CRN Deep Dive: The small but growing trend of cloud repatriation

How this new trend is impacting Australian partners.

Public cloud spending is on the up and up with Gartner reporting US$723.4 billion will be dropped this year on the infrastructure, a nearly US$200 billion jump from the year prior.

AWS, Microsoft and Google recently reported billions and billions of dollars worth of operational and sales growth for its first quarter this year.

While the numbers look good for the cloud giants, there is a trend that is growing in the background: cloud repatriation.

Cloud repatriation is simply moving workloads, data and applications from the public cloud onto either a private cloud or on-premise environment.

An Adapt study from 2023 shows that 61 percent of organisations are considering repatriating off the cloud.

This is a relatively new trend, with commentators noting its only made waves in the past 18 months. But will it become the norm?

Repatriation might seem like a harsh negative word, that besmirches the name of public cloud, but Angela Logan-Bell, head of sales for cloud at Interactive uses a kinder word: rebalancing.

“It's a more considered approach to right application in the right location,” Logan-Bell said.

She explained how organisations that had a “thundering focus” into public cloud may have prematurely bought into the dream.

“There are clearly some customers who have either gone down the path and said it's not fit for every application, because there's some very hungry applications ourselves,” Logan-Bell said.

When public cloud came into the foray in the early 2000’s via AWS, there wasn’t a plethora of solutions like there is now.

Hamish Ridland, head of cloud at Orro explained that the repatriation is more about customers having options.

“There's the early adopters of the cloud that’s been a pretty well worn path for the last 10 years with SaaS, PaaS, infrastructure, server and data centre, and there was that need to just go somewhere up that continuum,” he said.

“As time's worn on some customers, it's not necessarily a linear ladder that customers are going on... There's options that customers have now that they didn't have 10 to 15 years ago.”

Speaking to his customers, Adam Centorrino, CEO at Centorrino Technologies said close to 30 percent are concerned about cloud costs as a whole.

From those customers, Centorrino said between 60 to 70 percent are looking at optimising their current cloud offering.

“Whereas the remaining kind of 30 to 40 percent are talking about repatriating that stuff back or finding a more efficient way of doing it, which may not involve cloud,” he said.

Why is repatriation happening?

Data sovereignty, AI, and cost are some of the factors influencing a company’s decision to move off public cloud.

But cost has been a major factor for those organisations who are done with the public cloud.

Leon Scott, national practice manager for data centre, Data#3 explained that many pandemic-era lift-and-shift deployments are now under FinOps scrutiny.

“Variable usage charges, egress fees and commitment discounts reveal workloads that would be cheaper on dedicated equipment,” he said.

It also comes down to who is making technology buying decisions. In some organisations, as the technology buying decisions has moved from CIO and CTOs back to CFOs, the first thing the financial lead will do is cut costs.

“More technology decisions are being shifted to the CFO again, whereas they're no longer with the CTO or the CIO,” Centorrino said.

“Given the CFO is back looking at these things. What we're seeing is them looking and going, ‘hang on a second, I was buying this piece of tin and I could depreciate over a five or seven year period, if necessary, and get x return on investment’.”

Centorrino also highlighted the never-ending cost rises from cloud providers.

“Some of these costs rises we've seen are quite substantial. We've seen a10 percent [increase] in one go. We've seen twice a yearly cost rises from some of the vendors.

"They're substantial, they're challenging, and CFOs to some extent and organisations to some extent, can't figure out why is their price rising so much and why does it need to rise?”

Partner opportunities

For those partners looking to jump on this trend, Logan-Bell at Interactive recommends that they have deep expertise in several key areas and avoid being generalists.

“For us, what is really proving to resonate is the fact that for the customers that have an environment that is hybrid. The ability to manage all those different environments has been a real key to our conversations,” she said.

“The ability to not be a one trick pony whilst having some deep expertise in certain areas is more critical than ever.”

Logan-Bell also noted that this is a “brilliant time” for Australian partners to establish their capabilities in the areas where they feel they have real strengths.

“Leaning into what organisations that they line up with well in terms of size and focus areas. To make sure that that they can provide that surety to that organisation, that they're going to get what they need in terms of outcomes and mitigate risk,” she added.

Naran McClung, head of public cloud at Macquarie Cloud Services said partners need to get “dirty hands and real-world experience.”

He said, “Speak openly with customers about current and past projects. Be clear and transparent, and encourage satisfied customers to tell their stories first-hand. Repatriation isn’t new, but it is growing in demand.”

Risks involved

While some organisations begin their cloud repatriation journey, partners are concerned it may impact their bottom line – or even reputation.

Centorrino at Centorrino Technologies explained they had a large customer that migrated to cloud then decided two years later that they wanted to repatriate.

"We then repatriated them back to on prem, but it means we lost the managed service contract to manage that cloud and also the licensing surrounding that,” he said.

“There are absolutely both financial, reputational and overall sentiment challenges that occur as a result of these things.”

In terms of reputational challenges, Centorrino highlighted a few factors. The first being blamed for giving poor advice.

“The first is: ‘you recommended us to go the cloud, so it's your fault that you know it's unreliable’,” he said.

“We're trying to be a good partner to the vendor, and the vendor is telling, yes, move to cloud. You recommend that the customer does that, and then the vendor jacks up the price over the next year or two, and the recommendations that you put forward look like they're probably self-serving.”

Secondly, it may be a loss of business as end users may want an on-prem based specialist.

“You're tarnished with ‘you're the cloud company and we no longer want a cloud company, we want someone who specialises in on prem or other types of infrastructure’.”

What’s next?

Repatriation – or realignment if you take Interactive’s stance – may be a current trend, but cloud adoption is still strong.

If anything, Ridland at Orro said customers will optimise for their public cloud environments.

“There are more tools in the disposal to maybe cost optimise and optimise for cloud than there ever was, and that may not necessarily change it.

“It just gives you far more options of where you place it. I don't see that being a massive let's back the trucks up, and let's bring them all home,” he said.

Centorrino does not think it will accelerate beyond where it is now.

“It'll be a slow and steady thing and for some organisations, they will continue to migrate to cloud,” he said,

“There are still more people going to cloud than there are coming back from it. The overall net is still that cloud will increase, but people that go there are not necessarily there forever.”

While cloud repatriation may not be picking up speed anytime soon, Logan Bell is just shocked that she’s talking more about infrastructure now than when she did working at Rackspace Technologies.

“I never thought, having been in a public cloud focused partner like Rackspace, had become, that I would start to talk about infrastructure again,” she said.

“But I've talked more about infrastructure in the last year for about seven or eight years.”