6 Minute read.
The move of IT services to the cloud over the last decade has been one of the biggest and significant events in the history of business computing. Software as a Service (SaaS) and cloud services like Amazon Web Services (AWS) and Microsoft Azure have become ubiquitous. It’s now hard to imagine organisations not using cloud computing outside of specialised cases like military or defence, and even there cloud services are widely used.
So when a mainstream news organisation like the BBC runs an article suggesting that some organisations have moved away from the cloud, that’s a bit of a shock. When a widely quoted 2024 Barclays survey of CIOs that suggests 83% of organisations are looking to move services off cloud and onto hardware that they own (referred to as repatriation) that’s perhaps even more shocking.
It's not like the Barclays statistic is an outlier. Industry analysts IDC suggest that 80% of organisations are considering repatriating some services. The cloud services company Citrix estimates that 25% of UK organisations have already repatriated services.
One of the main benefits of moving to the cloud was meant to be cost saving. Strangely enough, that’s now a key reason companies are moving away from the cloud, but it’s not the only one. Other reasons can include data privacy, security, or performance.
Why is cost, once seen as a key benefit of cloud services, now seen as a problem?
There are a few factors, including:
We’ve covered these in more detail in recent blog posts – general cloud cost issues, cloud shrinkflation, shadow IT, and AI. Stepping back from the detail, it’s clear that many businesses have not reaped the cost savings they expected from cloud computing, or if they did initially, they are now in a very different position, with rising costs that they do not feel fully in control of.
Given the numbers quoted above around organisations either already repatriating or considering repatriation, asking if it is really happening might seem a little odd. However, there is some speculation that some of the commentary around this may not be completely objective.
For example, hardware manufacturers might prefer that organisations start to do more processing on servers that they own. Some of the big cloud providers build their own hardware, and those that don’t can command big discounts because of the scale of their purchasing. It’s notable that hardware manufacturers seem particularly keen on picking up on the Barclays “83%” number mentioned above, and indeed the source of that number referenced here is a post on X by Michael Dell.
Also, Amazon cited repatriation in its response to the UK Competition and Markets Authority’s investigation into the UK cloud marketplace. Amazon suggested that on-premise computing should be considered as another competitor within the cloud marketplace, particularly as Amazon were seeing customers repatriating some services. It’s clear that Amazon might want to paint repatriation as a significant phenomenon as part of its pushback against suggestions that the UK cloud marketplace is uncompetitive and therefore does not provide customers with good value for money.
Despite any concerns one might have about some of the claims about there have been about repatriation, it’s beyond dispute that there have been some high-profile examples of companies rejecting the Cloud. Cost savings are cited as the main reason for making the move, and the numbers are significant. Ahrefs are a well-known supplier of SEO (Search Engine Optimisation) tools, and they are claiming they saved in excess of $400 million over 3 years by having their own hardware. 37Signals, a provider of project management tools, believe they will save $10 million over 5 years.
The plethora of “how to” articles about cloud repatriation that are now available also suggests that organisations really are looking at this. It’s hard to get a clear picture on the scale of repatriation as the cloud market is still growing – but a lot of that is fuelled by the boom in generative AI tools like ChatGPT and Claude.
Is Repatriation The Answer?
Could repatriation be the right move for your organisation? Inevitably, the answer is “it depends”….
Specifically, whether repatriation makes sense is going to depend on the type of things you are currently using cloud services for, and at what scale. The Ahrefs and 37Signals examples above are both technology companies. This means they are heavy users of computing services, and they have a lot of in-house expertise.
For organisations in other sectors, and with less technology expertise, the case for repatriation is likely going to be clear cut, and would require thorough exploration.
While there might be headline cost savings with repatriation, there are some upfront and ongoing costs that need to be considered, including:
Given that repatriation is not a trivial undertaking, and may not be appropriate for your organisation are there other ways of reducing cloud costs? If we look at some of the main reasons for overspending on cloud applications and services, the answer is clearly yes –
Reducing the costs that are being incurred because of these factors looks straightforward, but is more complex in practice. How do you know what software is in place, and how much of it is appropriate, cost-effective or even required?
A good starting point is a complete audit of the cloud software and services that are currently in use across the organisation. Then there has to be an analysis of the software and services to identify any of the issues listed above. Both of these steps can be quite complex, and once they have been carried out then further work is required to create a roadmap to realising savings. Licence durations and terms have to be factored in, and when it comes to setting up services like AWS and Azure cost-effectively then significant technical expertise is required.
The good news is that by working with a partner like Costimised, organisations can access the expertise that will enable them to identify and realise cloud cost-savings without the upheaval and effort involved in repatriation. Contact us at enquiries@costimised.com to set up no-obligation discovery call where we can explore the potential cost savings for your business.
We recently worked with a company that had been purchased out of administration. The main reason the company had gone into administration was that it couldn’t generate enough revenue to cover its Cloud costs. An extreme example, but most companies are overspending on cloud. The good news? This is a fixable problem.
Read Full Blog
A number of factors are combining to make technology costs increase rapidly, and this is happening at a time when organisations are facing other cost pressures. We lay out what is going on to make software application and cloud services costs rise - including vendor actions, Shadow IT and the increasing use of AI, plus what you can do about it.
Read Full Blog
Organisations are increasingly dependent on technology, and most of that technology now lives in the cloud. Unlike on-premise software, if a cloud software vendor disappears, so can the software. How big a risk is this? What can you do about it?
Read Full Blog