Are there rainy days coming for cloud computing?

Software firm 37signals will see its profits increase by more than $1 million (£790,000) this year as a result of leaving the cloud.

“The fact that we were able to achieve this with such relatively modest changes to our company is astounding,” says co-owner and chief technology officer David Heinemeier Hansson.

The American company has millions of users of its online project management and productivity software, including Basecamp and Hey.

Like many companies, it outsourced data storage and processing to a third-party company, a so-called cloud service provider.

They own huge data centers where they store third-party data that can be accessed over the Internet.

In 2022, such services will cost 37signals $3.2 million.

“Watching the bill every week really radicalized me,” says Heinemeier Hansson.

“I went, ‘Wait! What are we going to spend on a week of rental?’ I could buy some really powerful computers for a week’s worth of (cloud) rent.”

So he did. Purchasing the equipment and hosting it in a shared data center costs $840,000 per year.

While costs prompted Mr. Heinemeier Hansson to act, other factors also raised concerns.

The Internet is designed to be incredibly resilient.

“I saw distributed architecture disappear as more and more companies were essentially relying on three computer owners,” he says, referring to the three leading cloud providers.

If the main data center goes down, a significant portion of the network may be disconnected.

The cloud was presented, he says, as cheaper, easier, and faster. “The cloud didn’t make things easier enough that we could measure any productivity gains,” he says, noting that his operations team has always been about the same size.

Was using the cloud faster?

“Yes, but it didn’t matter,” says Mr. Heinemeier Hansson.

“If you want to connect a hundred servers to the Internet, you can do it in less than five minutes (in the cloud). It’s amazing.

“But we don’t need, and I don’t think the vast majority of companies do, need five minutes of data processing on a huge number of additional servers.”

It can take him a week to deliver new servers and install them in the data center, which is fast enough.

37signals uses the cloud to experiment with new products. “We needed a few big machines, but we only needed them for 20 minutes,” says Mr. Heinemeier Hansson.

“The cloud is perfect for this. Buying a computer like this and leaving it idle 99.99% of the time would be a waste.”

He still recommends the cloud to start-up companies. “If you’re a speculative startup and there’s a lot of uncertainty about whether you’ll be in business in 18 months, you absolutely shouldn’t be spending money on computers,” he says. “You should rent them.”

37signals is not the only company involved in restoring workloads from the cloud, which is called repatriation to the cloud.

Digital workplace firm Citrix found that 94% of large U.S. organizations it surveyed had worked to move data or workloads from the cloud in the past three years.

Reasons given included security concerns, unexpected costs, performance issues, compatibility issues and service interruptions.

Plitch provides software that allows you to modify single-player games, including adjusting the difficulty level.

It built its own private data centers and repatriated cloud workloads to them, saving an estimated 30-40% in costs after two years.

“A key factor in our decision was the fact that we have highly proprietary data and R&D code that must remain strictly secure,” says Markus Schaal, managing director of the German company.

“If our investments in features, patches, and games were leaked, it would benefit our competitors. While the public cloud offers security features, we ultimately determined that we needed complete control over our confidential intellectual property.

“As we developed our AI-powered modeling tools, we also needed significantly more computing power, which the cloud could not provide within budget.”

He adds: “We occasionally encountered performance issues during periods of heavy use and limited customization options via the cloud interface. Moving to private infrastructure gave us full control over hardware purchases, software installation and a network optimized for our workloads.”

Mark Turner, Commercial Director at Pulsant, helps businesses migrate from the cloud to Pulsant’s colocation data centres across the UK.

In a colocation agreement, the customer owns the IT equipment but stores it in another company, where it can be stored safely, at an appropriate temperature and with backup power.

“The cloud will still be the largest part of IT infrastructure, but there is a good place for on-premises, physical, secure infrastructure,” he says. “There is a repatriation of things that should never be in the cloud or that won’t work in the cloud.”

Its largest repatriation clients include online software providers, where each additional client increases server load, which translates into higher cloud costs.

One such customer is LinkPool, which enables smart contracting using blockchain. It was built in the public cloud, initially using free credits. Business exploded, with cloud bills reaching $1 million per month. Colocation has reduced costs by up to 85%.

“(The founder) now has four racks in a data center in the city where he lives and works, connected to the world. He’s competing with his competitors and he can change his price point because his cost isn’t going to change in line with (customer demand),” Mr. Turner says.

“The IT change leaders are now the people who don’t say ‘cloud first,’ but they say ‘cloud when it fits,’” he adds. “Five years ago, the change disruptors were saying ‘cloud first,’ ‘cloud first,’ ‘cloud first.’”

Of course, not everyone will repatriate. Cloud computing will remain a huge business, with AWS, Microsoft Azure, and Google Cloud Platform being the biggest players.

For companies like Expedia, they are essential.

It used the cloud to consolidate 70 petabytes of travel data from 21 brands.

Applications also run in the cloud, except for legacy software that does not yet run in the cloud.

“We are travel experts,” says Rajesh Naidu, chief architect and senior vice president of Expedia. “(Cloud service providers) are experts in running infrastructure. It’s one less thing I have to worry about as we focus on running our business.”

“One of the most important things that the cloud gives us is global presence, the ability to deploy our solutions closer to the region where they need to be,” he says.

“Another issue is the resilience and availability of infrastructure. Cloud service providers have designed and engineered their infrastructure really well. We can take a cue from their innovations.”

Expedia has an excellent cloud computing center that has helped it save about 10% on cloud costs over the past year.

“You have to set the rules, otherwise companies will easily incur huge cloud costs,” says Mr. Naidu. “You can discard things when you don’t need them. If you use (cloud resources) wisely, the bill won’t be a surprise at the end of the day.”