Tracking the change in enterprise attitudes to hybrid cloud

Changes in opinion

Russell Macdonald, chief technologist at HPE, tells Computer Weekly hybrid cloud used to be viewed as a “compromise” by enterprises.

“By compromise, I mean that customers would migrate workloads to public cloud, but would reach a point where they had migrated all they could and there were still business applications and data that remained on-premise that they thought they could retire or replace. So that was the ‘hybrid cloud compromise’ – some cloud-native IT, but also some traditional on-premise IT,” he says. 

“But now things have changed. Customers are realising they can do more modern and digital IT on-premise using the latest technology, which can be more cost-effective for certain use cases than running it in public cloud.” 

Now hybrid cloud is pivoting, says Macdonald, from “compromise to conscious choice” for a lot of enterprises that are, in his words, “looking for a more balanced approach and consciously choosing to place workloads on-premise rather than it being a compromise”.

As alluded to by Macdonald, cost is another reason why the need for hybrid cloud has proven to be more enduring than enterprises may have first thought. 

Public cloud has always been marketed as being less costly than on-premise IT because enterprises only pay for what they use, but the more data companies move to the cloud, the more it costs to store and process, for example.

“Once you get beyond dipping your toes in the water [with public cloud], things do get complicated. Yes, there’s a low cost barrier to entry for many cloud services due to free-tier pricing, but once you start getting into the terabytes and petabytes and production scale, it can be really expensive,” adds Macdonald. 

“What we found during the energy crisis last year was companies that increased their adoption of public cloud during the Covid-19 coronavirus pandemic suddenly realised you can’t sweat an asset you don’t own. And the bills kept on coming and they kept on getting bigger. So, at a time when they wanted to tighten their belts, there were no levers left to pull to reduce their cloud costs,” he says.

Cloud about-turn

This realisation has prompted many enterprises to re-evaluate their cloud strategies and start taking steps to “repatriate” workloads out of the cloud and back on-premise, according to research from digital workplace platform provider Citrix.

The company polled 350 UK IT leaders about the current state of their hybrid cloud strategy, a quarter of whom (25%) said they had already moved at least half of their cloud-based workloads back on-premise – or were considering doing so.

Meanwhile, 93% of participants in the poll said they had been involved in a project in the past three years that involved some element of “cloud repatriation”. 

A third of the survey participants (33%) name-checked security issues and high project expectations as the top reasons for wanting to row back on their public cloud migration plans, along with unexpected costs, performance issues, compatibility problems and service downtime.

On the cost side of things, 43% of IT leaders said moving to the cloud had ended up being more costly for their organisation than expected, although 54% said migrating workloads off-premise had made their organisations more “financially predictable”.

Even so, the IT leaders who participated in the poll said they would recommend to the CIO that they pursue a hybrid technology strategy that is “mostly cloud and some on-premise IT”.

Speaking to Computer Weekly, Calvin Hsu, president of product management at Citrix, says the survey results highlight that the C-suite’s view of hybrid cloud is changing. 

“IT organisations are realising that hybrid cloud is not just a halfway house on the way to cloud – hybrid cloud is in fact the desired state. That means thinking about hybrid cloud as a strategy, not just a phase you go through”

“IT organisations are realising that hybrid cloud is not just a halfway house on the way to cloud – hybrid cloud is in fact the desired state. That means thinking about hybrid cloud as a strategy, not just a phase you go through,” says Hsu. “Many CIOs have shifted their directives from ‘cloud first’ to ‘cloud smart’, and are treating each workload as its own business case.” 

And these shifts have been prompted by the learnings IT leaders and the C-suite have accrued while trying to go “all-in” on public cloud – and realising the costs involved are much higher than expected, adds Hsu.

“The elasticity and pay-as-you-go flexibility of cloud comes at a cost, and IT and finance leaders are realising that workloads that are very predictable are not a good fit for cloud over time.” 

A high-profile example of an organisation that has undergone a reverse cloud migration of this sort is web software company 37signals, the maker of web-based project management software Basecamp.

The firm’s co-founder and chief technology officer (CTO), David Heinemeier Hansson, has published numerous blogs since October 2022, when he went public with the company’s plans to exit the public cloud after more than a decade of using a mix of Amazon, Google, Kubernetes and “bare virtual machines” to host its services. 

“We’ve seen all the cloud has to offer, and tried most of it. It’s finally time to conclude: renting computers is (mostly) a bad deal for medium-sized companies like ours with stable growth. The savings promised in reduced complexity never materialised. So we’re making our plans to leave,” he wrote in his first blog on the topic in October 2022. 

At the start of 2024, the company confirmed it had succeeded in moving seven of its major applications out of the cloud, including its born-in-the-cloud HEY email service, without any disruption to its user base. It also further revealed that AWS was charging it $300,000-$400,000 in egress fees to leave its platform.

However, according to 37signals, the company’s decision to exit the cloud will save it $7m over the coming five years.

“We’ve seen all the cloud has to offer, and tried most of it. It’s finally time to conclude: renting computers is (mostly) a bad deal for medium-sized companies like ours with stable growth”

“They were all-in on cloud and then decided as a medium-sized software company they didn’t have a [big enough] spend with AWS [$3.2m a year] to negotiate a better deal,” says HPE’s Macdonald, picking up the story. “The co-founder and CTO just went out and bought $600,000 worth of servers and completely repatriated everything.” 

37signals completed its repatriation in June 2023, and Macdonald says more and more enterprises are reaching similar conclusions to Hansson about their company’s own cloud spend.

“[We’re] starting to see more stories like that where people who’ve got the [data] volume, and have been in it for a while, are starting to say [cloud] is not [always] the cheapest way of doing compute,” says Macdonald.

Mix and match

It remains to be seen how many will ditch cloud completely, as in 37signals’ case, or make the “conscious choice” to opt for a hybrid cloud setup instead. 

According to Citrix’s Hsu, that decision will be specific to each enterprise and largely dictated by the nature of the workloads they run, in terms of whether they are prone to “peakiness” or are generally more stable and predictable on a day-to-day basis. 

“The elasticity and pay-as-you-go flexibility of cloud comes at a cost, and IT and finance leaders are realising that workloads [that] are very predictable are not a good fit for cloud over time,” says Hsu.

“Contrastingly, use cases like seasonal workers, mergers and acquisitions, geographic expansion, and the like are near impossible for on-premise to absorb.” 

He continues: “The key to success going forward is to invest in [technologies] that inherently offer hybrid cloud flexibility so that IT can manage both on-premise and cloud workloads in a unified manner. The unified control of on-premise and cloud workloads is a critical piece to strategically adopting a hybrid cloud strategy.”