This year, software firm 37signals will see a profit boost of over $1 million (£790,000) from leaving the cloud. “To achieve this with relatively modest changes to our business is astounding,” says co-owner and CTO David Heinemeier Hansson. The US company, which serves millions with its project management and productivity software, including Basecamp and Hey, previously relied on third-party cloud services.
In 2022, cloud services cost 37signals $3.2 million. “Seeing the bill on a weekly basis really radicalized me,” says Heinemeier Hansson. He realized that a week’s worth of cloud spending could buy powerful computers, prompting him to invest in hardware and host it in a shared data center for $840,000 per year. This move was driven by costs and concerns over the concentration of internet infrastructure in the hands of a few major cloud providers.
Despite the cloud’s promise of being cheaper, easier, and faster, Heinemeier Hansson found no measurable productivity gains. The speed of cloud deployment, while impressive, was unnecessary for their needs. For experiments requiring significant but short-term computing power, 37signals still uses the cloud, finding it ideal for such tasks.
Heinemeier Hansson recommends the cloud for start-ups with uncertain futures, advising against buying computers when renting is more viable. However, 37signals is not alone in cloud repatriation. A Citrix survey found that 94% of large US organizations had repatriated data or workloads from the cloud in the last three years, citing security concerns, unexpected costs, performance issues, compatibility problems, and downtime.
German firm Plitch, which provides software for modifying single-player games, moved to private data centers, saving 30-40% in costs after two years. The need for control over proprietary R&D data and advanced AI processing power drove their decision. Performance issues and limited customization options in the cloud also contributed.
Mark Turner, chief commercial officer at Pulsant, helps companies migrate from the cloud to colocation data centers, where clients own the hardware but house it with another firm. Turner notes a growing trend of repatriation for workloads that never belonged in the cloud. His clients, such as LinkPool, have significantly reduced costs by moving to colocation.
Despite this trend, cloud computing remains a massive business with major players like AWS, Microsoft Azure, and Google Cloud Platform. For companies like Expedia, the cloud is essential, enabling them to consolidate data, deploy solutions globally, and benefit from the cloud providers’ resilient infrastructure. Expedia’s cloud center of excellence saved about 10% on cloud costs last year by setting policies to manage consumption wisely.
While some companies are moving away from the cloud, it continues to offer significant advantages for many businesses, proving that the decision to use cloud services depends on specific needs and circumstances.