The Cloud Back-Flip

It was many years back when we first even heard of the concept – migrating away from a public Cloud. Back then this was ventured boldly by Dropbox. And then we heard of it again only in 2022 when Basecamp maker 37signals attempted a Cloud repatriation too. Turns out, it has already saved about $2 million in its first ‘cloud-clean year’. These companies, apparently, saved not just on Cloud bills but also on rack capacity, expensive storage and hidden costs. Recently enough, a bank did the step-down as well – when Cloud struggled with latency as well as the requirements of the Data Protection Act and the Central Bank regulations in the region of Africa.

If these sound like one-off cases, consider what some reports are sniffing out. In the IDC’s Cloud Pulse 4Q 2023 survey, it was observed that close to half of cloud buyers spent more on cloud than they expected in 2023, and 59 per cent have anticipated similar overruns in 2024. Companies are struggling to make accurate cost forecasts because of the complexities of cloud environments, and unforeseen external influences along with increasing costs of third-party services, energy costs, and new technologies like GenAI. While the number is still small (with only eight to nine per cent of companies planning full workload repatriation in the IDC’s Server and Storage Workloads Survey), the signs are loud and clear.

They also echo in a recent Citrix study which found that 25 percent of UK organizations have migrated more than half of their cloud-based workloads back to on-premises infrastructures. It is notable to see that 93 per cent of respondents had been involved with a cloud repatriation project in the last three years. A lot of this relocation is happening due to security issues and high project expectations (33 per cent) and a lot is due to failure to meet internal expectations (24 per cent). For 43 per cent of IT leaders moving applications and data from on-premises to the cloud, it was also because this format turned out to be more expensive than expected.

The IDC’s June 2024 report ‘Assessing the Scale of Workload Repatriation’ also spotted 80 per cent of respondents ‘expected to see some level of repatriation of compute and storage resources in the next 12 months.

While it is a new kind of threat for some Cloud players like AWS (that claimed as part of a competition investigation that it was facing competition from cloud repatriation), some players like VMware are looking at this as an opportunity to target repatriated workloads towards their platform.

So why is this happening?

The big truck in reverse gear

Cloud repatriation is driven by various factors, including high cloud bills, hidden costs, complexity, data sovereignty, and the need for greater data control. In markets like India—and globally—these factors are all relevant today, points out Vishal Kamani – Cloud Business Head, Kyndryl India. “Currently, rising cloud costs and complexity are part of the ‘learning curve’ for enterprises transitioning to cloud operations.”

As organizations mature and optimize their usage, these issues will likely diminish and no longer serve as significant reasons for repatriation in the medium to long term. - Vishal Kamani, Cloud Business Head, Kyndryl India

One of the top SaaS providers, for example, moved core storage on-premises from the cloud to cut costs and lower dependency on third-party providers, cites Amit Patil, Senior Director- Technology, Publicis Sapient. “Similarly, industries with strict data sovereignty requirements are repatriating workloads to ensure compliance and better manage infrastructure costs. While repatriation is not a trend that suits all use cases, it is particularly relevant for organisations that have stable, predictable workloads and can benefit from retaining greater control over their data and infrastructure.”

While cloud repatriation is not an alien concept anymore, such reverse migration back to on-premises data centres is seen happening only in organisations that are technology-driven and have deep tech expertise, observes Gaurang Pandya, Director, Deloitte India. “This involves them focusing back on the basics of IT infrastructure which does need a high number of skilled employees. The major driver for such reverse migration is increasing cloud prices and performance requirements. In an era of edge computing and 5G, each end system has now been equipped with much more computing resources than it ever had. This increases their expectations from various service providers.”

Money is a big reason too- especially when you don’t know where is it going.

The primary motivator for many companies has been cost; with cloud bills sometimes exceeding budget by 3-4x, most businesses cannot sustain these expenses and others would rather optimise this cost, argues Bruno Goveas, Director of Cloud Computing, Akamai India. “For enterprises with existing internal infrastructure and skilled resources, maintaining workloads on-premises can often be more cost-effective. They see repatriation as a way to avoid sudden budget shocks and achieve better cost predictability.”

While cloud repatriation may suit niche cases, the cloud’s ability to dynamically adapt to evolving business needs ensures its position as the foundation of modern enterprise IT. - Goutham Parcha, Vice President, Application Development, Pega India

Cloud providers’ pricing models, discounts, and billing mechanisms can be complex, complicating cost optimization.”, - Arvind Purushothaman. Cloud Leader, EY Global Delivery Services

Goutham Parcha, Vice President, Application Development, Pega India also underlines the money angle. “While cloud bills can grow significantly at scale, it is often the combination of direct and indirect expenses that drive organisations to reassess their cloud strategies. For specific workloads, on-premises infrastructure can offer a more cost-effective alternative.”

There is also the question of workloads that can spur such decisions. Some workloads may not be suitable for cloud adoption in their current state, requiring consideration during planning, contends Arvind Purushothaman, Cloud Leader, Technology Consulting, EY Global Delivery Services. “Organizations must adapt team structures, skills, and operating models to fully realise cloud benefits. Without these, ROI becomes challenging, prompting potential repatriation.”

Ask Biswajeet Mahapatra, principal analyst at Forrester and he captures how the allure of predictable costs associated with on-premises infrastructure is compelling against the backdrop of escalating cloud bills. Enterprises with stable workloads find on-premises solutions more economically viable, challenging the cost-effectiveness of cloud scalability. “Specific applications demand the high performance and low latency achievable through on-premises infrastructure. This direct control over the hardware environment ensures optimal performance for critical workloads.”

And then there is the big fear of security. For some years now, cybersecurity has been viewed by many business executives as a brake on speed and agility. Conversely, many security leaders viewed the rapid proliferation of cloud environments as an unwelcome source of additional complexity, expanding the attack surface of the networks they were tasked with securing, explains Vivek Srivastava, Country Manager, India & SAARC, Fortinet.

There is some tweaking but ‘en masse’ cloud repatriation is an industry myth. - Yugal Joshi, Partner, Everest Group

Understood. But is this ‘fix’ going to help for long? Would the heavy lifting back to the backyard be worth the trouble and FOMO in a world where the Cloud is a mainstream factor?

Will the rollback continue?

“Cloud repatriation is emerging as a strong trend, with an estimated 32 per cent of organisations bringing back at least some workloads on-premises or to private Clouds according to a 2023 study by 451 Research, opines Bharat Unadkat, Engagement Partner at Practus. Banks like JPMorgan Chase are repatriating parts of their workloads from public Cloud providers to private or hybrid environments to gain better data control. As financial regulations tighten, these moves also help banks avoid the escalating costs of data egress and security fees in Cloud environments.”

Mahapatra also outlines how the declining cost and enhanced capabilities of on-premises hardware render it an increasingly attractive option. Modern infrastructure advancements offer competitive performance benefits at lower costs compared to cloud services.

Dropbox migrated its storage back to an in-house infrastructure in 2016, resulting in an annual savings of $75 million over several years. Dropbox found that hosting storage infrastructure in-house provided a more predictable cost model and greater control. - Bharat Unadkat, Engagement Partner at Practus

Pandya adds how the service providers that take part in such reverse migration, also tend to build a strong and robust tech infrastructure in which they have a lot more control right from chip to code, thus providing necessary performance gains to their end users.

That said- There is still a significant portion of IT needs that have remained on-premise for various reasons including primarily legacy applications that cannot be moved so easily to the cloud, security reasons or strategic business reasons, reminds Naresh Chandra Singh, Sr Director Analyst at Gartner. “These can’t be considered as repatriation as this does involve moving back stuff from cloud to on-premise. While there has been some cloud repatriation, it has either been as part of an IT rationalization to address costs and complexities or strategic business needs such as sovereignty and data security.”

While there has been some cloud repatriation, it has either been as part of an IT rationalization to address costs and complexities or strategic business needs. - Naresh Chandra Singh, Sr Director Analyst at Gartner

Yugal Joshi, partner, Everest Group shines a light on the scale part too. “We don’t see cloud repatriation at scale; however, it does happen in small pockets. Clients are indeed rethinking their workload placements and new build-outs going forward. They have realised they massively overestimated the cloud’s impact on cost reduction and therefore, are now evaluating their earlier and newer cloud initiatives. Clients are tweaking their workloads that are running on the cloud by bringing them on-premises, but then redeploying them on a cloud. Existing workloads on the cloud are almost a one-way journey. Yes, there is some tweaking but ‘en masse’ cloud repatriation is an industry myth.”

Kamani augurs that as organisations mature and optimise their usage, these issues will likely diminish and no longer serve as significant reasons for repatriation in the medium to long term.”

He explains that in the short to medium term, a hybrid approach will be the primary preference as organisations adapt to cloud paradigms and digital regulations stabilise. In the longer term, once the global landscape matures, decisions on where to run digital assets will revolve around functionality, scalability, reliability, and cost. “Over time, even cost is likely to become commoditised, much like utilities such as power or fuel. Cloud repatriation is a transitional phase, influenced by immediate challenges but ultimately shaped by the broader evolution of technology, regulations, and enterprise maturity.”

Goveas highlights how, by maintaining a balance between on-premises and cloud resources, enterprises avoid putting ‘all their eggs in one basket’ and gain more leverage in negotiating with cloud vendors. “Repatriating some workloads can also simplify operations by reducing dependency on complex multi-cloud environments, which often carry hidden costs and additional management overhead.”

There are costs associated with this decision too. Cloud providers often charge ‘data egress fees’ when data is transferred out of their environment, leading to unexpected costs for companies that handle large amounts of data, reminds Unadkat. “These factors suggest that more enterprises may consider repatriation. However, the rise of hybrid Cloud solutions that combine the benefits of public Cloud with on-prem infrastructure is also likely to reshape Cloud strategies in coming years.”

Purushothaman warns how companies using a ‘Rehost-First’ (lift-and-shift) approach often expect immediate savings but overlook key factors like modernising legacy applications and aligning the Target Operating Model to fully leverage cloud-native services, impacting long-term outcomes.

As per the 2024 Cloud Security Report sponsored by Fortinet, 51% of organizations report that they lack the right skills to deploy and manage a complete solution across all cloud environments, while 55% reported concerns about being able to ensure data protection and privacy across multi-cloud environments. - Vivek Srivastava, Fortinet

Cloud repatriation reflects a strategic pivot towards optimising cost, control, and compliance. Enterprises are not abandoning cloud solutions but are instead adopting a hybrid approach, concludes Mahapatra.

The landscape is still evolving and it’s hard to say what new paradigm will emerge until the dust settles down. Or until a new kind of technology storm takes over.

Doing a back flip takes the same level of agility, core strength and courage as a front flip requires. Not everyone gets to tell this story like Dropbox or 37signals. But then, not everyone has the clarity or the courage to ask the tough question – to repatriate or not.

By Pratima H

pratimah@cybermedia.co.in