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  • Writer's pictureMatt Ferguson

Companies are turning their backs on the cloud

Rising costs and complexity are fostering a cloud repatriation

As of early 2023, a new trend is emerging in corporate IT: companies are increasingly turning their backs on cloud-hosted infrastructure and returning, at least partially, to on-premises infrastructure. High cloud hosting bills and the complexity of managing cloud spending are placing an untenable load on smaller companies who don’t have the manpower or resources to babysit their cloud balance sheets.

In a survey by FoundryCo, 40% of survey respondents cited the need to keep cloud spending in check as a roadblock to further use of cloud services. When a company’s IT department is juggling cloud services from multiple cloud providers, this task becomes a growing headache. FinOps systems are available to help companies manage their cloud spending, but buy-in for such a system necessitates more spending, perhaps more hiring, and additional complexity within the organization.

For larger companies, the burden of integrating a new systems management paradigm is easier to defray; for smaller organizations, however, implementing a FinOps system for cloud spending management could overwhelm existing budgets.

So what are SMBs (small and medium businesses) to do in this situation? Cloud repatriation. In the age of rising cloud computing prices, pulling back cloud resources to on-premises infrastructure can represent substantial cost savings. In a 2022 survey by Anodot, 50% of IT executives reported that “it’s difficult to get cloud costs under control”. Further, Anodot’s survey found that: “over a third of participants (37%) have been surprised by their cloud costs; more than half (53%) say the key challenge is gaining true visibility into cloud usage and costs, while 50% said complex cloud pricing and 49% said complex, multi-cloud environments; more than one quarter (28%) of respondents said it takes weeks or months to notice a spike in cloud costs, a figure that has not improved over 2021.”

When we consider that the majority of the cloud compute and storage market is dominated by three major players, Amazon Web Services, Microsoft, and Google, it becomes less surprising that pricing is not as transparent as it could or should be.

A 2022 study from HashiCorp found that 94% of companies are wasting money on cloud technologies.

In its fourth-annual multicloud survey, Virtana, a multicloud management platform vendor, found that, among its 350 respondents, 69% said cloud storage accounted for more than one quarter of their total cloud costs, and 23% of respondents said cloud storage spending accounted for more than half of their total cloud costs. Overall, Virtana found that 94% of the IT leaders it surveyed reported rising cloud storage costs and 54% reported spending on cloud storage was growing faster than their overall cloud costs.

In addition to concerns about spending and waste, additional concerns in the realms of information security and performance have also entered into the equation for many organizations. With the parade of high-profile data breaches, the largest of which all having occurred after 2010, CIOs and other IT executives are facing increasing operational headwinds when working to secure their companies’ resources. The burden on smaller organizations is disproportionately larger, owing to smaller budgets and slower reaction times to incidents like ransomware attacks and proprietary data leaks.

IBM reported in its 2022 Transformation Index that 54% of respondents felt that the public cloud is not secure enough. The challenges facing organizations who use the public cloud are only mounting, as datasets grow larger and the complexity of managing disparate data silos increases in kind. In 2020, data integration vendor Matillion surveyed 200 IT professionals on the issue of data integration and found that 90% of respondents cited lack of data insights as a barrier to growth. Rapid data growth and, consequently, the monumental tasks of management, archival, and security of that data have led to what can only be described as a data crisis at some organizations.

Further complicating matters at the physical data storage level itself is the arms race between data storage demands and currently available storage technology. With advanced storage methodologies like HAMR (heat-assisted magnetic recording) soon to hit the market, it may seem like we’re managing to keep up with demands of global data centers. The issue, however, is complexity. As hard drive densities increase, along with the complexity of the physical mechanisms needed to grow their densities, management becomes more difficult. Higher capacity hard drives require tighter tolerances, more advanced engineering techniques, more complex storage controllers, and are more prone to encountering unrecoverable errors during storage array rebuilds.

Smaller organizations can glean some useful information on the relative merits of “lifting-and-shifting” their IT infrastructure to the cloud, versus keeping their data and compute on premises. For smaller companies, the calculus for shifting IT infrastructure to the cloud often tilts in favor of utilizing the public cloud in low-demand scenarios, such as identity management, hosted office applications, and VoIP. However, even in lower demand scenarios, inflation in cloud pricing has led to 50% of organizations exceeding their budget for cloud storage spending. In February 2023, Google announced price increases in its Google Workspace Flexible Plans and in Google Workspace Enterprise Standard, but also announced new flexible pricing options for organizations looking to migrate their data to Google’s cloud platform.

While pricing trends in cloud computing seem to be downward, cloud storage pricing is moving in the opposite direction; demand for cloud data storage is skyrocketing, forecast to grow around 25% year-over-year through 2028. Higher costs are a function of both this explosive demand in the storage sector and in ongoing supply chain snarls that have driven up semiconductor prices worldwide. When this trend will reverse is not clear–high year-over-year price increases in cloud storage are likely here to stay for the foreseeable future.

If your business is struggling to get cloud compute and storage costs under control, Geeks for Business can help. Let us analyze your current cloud spending, your business’s compute and storage needs, as well as your forecasted growth, and we can help streamline complex multicloud environments while reducing ongoing costs. Every organization’s needs are unique: on-premises infrastructure isn’t (yet) a cure-all for high operating costs. Get in touch with Geeks for Business today and let’s get to work on getting your IT costs under control.

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