6 Reasons Businesses Are Considering Cloud Repatriation

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With the advent of AI causing growing concerns surrounding security, the need for a centralized source of data, and competitors all vying for the same top spot in their niche, the cloud has been a natural response to solving these challenges. While this has been the typical move in the recent past, there has been a new trend coming to the forefront: cloud repatriation.  

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What is Cloud Repatriation?

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For starters, cloud repatriation is the process that involves the movement of data, workloads, or applications back from public cloud infrastructure to on-prem architecture, such as an internally owned datacenter or a shared facility. So, wait – companies jumped on the bandwagon to move to the cloud and are now switching back to on-prem? It’s surprising to read, but in reality, many organizations are finding the initial allure of the cloud didn’t result in the long-term ROI they had anticipated.

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While this term “repatriation” may sound new due to its growing popularity, it’s not as new as you would think. Back in 2018, Morgan Stanley predicted the hardware market would experience double-digit growth at the end of that year. The surprise comeback of hardware was leading to conversations surrounding cloud migration, rather than the actual move to the cloud itself.  

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As a result, 25% of organizations in the United Kingdom alone have switched at least half of their workloads on the cloud back to an on-prem model. This could be a trend that makes its way over to the United States, and it’s important for you to be prepared. So, why are they making the switch back?

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1. Cost Management: A top concern among organizations is money management, especially during times of economic turmoil, but this is especially true with the cloud. Cloud services have gained notoriety for their flexible and scalable options, but they have become expensive as data volume and user demand continues to grow. While the cloud has numerous benefits that are not to be ignored, the costs associated with the cloud are starting to become unpredictable, with charges that are based on usage and quickly spiral out of control. By repatriating certain workloads, organizations grasp a tighter control over their expenditures and mitigate IT operational costs.  

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2. Enhancing Performance: Some applications necessitate ultra-low latency and higher performance, which can often be challenging to maintain in a public cloud environment. For mission-critical applications where performance is crucial, on-premises infrastructure can provide the necessary speed and responsiveness. Repatriating these workloads ensures they run with minimal delay and optimal efficiency.

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3. Tailored Infrastructure: On-prem infrastructure offers a higher level of control and customization that the public cloud can’t always match. Organizations should adapt and configure their hardware and software environments to meet unique business demands. This is something that’s often constrained to a strictly public cloud setting. This level of control allows businesses to tailor solutions to their unique requirements, which can be especially valuable for complex or specialized applications.

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4. Vendor Constraints: A significant concern for many organizations: vendor lock-in relying heavily on a single cloud provider. As time progresses, organizations can run into issues with their cloud providers due to contractual obligations, the difficulty of transferring data, and proprietary technology. The more involved an organization becomes with a certain vendor, it becomes increasingly more challenging to migrate services away. One strategy for this is to plan for an exit strategy during your cloud planning phase, but since many organizations have already migrated on to the cloud, this is not possible. There are, thankfully, other strategies such as conducting a lift and shift on existing applications and accompanying databases. This is known as the process of migrating a replicated copy of the application and workload in conjunction with its data store and operating system (OS).

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5. Data Transfer Costs: Certain organizations run intense data-driven operations and transfer vast data sets to and from the cloud, known as data egress, which can incur significant expenses. This typically occurs when data leaves the network in various forms, such as text, email, etc. This can be a strenuous financial burden for organizations with substantial data requirements. Keeping your data on-prem or hosting it within a private cloud is one way to avoid significant transfer costs and streamline your data management process. Consider your data workloads and how much is necessary, as this could be an area where costs can be whittled down in a sustainable way.  

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6. Security Measures: Finance, healthcare, and government are a few industries that are heavily regulated. Data security has become a top priority for CIOs and organizations in general. In 2024, data breaches have reached all-time highs, as 1 billion victims have experienced system compromises. This number is already more than twice as high as in 2023, where there were 418 million victims of data breaches. Due to this and stringent compliance measures and standards, organizations in these sectors (and others) have begun to hunker down. While the cloud offers expansive security measures, there are organizations still facing an uphill battle against regulators. When moving sensitive data and applications back to on-prem, organizations can take better care of their data, gaining back control.

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Considerations

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If you’re not sure what the best move is for your organization – move or stay in the cloud or repatriate to on-prem – here are a few things you and your IT team can consider.  

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1. Cloud Deployment Assessment: Organizational leaders should aim to undergo an analysis of their current deployments and identify areas where repatriation could be needed. This iterative process involves understanding applications, existing infrastructure, what data is hosted within the cloud, and more.  

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2. Migration Complexity: Another consideration is how applications and data will need to be migrated. Dependencies between cloud services and applications must be identified with planning the potential reconfiguration or rewriting of these applications.

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3. Compliance: Organizations must undergo a thorough analysis of how cloud repatriation affects their ability to remain in adherence to their industry’s regulations and legal obligations. Additionally, it would be wise to conduct a review on existing cloud service contracts for any clauses related to data migration or termination that could play a role in the process.

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4. Resource Management: This is a simple step in assessing whether the IT team has the proper skills to manage, monitor, and maintain on-prem infrastructure. Resource allocation also falls under this scope, such as weighing the need for additional staff or training to support or augment the new environment.  

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5. Operational Continuity: Plan for potential downtime or disruptions and ensure a strategic plan is instituted to mitigate the impact of the transition on your operations. Ensuring a backup and recovery solution is installed will help to protect against any data loss that occurs during migration.  

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A Quote from Our Expert

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“When analyzing migrations to or from the cloud, it essentially becomes a financial thesis based on the company’s objectives. For instance, if you’re focused on protecting your EBITDA (Earnings before interest, taxes, and amortization) margins because your core valuation is based on EBITDA, you might prefer an on-premises architecture. This is because cloud expenditure could lower your margins.

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From a cloud perspective, if controlling cash flow is crucial and you can’t afford significant capital outflows against your line of credit and/ or liquidity, a clean cloud deployment might make sense. Additionally, a hybrid cloud model could be beneficial, where some applications and workloads are in the cloud, especially if you’re leveraging serverless architectures and data buckets for file and blob storage.

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When conducting a cost analysis, consider the Total Cost of Ownership (TCO) over a 5-year period. For example, if your total cloud costs are $40k per month ($480k per year), over 5 years, that would amount to $2.4M. You might be able to build a similar solution for $900k in a collocated data center. However, remember that additional team resources and maintenance costs could push you over the $2.4M that the cloud might cost.

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Ultimately, the details matter when doing financial modeling for an on-premise vs. cloud analysis and that is why you have DataStrike!”

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- Carlo Finotti, SVP of Service Delivery  

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Conclusion

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It’s apparent that both the cloud and on-prem infrastructure have discernable benefits for organizations. Many businesses have felt the need to migrate back to their previous on-prem model to gain back control of their data, leverage a better model of cost management, optimize performance and latency, avoid being stuck in the middle of a vendor contract they cannot escape, reduce their data, and enhance security measures to adhere to their industry requirements. Be on the lookout, as this may become increasingly popular heading into 2025 as economic indicators signal a downturn may be on the horizon.

About DataStrike

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DataStrike is the industry leader in 100% onshore data infrastructure services and enables companies to harness IT changes as a catalyst for growth. With a network of highly specialized experts, strategic partnerships with the world's biggest technology providers, and a platform agnostic approach, DataStrike provides innovative solutions and practical guidance to accelerate digital transformation initiatives and drive better business outcomes for small-to mid-sized businesses. Click here to learn more about our service offerings.

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