37Signals on Leaving the Cloud

The key reason for the shift back to on-premise is cost, and the change in economics over the past five years.

Cloud migration has accelerated over the past two years, as more businesses look to move their operations either partly or fully onto cloud servers. While there are plenty of benefits to migrating to the cloud, some businesses are finding the grass is not as green as they were sold when they originally packed up and moved, especially when it comes to cost. 

In a podcast episode, 37signals partner David Heinemeier Hansson and director of operations Eron Nicholson discussed the company’s move away from public cloud and back to on-premise. This was published after Hansson’s blogpost on the subject, which received a lot of traction on social media. 

The key reason for the company’s shift back to on-premise is cost, and the change in economics over the past five years in regards to running on-premise storage and compute. “Like the hype cycle for cloud is now a decade plus old. And I think there are a lot of other companies like ours who are starting to have doubts as to whether the all cloud all the time is the right answer. They keep getting these astronomical bills,” said Hansson. 

Hansson disclosed that 37signals currently has a cloud budget of around $3 million a year, which is an enormous figure for a medium-sized organization that does not have a huge amount of traffic. Even though this comes with a lot of services such as database, search, and analytics, in terms of raw cost of materials, the difference is rather large.

See also: Why is Cloud Repatriation Happening?

Illustrating the point, Hansson said that the cost of 12 terabytes of N V M E storage, which the company uses for its Hey email service, was once “tens of thousands of dollars of exotic equipment that had to be bought from specialist vendors, like really enterprisey esoteric stuff,” but only cost the company $3,000 in 2022.

This divide in the price of storage, CPU, and GPU and the comparative costs of renting these servers from a cloud storage provider is very acute for businesses that don’t have fluctuating amounts of traffic. For 37signals, traffic is consistent and there is not a day when it sees over three or four times the normal traffic, unlike Shopify or Shein, which have specific days like Black Friday where they might have over 50 times the normal traffic. 

In these cases, having a cloud server to control the massive amounts of traffic is a good thing, as it can keep the business operational at the most important times. Hansson notes that being fully on cloud with the launch of Hey was a good thing, as there was ten times the expected usage within the first three weeks. 

See also: You’ve Migrated to the Cloud, Now What? 4 Critical Cost-Saving Practices

Speaking of the move from the cloud, Nicholson said it would be a multi-year process: “It’s going to involve standing up basically similar sized resources as what we have in the cloud. And then making a slow calculated move to turn individual services off one at a time and make sure that they work and make sure the monitoring is set up and our customers are happy. And that should take months if, if not years to move everything off that we moved on.”

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