This year, many companies migrated their work from cloud to on-premise. The notion that the public cloud saves money because a company only pays for what it uses is only theoretical and, in reality, an illusion. In reality, companies tend to buy capacity rather than actual time used. So companies are in a situation where they are asked to either take or pay, similar to the private cloud or on-premises solution.
What is driving reverse cloud to on-premise migration?
First, the cost of cloud services is not falling as fast as it used to. Years ago, it seemed that the public cloud cost would continue to fall, and economies of scale would allow hyper-scale cloud platform providers (AWS, Google Cloud Platform, and Microsoft Azure) to operate services at margins lower than the cost of on-premises solutions.
However, there has been much speculation that hyper-scale cloud providers would eventually start making higher profits and diminish economies of scale. Both of these seem to be the case now. This is not surprising, as we know that it is rational for companies to prioritize profitability.
Second, the total cost of public cloud increases because of the additional services or features, data feeds, and costs that the three hyper-scale cloud providers charge for the real estate that resides on their platforms. This is because they are offering valuable new services that they charge for. They also now charge for data throughput.
Although public cloud platforms offer significant benefits not previously available to businesses (e.g., data management and AI tools), these additional services cost more. The cost is starting to be felt. Increasingly, companies that have migrated large inventories to the cloud find that their budgets are harder to manage in a public cloud environment, and they are spending far more than anticipated.
So, they are trying to get their costs back under control by moving a lot of their work from cloud to on-premise and private cloud solutions. They realize that they can still take advantage of many (but not all) of the benefits of the public cloud platforms but can do so at a lower and more predictable cost than in the public cloud arena.
Hybrid Clouds - Solution to the reverse cloud migration
The reverse migration discussed above happens mostly in larger companies. Smaller enterprises and SMBs often find it more convenient to use a pure public cloud. It makes sense because it allows them to achieve greater economies of scale than they would otherwise be able to.
But for larger enterprises looking to move their work back from the cloud to on-premise and private cloud solutions, the fortress-like behaviour of hyper-scale cloud platform vendors and the development of barriers to switching make porting to private or other cloud platforms difficult. This restriction on portability causes significant friction.
As enterprises now seek to control costs and operate at a lower and more predictable cloud price point, we are seeing enterprises deploy multiple private cloud platforms and on-premises solutions, setting themselves up in a hybrid world rather than choosing a full public cloud alternative.
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