Shifting toward a third-party cloud provider such as Amazon Web Services, Microsoft Azure, or Google Cloud was billed as the answer to enterprise computing needs. It was supposed to deliver almost unlimited scalability, maximized uptime, redundancy, faster deployments, and reduced infrastructure management for companies.
The prevailing hope was that shifting to a third-party cloud provider would lower IT and IT management costs. Did the cloud deliver on that hope? Mostly. And for a time, fully. However, today, many companies are withdrawing some functions and operations from the cloud. Why? Costs.
It’s time you understand exactly why cloud fees are increasing, and what the new answer is to reduce IT budgets.
The Rising Cost of Third-Party Cloud Solutions
Like so many things in life, the devil is in the details. That’s what enterprise organizations have discovered about using third-party cloud providers. Yes, there are a lot of great upsides, but cost savings is no longer among them. The reason comes down to fast and frequent increases in cloud egress fees.
Understanding Cloud Egress Fees
Uploading data to the cloud is free — but it’s a trap. They want you to upload massive amounts of data and make the cloud your central storage and computing solution. Why? Because of a not-so-little thing called egress fees. While uploading data is free, downloading (egressing) is not. You pay for every bit of data that is drawn from the cloud. It’s among the ways third-party cloud providers make money, by charging you to actually access your data.
There’s also a more nefarious reason to charge these fees. They become a cage. The use of the cost to remove your data from a competitor or an on-premises solution as a fear tactic. They want companies so shocked by the cost of removing their data that they remain locked in as customers for life.
Why Enterprises Are Fleeing the Cloud
Bill Shock
Long-term operational costs, including migration fees and ongoing expenses, are higher than estimated.
Egress Fees
This is among the highest unexpected costs of the cloud.
Predictable Workloads
Dedicated hardware is often a superior solution for consistent, repetitive workloads, including ERP systems, SQL databases, virtual desktops, identity storage, and others. The cloud is more suited for highly variable workloads.
Compliance and Data Sovereignty
Healthcare, finance, manufacturing, defense, and government use dedicated hardware to meet stringent regulatory requirements.
Yes, moving away from a third-party cloud solution can come with a bit of sticker shock. But you can also see that staying in the cloud comes with several undesirable costs and potential concerns. Companies need to examine the five-, ten-, and fifteen-year ROI, rather than focus on a short-term IT hit. Understand that third-party cloud solution providers don’t want you to think or play the long game; however, that’s exactly what successful enterprise companies must do to protect their competitive position.
The Growth of Data Volume
AI, business analytics, data recovery, and high-performance computing all use massive amounts of expensive gigabytes. In some scenarios, these recurring costs exceed the cost of owning or collocating physical IT infrastructure. This leads to a phenomenon known as cloud repatriation. That is the shift enterprise clients are making away from fully cloud-based solutions toward hybrid architectures that combine third-party cloud benefits with a dedicated on-premises or secure off-site IT infrastructure.
This shift has changed a fundamental IT question. For years, CISOs and IT leaders were asked whether they should move their company to the cloud. Now, the better question is which workloads belong in the cloud, and which are most cost-effective to run elsewhere.
Suggestions for a Hybrid Solution
- Mission-critical workloads remain on dedicated infrastructure
- Elastic or unpredictable workloads use third-party cloud solutions
- Sensitive or regulated data stays on premises
- Disaster recovery and backups continue on third-party cloud systems.
These suggestions are, of course, generalizations, and each company needs to evaluate its own needs, challenges, and uses. That said, the suggestions provide a clear starting point for optimizing performance and costs.
Infrastructure Requirements for Enterprise Cloud Repatriation
Any enterprise considering a hybrid migration away from a third-party cloud provider will require several foundational infrastructure components.
Essential IT Infrastructure for Repatriation
- Enterprise rack-mounted servers
- Redundant storage systems
- Virtualized platforms
- High-speed switching
- Redundant firewalls
- Carrier-diverse connectivity (Fiber optic, cable, LTE, Satellite)
- Cross-connects to cloud providers
- Backup power
- Precision cooling systems
- Environmental monitoring
- Physical security controls
- Remote support
- Disaster recovery
- Structured cabling
- Network segmentation
- Centralized monitoring and management
Colocation Infrastructure Costs — Are They Lower Than a Full Cloud Solution?
The simple answer is this: a colocation/hybrid solution will be more affordable. The reason makes sense. With colocation, the equipment is owned by the colocation provider. With a third-party cloud service, everything is fee- or rental-based, creating increasing costs in perpetuity.
The idea that colocation is more affordable is widely accepted. Few, even third-party cloud providers, can disagree. Of course, a few things are absolute. There are definitely scenarios and enterprises that would run most cost-effectively on a third-party cloud solution. Also, some companies could argue they are comfortable with ongoing fees rather than taking on IT needs in-house. Ultimately, you need to work with an IT infrastructure provider to find the best answer, but as a starting point, if you’re looking for ROI, colocation is the way to go.
Colocation offers advantages beyond cost as well.
Beyond Dollars and Cents: Advantages of Colocation
- Lower network latency
- Predictable application performance
- Greater IT infrastructure visibility
- Hardware customizations
- Improved resource utilization
- Simplified compliance reporting
- Direct control over the upgrade/maintenance schedule
- Reduced dependencies on third-party partners
8 Tips for a Cloud Repatriation Strategy
Moving from a third-party cloud solution to a colocation or fully on-premises infrastructure solution requires strategizing. Here are the best practices for planning your move.
- Identify workloads with consistent utilization.
- Measure monthly cloud egress costs
- Calculate total commute expenses over the years
- Evaluate compliance needs
- Assess latency-sensitive applications
- Determine which services benefit from cloud elasticity
- Design secure connectivity from cloud and colocation environments
- Implement phased workload migration
What many companies find is that only a portion of their enterprise environment needs to shift to a colocation model to achieve cost savings.
Ready to Future-Proof Your Enterprise With a Cloud Repatriation Strategy?
Cloud repatriation is a significant financial opportunity and is often essential to future-proofing enterprise operations. Planning and deploying the best approach to achieve it requires working with an expert. Matrix-NDI solves the challenges of your business operations by unlocking the full ROI of your technology investments. We design and install networks built for maximum speed and perfectly matched to bandwidth demands.
Why Work With Matrix-NDI?
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Contact Matrix-NDI to get started. Let’s build smarter, safer, more connected spaces — together.
