public cloud environments which is understandably more complex. However, instead of ditching cloud as too expensive or too risky, a well-defined strategy will ensure you can make an educated decision around opex versus capex. It will also provide you with insight into your costs upfront – you need to know exactly how much that instance is going to cost, or how much you will spend on required assets before you invest in the cloud. 

Companies are losing their love for the cloud because not enough work is being done to evaluate their environments correctly at the start, and because they don’t realise how many tools and services exist in environments like Azure which are designed to help them do just that. These tools give companies options when it comes to deciding their cloud futures because they offer insight into expenditure and give finance teams the data they need to make informed decisions. Instead of jumping back on-prem, you can optimise their infrastructure based on real-time, relevant insights that shift your costs back down to the level that you need. It comes down to having the right information. 

Companies are eyeing the exit because of amorphous promises about cost savings and unfulfilled expectations. Strategy, stakeholder buy-in and engaging with decision-makers are key success metrics for cloud – and for exiting the cloud or creating a hybrid or multi-cloud architecture. Whether your organisation wants to expand geographically or build an ecommerce site or simply refine expenditure, you need to consistently return to your strategy and planning.

The same applies to your decision to leave the cloud. Is your plan taking your strategy into account? Will your existing cloud or on-prem architecture deliver on what the business needs over the next five to ten years? How will leaving the cloud shape expenditure versus staying? Ultimately, there is no one perfect architecture for everyone, but there is the perfect solution for your business and your strategy. That’s where the sweet spot lies, and where you decide if you’re pivoting out to the cloud or into on-prem. And it’s where having a partner that understands the sweet spot is essential because then you don’t run the risk of losing out. 

Chris Badenhorst is the head of Azure Core Services at Braintree.

BUSINESS REPORT