Why Australian companies reverse out of the cloud

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Why Australian companies reverse out of the cloud
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The initial hype suggested public cloud migrations would be one-way traffic. Data and applications would march into data centres run by hyperscale firms like Microsoft, Google and Amazon, while carriers and smaller service providers would scoop up the rest. These workloads would never return.

But ask around and it's not hard to find examples of companies that have made bold steps toward the cloud, only to backtrack when costs spiralled, connections stalled, providers crashed or for myriad other reasons.

CRN quizzed dozens of customers and IT suppliers for their stories about reversing out of public and private clouds. The examples came thick and fast (though most asked us not to publish the name of the red-faced customer organisation, for obvious reasons).

Bill shock was by far the biggest reason for the change in strategy. Other issues included internet problems, underwhelming performance, project failures, a lack of full functionality in the cloud, and also issues such as regulation and data sovereignty.

This disenchantment with public cloud – or at least with the concept of public cloud as a one-size-fits-all solution for IT – explains why the world's biggest hyperscale providers are shifting to a hybrid message. Only this week, Microsoft announced general availability of Azure Stack, a best-of-both-worlds product for customers who want to pick and choose where workloads live. AWS has a partnership with VMware, and even Google announced a tie-up with Nutanix, dipping its toe into hybrid.

Bill shock

The Commonwealth Bank revealed in June how it moved to a private cloud approach using bare-metal infrastructure based on OpenStack, after mounting public cloud costs and disillusionment with conventional virtual machines. The bank had been an early, prominent and bullish user of AWS.

Quinton Anderson, CBA's head of engineering and platform products, said there had been a growing realisation that the cost benefits of public cloud services begin to dissipate as scale increases. “Once you get past 1000 servers and you’re running at a high utilisation rate, the economics quickly flip on you and they don’t make sense."

Steve Martin, head of channels at NextDC, has seen the ebbs and flows of public and private cloud from his position inside one of Australia's largest co-location firms. While NextDC has never publicly revealed the names of its hyperscale clients, it is known to host major providers, including Microsoft, along with many Australian managed service providers and hosting companies.

"There are numerous use cases on how cloud is helping organisations to move faster, rapidly deploy new systems and drive unheralded innovation," Martin told CRN.

"However, not all workloads are ready for the cloud. In the early days, a number of businesses jumped headlong into cloud only to be hit with a bit of bill shock causing a number to re-evaluate their cloud position."

He explains that some of NextDC's partners "suggest workloads in use for less than a third of a three-year period are perfect for public cloud, while higher-use workloads could be better suited to in-house infrastructure or private cloud".

The unexpected nature of these costs – it is called bill shock, of course – can be a sharp learning curve for users. Bauer Media, for instance, told CRN's sister title, iTnews, last year how it had been caught out by developers leaving servers running in AWS. The publisher solved the problem by turning to Australian cost optimisation start-up GorillaStack, which automates the process of switching off servers.

One of the highest-profile Australian software firms to move to the public cloud was TechnologyOne, a Brisbane-based company listed on the ASX that primarily serves local government.

The company was named AWS technology partner of the year in 2016, having taken everything to AWS after a three-day outage during the Brisbane floods in 2011.

However, in 2016 TechOne invested in its own NetApp storage after struggling to control costs due to a lack the flexibility.

NetApp deduplication and FlexClone technology led to an 85 percent reduction in production data – which was a “seven-figure saving", according to Iain Rouse, R&D group director, cloud at TechnologyOne. The four-node MetroCluster, which has 20TB of flash, 200TB for file storage and sits inside the Equinix SY3 data centre in Sydney, connects to AWS using Cisco Nexus switches.

Chris Nixon, distribution partner manager for NetApp Australia and New Zealand, said: "We are helping our customers get to the cloud with data management that seamlessly connects different clouds, whether they are private, public or hybrid environments."

Held for ransom by retrieval costs

Retrieval of data can catch users out. AWS' Glacier cold-storage product carries infinitesimal costs, currently just $0.005 per GB per month, but costs $0.036 per GB for the most expensive 'expedited' retrievals – roughly 7x the price.

Stephen Knights, managing director of Sydney-based IT firm Commulynx, pointed to an example of  "a midmarket organisation that works in the finance industry with hosted email archive and needed the data back. The vendor in question charged them US$30,000 to get their own data back."

Kevin Allan, managing director of Perth-based Probax, has seen customers "get hit with bills in the tens of thousands specifically when restoring data because both AWS and Azure charge for outbound data transfer, which a lot of businesses overlook when scoping their public cloud needs".

Safi Obeidullah, director of sales engineering at Citrix ANZ, said one customer received bill shock because "their approach was to simply move their current VMs into the cloud 'as is' and underestimated the costs because everything looks cheap at a few cents an hour".

"While I can’t go into the details about that specific organisation, we are seeing other examples of bill shock where organisations are not accurately estimating or understanding the costs involved in running services in a public cloud."

Obeidullah said these customers are not necessarily backing out of the public cloud, but reviewing their approach.

"Simply moving workloads from on-premise to public cloud 'as is' will not necessarily be cheaper on a per-workload cost basis. However in some cases, the drivers for moving to cloud aren’t just about the workload and instead about a broader organisational desire to, for example, shift away from maintaining their own data centres, which brings with it additional costs/savings. I do believe that a hybrid approach is what will eventuate for most organisations."

It's horses for courses, added David Malcolm, executive director of Network Professional Services based in Cremorne, Victoria. Software-as-a-service tends to be cost-effective and customers will stick with SaaS, but infrastructure? Not necessarily.

"Depending on scale and requirements, putting internal infrastructure in the cloud may not be as cost effective as running it in house. Although it may be suitable where an organisation prefers to outsource these services rather than retain in-house expertise.

"Some of our customers have experience where they've moved assets to the cloud, found it uneconomical, and moved back to their own infrastructure, although their SaaS apps tend to remain cloud-based, and they adopt a hybrid model."

Malcolm points to SaaS identity management tools such as Okta and endpoint protection such as CrowdStrike as being better off in the cloud, while general business systems, industry-specific databases, Active Directory, file and print sharing is often best run internally.

Next: Bandwidth bandits

Do you have your own story of a company reversing out of cloud or redefining their public cloud strategy? Leave your comments below.


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