Are Organizations Moving from Cloud to On-Premises? AWS Says Yes; Gartner Says It's Not Widespread

• By David Ramel
• 09/30/24

Is there a widespread backlash to cloud computing that sees organizations moving their IT operations back to on-premises data centers? The longstanding debate over that very question was rekindled by recent comments from AWS about cloud repatriation among its customer base.

The comments came in a "Cloud Services Market Investigation" from the UK Competition and Markets Authority (CMA), published in July.

AWS testified in a hearing about cloud competitiveness and other matters, with the investigation report listing comments including:

That spawned many news articles in the IT industry as organizations were faced with another reminder that their big cloud bets may not have been the sure things they thought. The AWS comments were a reminder because of the ongoing, years-long debate on the matter.

Recent examples include a Citrix blog post from February titled, "Research finds IT leaders are choosing hybrid cloud strategies due to flexibility, cost-effectiveness, and security."

It says: "According to a recent study by Citrix, a business unit of Cloud Software Group, 42% of organizations surveyed in the United States are considering or already have moved at least half of their cloud-based workloads back to on-premises infrastructures, a phenomenon known as cloud repatriation."

Similar notions abound, and Red Hat last year published cloud vs. on-premises guidance that provides a handy checklist of why orgs are going back to ground:

• Cost: Depending on usage patterns and workload characteristics, in some cases on-premises datacenters can be more cost-effective than cloud computing. For example, if a business has stable and predictable traffic that requires significant computing and storage resources over a long period, it may be more cost effective to invest in on-premises infrastructure rather than pay for cloud resources over time.
• Data sovereignty: Some organizations may be lawfully required to keep data within specific geographic locations, which may not be possible with cloud computing. In such cases, the organization may deploy workloads on premises to comply with data sovereignty regulations.
• Security and compliance: Some organizations have strict security or compliance requirements that are difficult or impossible to meet with cloud computing. In such cases, the organization may bring the workload back on premises where they can better control the infrastructure and security policies.
• Convenience vs. blast radius: Despite having central access to convenient all-you-can-eat products and services from a cloud service provider, the cloud operations track record shows that it increases the blast radius (or impact) for failures and outages on a global scale.
• Balancing roles and responsibilities with SLAs: The roles and responsibilities of cloud service providers and their consumers have been a key area of friction in implementing end-to-end services with service-level agreements (SLAs). While cloud providers have established high levels of separation between these roles and responsibilities, issues can arise in the operational experience of handling these responsibilities and signing off on end-user SLAs. This can create challenges that are overwhelming for all parties.
• Latency and performance: Applications that require low latency and high performance may not be suitable for cloud computing due to the inherent network latency and potential for contention with other workloads running on the same hardware. In such cases, on-premises datacenters can provide better performance and lower latency for critical applications.
• Unforeseen costs: In some cases, businesses may experience unforeseen costs associated with cloud computing, such as unexpected network transfer fees, storage costs, or licensing costs. These costs may be difficult to control or predict, leading some businesses to bring a workload back on premises.

And just last month the company Puppet published "Cloud Repatriation: Examples, Unpacking 2024 Trends & Tips for Reverse Migration," which presents both sides of the debate: "Cloud repatriation can reduce long-term cost and enhance security, but it can also increase complexity and cost more in up-front fees."

Also, just about the same time as the AWS comments were publicized, the company Mirantis published "Cloud Repatriation: Key Benefits and Essential Steps."

Clearly certain vendors are backing cloud repatriation and would like you to think it's widespread, but at least one independent research firm has thrown cold water on that.

Gartner in April published "Moving Beyond the Myth of Repatriation: How to Handle Cloud Project Failures." Two of its key findings include:

• On-premises vendors are driving a false narrative of widespread and common "cloud repatriation," in which applications are returned from cloud services to traditional data centers and infrastructure.
• Cloud projects of all size and scope sometimes fail, or are suboptimal, which may lead to a decision to pursue alternatives. Most commonly, the project conception is flawed: the application may be a poor fit for cloud services, the cost or effort estimate might have been inaccurate, or the customer might have had unrealistic expectations.

Gartner has been on this tack for a while now, having way back in 2019 published "The Top 10 Cloud Myths," one of which was:

The idea that workloads are being repatriated from the cloud is primarily wishful thinking on the part of legacy vendors who would benefit from this myth being true. The reality is that most enterprises have not moved cloud workloads back. Of those that have moved, most are not coming from cloud infrastructure as a service (IaaS), but rather from SaaS, colocation and outsourcers.

That is not to say every cloud migration is successful. However, organizations are more likely to address problems as they arise rather than abandon their cloud strategy and move applications back to their original location.

And Gartner isn't alone. Fellow research firm IDC last year published "Larger Organizations Show Greater Activity in Repatriating Compute Resources from Public Cloud," which emphasizes that while some big organizations have repatriation activities, they are typically part of a broader hybrid cloud strategy rather than a full-scale movement away from cloud services.

So take all those news articles about AWS's comments that speculate about a widespread trend with a grain of salt: Cloud spending isn't slowing down anytime soon.