Is cloud computing heading for a rainy season? – BBC News

Software company 37signals will see its profits rise by more than $1 million (£790,000) this year as a result of moving away from the cloud.

“It’s amazing that we’ve managed to do this with such relatively modest changes to our business,” says co-owner and technical director David Heinemeier Hansson.

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

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

They own huge data centers where they host other companies’ data that can be accessed over the Internet.

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

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

“I thought, ‘Wait a minute! What are we spending on a week’s rent?’ I could buy really powerful computers with just a week’s rent. [cloud] Expenditure.”

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

Although costs compelled Mr Heinemeier Hansson to act, other factors also gave rise to concern.

The Internet is designed to be highly resilient.

“I saw the distributed design erode as more and more companies essentially focused on three computer owners,” he says, referring to the three leading cloud providers.

If a major data center fails, large parts of the Internet can go offline.

The cloud is cheaper, simpler and faster, he says. “The cloud hasn’t made things simple enough for us to measure productivity gains,” he says, pointing out that his operations team has always been roughly the same size.

Was using the cloud faster?

“Yes, but that 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]. That’s incredible.

“But we don’t need a five-minute turnaround time for a huge number of additional servers, and I don’t think the vast majority of companies need it either.”

He can have new servers delivered and installed in his data center within a week, which is fast enough.

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

“The cloud is ideal for this. It would be a waste to buy this computer and have it sit unused 99.99% of the time.”

He still recommends the cloud for young companies. “If you have a speculative start-up and there is a lot of uncertainty about whether you will still be here in 18 months, you should definitely not invest your money in buying computers,” he says. “You should rent them.”

37signals is not the only company that brings workloads back from the cloud (so-called cloud repatriation).

Citrix, a digital workplace company, found that 94% of large U.S. companies surveyed had worked on migrating data or workloads from the cloud in the past three years.

Reasons cited included security concerns, unexpected costs, performance issues, compatibility problems and service outages.

Plitch provides software that allows users to modify single-player games and adjust the difficulty level.

The company built its own private data centers and moved cloud workloads there, saving an estimated 30 to 40 percent in costs after two years.

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

“If our investments in features, patches and games were to leak, it would be an advantage for our competitors. Although the public cloud offers security features, we ultimately concluded that we needed full control over our sensitive intellectual property.

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

He adds: “We occasionally experienced performance issues under heavy loads and the customization options via the cloud interface were limited. By moving to a privately operated infrastructure, we had full control over hardware purchases, software installation and networking optimized for our workloads.”

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

In a colocation arrangement, the customer owns the IT hardware but houses it with another company where it can be kept secure, at the right temperature, and with a backup power supply.

“The cloud will continue to be the largest part of IT infrastructure, but there are also good opportunities for local, physical and secure infrastructure,” he says. “There is a repatriation of things that should never have belonged in the cloud or that don’t work there.”

Its largest customers for repatriation include online software providers, where each additional customer places greater strain on the servers and thus increases cloud costs.

One such customer is LinkPool, which enables smart contracting using blockchain. It was developed in the public cloud and initially used free credits. Business exploded and the cloud bill reached $1 million per month. Colocation helped reduce costs by up to 85%.

“[The founder has] now has four racks in a data center in the city where he lives and works, connected to the world. He competes against his competitors and can shift his price point because his costs are not in line with the [with customer demand]”, says Mr Turner.

“The people who are driving change in the IT industry today are the people who don’t say cloud first, but cloud when it suits them,” he adds. “Five years ago, the disruptors of change were cloud first, cloud first, cloud first.”

Of course, not everyone is returning home. Cloud computing will continue to be a huge business, with AWS, Microsoft Azure and Google Cloud Platform being the biggest players.

They are indispensable for companies like Expedia.

The company has used the cloud to consolidate 70 petabytes of travel data from its 21 brands.

Applications also run in the cloud, with the exception of legacy software that does not yet work there.

“We are experts in travel,” says Rajesh Naidu, chief architect and senior vice president of Expedia.[Cloud providers] are experts in operating infrastructure. That’s one less thing for me to worry about while we focus on running our business.”

“One of the key benefits of the cloud is our global presence and the ability to deploy our solutions closer to the region where they are needed,” he says.

“Another point is the resilience and availability of the infrastructure. Cloud providers have designed and built their infrastructure really well. We can benefit from their innovative strength.”

Expedia has a cloud center of excellence that saved about 10% on cloud costs last year.

“You have to set policies, otherwise companies can quickly incur huge cloud costs,” says Naidu. “You can turn things down if you don’t need them. If you [cloud resources] If you act wisely, you won’t have a surprise bill at the end of the day.”