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Why A Recent Client Bid Cloud Computing Goodbye: A Real-World Business Insight

As amazing as many of us think the cloud is, as much as we love AWS, Amazon’s 30% margins on cloud services doesn’t lend much to the cost effectiveness that businesses can glean from running their applications in the cloud.

The cost, in many cases, outweighs the benefits.

If you’re part of a growing business, chances are you’ve been charmed by the allure of Cloud Computing services like Amazon Web Services (AWS). The prospect of no upfront costs and the ability to scale resources on demand is attractive to businesses. But what happens when this seemingly dreamy setup starts to drain a companies wallet significantly? This post explores why, for many businesses, parting ways with cloud services can be a strategic move.

Introduction to the High Costs of Cloud Computing

I recently worked with a client that hosted their entire IT application footprint in the cloud. Total annual cost was north of $3 million annually. They tapped us to migrate all of their applications to an on-premises datacenter with hardware that was newly purchased. Hardware costs, by itself, totaled $450,000, with the associated Windows Server and VMware licensing costs. In total the entire project scope encompassed 450 servers all running over 200 applications on Windows and Linux servers.

Initially, cloud services seem like the perfect solution in a companies business toolkit—only pay for what you need, and forget about the rest. This approach is particularly appealing to startups and small companies. However, as your business expands, so does your usage—and abruptly, so does your bill. I want to dive into why escalating Cloud Computing costs can turn from a minor nuisance into a major burden.

1. Scaling Expenses Versus Scaling Efficiency

Cloud costs can accelerate faster than your business growth. Initially, the costs are manageable, with very little traffic and a modest architecture, this is attributed to the convenience Cloud Computing provides. However, as your demands increase, so do the expenses related to high-volume data transfers, extensive storage needs, and increasing computing power demands. Suddenly, the costs aren’t just about convenience anymore—they start cutting deep into your profits. Consider a monthly bill for an application that has it’s highest usage during the day, with little to no usage at night, where the costs are over $100,000 per month. If we give up our ability to scale, assuming it’s not needed, we could drastically improve our cost savings and move our application footprint to an on-premises datacenter for a lot less on an annualized basis.

2. Unveiling the Hidden Costs

Then there are the hidden costs. Think about enhanced security, premium support services, and compliance features, which are critical yet expensive. Another pain point is vendor lock-in—getting too intertwined with one Cloud Computing provider makes it expensive and complicated to switch or move away. Native cloud tools, or tools designed by cloud providers, make it easier and more efficient to use a cloud providers platform. It also makes it more difficult to break away. Some products such as Windows Server or VMware, which is a virtualization technology, can be used anywhere whether it be the cloud or on an on-premises datacenter. Those technologies are universal in their application. AWS specific technologies such as S3 or EC2 are specific to AWS, or in other words proprietary, which makes it difficult to move a companies applications and infrastructure somewhere else if we’re dependent on using AWS native tools and technologies.

3. Identifying the Tipping Point

It’s crucial to recognize when sticking with Cloud Computing stops being economical. This tipping point varies but generally occurs when Cloud Computing costs begin to significantly impact your profit margins. Cloud pricing models charge by the amount of compute you use, or the type of server you use. Essentially, the amount of time that your servers are up and running, regardless of whether they are actively being used or not.

4. Real Stories, Real Insights

Learning from other companies that have shifted away from Cloud Computing can be incredibly insightful. I’ve noticed many prominent firms across various sectors have returned to private data centers after finding that Cloud Computing was no longer financially viable. These case studies can provide valuable lessons and benchmarks for your considerations.

Advantages of Moving Away from Cloud Computing

Deciding to move away from the cloud is not just about reducing expenses—it’s about gaining control. Here are some benefits of managing your own infrastructure:

Predictability in Spending

When you own your infrastructure, your expenses are more predictable, and over time, they are generally lower than what you would spend on a comparable Cloud Computing setup. The initial investment might be substantial, but the long-term savings can be significant. If your cloud environment grows and aligns with it’s usage, it makes sense, but if your cloud environment growth does not align with it’s usage, costs can mount drastically.

Customization for Your Specific Needs

With your own infrastructure, you can fine-tune every component to meet your precise needs, enhancing both performance and efficiency—a customization level that Cloud Computing, with its generalized approach, can rarely match.

Enhanced Security

By managing your own servers, you can implement security measures and comply with regulations on your terms without depending on a third party. All cloud providers have IT Governance and Security benchmarks that they are responsible for and manage as part of your agreement. However, this isn’t a point of contention when we compare the pro’s and con’s of running our applications in the cloud, even while this control often translates into a greater peace of mind businesses.

Challenges of Independent Infrastructure Management

The upfront costs of setting up your own infrastructure can be daunting. You’ll need a robust IT team to manage everything from installation to routine operations. While you gain control, you might lose some of the flexibility that Cloud Computing offers, especially in scaling operations quickly.

Conclusion: Is It Time to Say Goodbye to Cloud Computing?

Stepping away from Cloud Computing isn’t the right move for every business. However, for those whose growth has outpaced what Cloud Computing economically supports, it can be a transformative decision. It’s all about understanding your needs, conducting thorough research, and sometimes, taking a bold step. For companies aiming to retain more of their earnings and seeking a strategic advantage, building their own infrastructure, separate from the rented solutions of Cloud Computing, might be the way forward.

This in-depth look at our clients decision to move away from Cloud Computing highlights the importance of weighing the long-term financial impacts against the initial convenience. If you’re finding that Cloud Computing is becoming a costly affair, it might be time to consider whether it’s still the best solution for your business’s evolving needs.

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