Here’s Why More Companies Will Leave the Cloud in 2024

More and more companies are moving away from massive cloud service providers. Should you join them? It’s time to take another look at your hosting and infrastructure costs.

For years a safe, default hosting decision worked well, or at least well enough, for all sorts of businesses. By promising resources on demand and “abstracting away” the actual hardware, hyperscale cloud services won customers from everywhere: enterprises emptied out their own data centres, and start-ups went cloud native on day one. Cloud services, supplied by some of the largest companies in the world, have almost become the industry standard.

There was a time when “no-one ever got fired for picking IBM”. Once cloud hosting took over, the safe thinking became “no one gets fired for running things in the Cloud”. But just like IBM faded, today’s normal will change as well.

Hosting choices always boil down to one big question: Are we better off assembling and operating cloud services, or directly operating hardware? (A blend of both options can work, too). For years the decision not to run your own hardware has seemed obvious, but the maths is changing. Pressure is coming from two directions.

Cloud Providers Are Making Hay While The Sun Shines

The first source of pressure is the cloud providers themselves, and the margins that they’re making. They are stock market darlings for a reason. 

The world’s biggest data centres are being treated as cash cows. It’s starting to look petty. Millions of businesses around the world are about to be charged by their cloud provider for IPv4 addresses, for example.

These new fees will just be another line on long, complicated bills. Cloud cost optimisation is a hot topic amongst CTOs and CFOs, because cloud architecture hasn’t been as set-and-forget as many of them hoped. Operations teams are as important as ever, and bill blow-outs can hit whenever code isn’t perfectly optimised. We were caught out ourselves by an infinite loop that ran in the cloud, at our expense, all weekend.

It all adds up. Andreessen Horowitz estimate that by overpaying for cloud services, public companies in the US have shouldered a negative impact of US$500B. This is particularly galling when the main input that cloud providers depend on – hardware – has been getting better and cheaper every year. 

Today’s Hardware Is In a Different Class

The second reason that bare metal is more competitive today is straight-up performance. Servers that don’t cost a lot can do a lot. You know Moore’s Law, and you’ve been impressed by upgraded phones and laptops. But are you really aware of how different today’s servers are from the machines you considered, and probably rejected, in 2014 or even 2019?

The facts even surprise us, and we run our own data centre! Last year we dug into the history of Dedicated Servers that we’ve assembled since 2007. We found that[CPUs have gotten 100x faster, and no more expensive.

Disk drives and storage are a little harder to measure over time, but you can lock in a 95% drop in the price of a gigabyte while drives got around 800x faster.

The bottom line for businesses is that every dollar spent on renting or owning hardware goes hundreds of times further than it used to. The same machines underpin cloud computing, where bills haven’t improved at anywhere near the same rate. The gains are piling up somewhere else.

If you haven’t taken a serious look at server prices and specs in the past year or two, you literally don’t know what you’re missing out on. Or how much money you could be saving.

The Migration Has Begun – Should You Join It?

Early movers are well on their way [out of the cloud]and back to Earth. TechCrunch has called it the “cloud backlash”. 

There are advocates in almost any sector you can think of. At one business and project management software company, which used to run entirely on cloud services, the CTO says:

“The shocking thing about buying your own hardware is realizing both how cheap and how powerful it’s become. The progress in the last 4-5 years alone has been immense. This is one of the reasons that much of the cloud is getting to be a worse deal by the year. Moore’s Law is hammering the prices and increasing the capabilities of stuff you buy from Dell and others.”

It doesn’t take long on Google to find stories from all over the tech industry, like makers of social media, music streaming platforms, file sharing apps, and  software development tools. Business leaders are competing to show the biggest boost to the bottom line from things like:

  • Directly swapping cloud services for bare metal – and saving millions of dollars a year, in the biggest cases.
  • Architecture that modern hardware makes possible, like running Kubernetes on managed servers rather than in the cloud.
  • Abandoned “full cloud” plans that couldn’t make the business case stack up. 
  • In-house toolsets that show developers how expensive code will be to run in the cloud as they write it.

Stories like these keep coming. If you’re making infrastructural or hosting decisions – or looking to cut costs – in 2024, leave behind old ideas about the cloud being the safest option. It’s time to take a clear-eyed view of all your options. The landscape has changed.