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

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:

AWS said that it faces competition from on-premises IT and that analyst reports suggest that cloud services only make up around 15% of the IT services market as a whole. AWS said that the perception that once customers move to the cloud, they never return to on-premises is not correct.

AWS said that its cloud business faces competition from on-premises IT and provided examples of customers moving from the cloud back to on-premises IT solutions.

AWS noted that building a data centre requires significant effort, so the fact that customers are doing it highlights the level of flexibility that they have and the attractiveness of moving back to on-premises

AWS said that customers may switch back to on-premises for a number of reasons, including to reallocate their own internal finances, adjust their access to technology and increase the ownership of their resources, data and security.

AWS said that perceived benefits of on-premises may include closer control of assets and proximity.

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.