Recently, a statistic has been sparking debates about the choice between public and private cloud infrastructures. According to the 2024 CIO survey by Barkley, a surprising 83% of enterprises plan to move their workloads back to private clouds. Michael Dell, CEO of Dell Technologies, remarked that these findings were “not surprising.” Similarly, the cloud analysis firm IDC has observed a similar trend, reporting that 70% of enterprises are shifting their workloads back to on-premises or hybrid cloud environments.
This raises the question: what is driving this migration back to private clouds?
The Advantages and Disadvantages of Public Clouds
Public clouds, operated by third-party service providers, have become especially popular among startups and small to mid-sized companies. The main reason for this trend is that public clouds reduce entry barriers and initial costs. Businesses using the public cloud avoid the need to invest in physical hardware and an in-house IT team to manage it. Instead, the public cloud infrastructure is shared among many companies, providing the best economies of scale, and eliminating the need for a large upfront investment. Additionally, public cloud infrastructures offer quick, on-demand scalability. Due to its pay-per-use model, the public cloud can quickly adjust to varying workloads without requiring companies to commit to physical resources.
However, the public cloud model doesn’t come without its downsides. While public clouds have robust security measures in place, their shared infrastructure can become a point of concern for industries handling sensitive data, such as financial institutions. The shared nature of public clouds inherently increases the risk of unauthorized access or data breaches, making them a less attractive option for companies managing confidential data.
Additionally, public clouds offer limited control for businesses looking to establish specific configurations and data management protocols. In a shared cloud environment, companies must adhere to standardized configuration protocols set by the service provider, which can significantly limit customization. For industries and companies that require a tailored infrastructure, this lack of control can hinder their ability to optimize configurations for unique workflows or to meet regulatory requirements.
The Repatriation Trend: Why Public Clouds Are Being “Kicked to the Curb”
What is Repatriation?
Repatriation refers to the process of moving applications, services, and data from public clouds to on-premises or private cloud infrastructure. This trend is part of a broader industry shift away from public clouds toward hybrid multi-cloud IT strategies.
Reasons for the Cloud Repatriation
Initially, many applications were moved to the cloud to take advantage of its flexibility and rapid deployment capabilities. However, over time, it has become clear that public clouds don’t always provide cost savings at scale. As businesses mature and their need for rapid scalability decreases, public clouds no longer offer the same cost benefits. The commoditization of hardware over the past years, coupled with price declines, has made private clouds a more cost-efficient solution for running workloads.
In fact, 37signals has left the public cloud, opting to build their own infrastructure. David Heinemeier Hansson estimates annual savings of $1.5 million, signaling that the public cloud may not be the cost-efficient solution for medium to large enterprises.
Additionally, according to the IDC Cloud Pulse 4Q 2023 survey, close to half of cloud buyers experienced unexpected cost overruns, with 59% anticipating similar overruns in 2024.
Another widespread concern with public clouds is vendor lock-in, as businesses risk becoming overly dependent on a specific provider. Since migrating data and applications to another platform can be complex, companies may become vulnerable to sudden price increases from their public cloud provider.
This vulnerability is exemplified by Broadcom’s recent acquisition of VMware has resulted in a shift to a subscription-based licensing model. This change has led to significant cost increases for organizations, with some of them experiencing 2x to 5x increases in VMware renewal fees.
Another factor driving businesses away from the public cloud is the advent of Artificial Intelligence (AI). While public clouds can handle AI workloads, the high costs make them less appealing for compute-intensive AI applications. As a result, many companies are opting to develop AI systems in-house. According to IDC, this trend is expected to contribute to a 10% increase in hardware infrastructure sales this year, fueled by the growing demand for AI solutions.
The Case for Private Cloud Solutions
Private clouds are built exclusively for a single organization. With data storage customized for a single company, private clouds assure higher levels of security.
Another significant advantage is control. Private clouds allow organizations to manage their data configurations fully. Companies have the freedom to customize and optimize their infrastructure without external constraints, making private clouds the perfect solution for businesses that require greater control over their applications or handle sensitive data.
In terms of costs, private clouds can initially seem more expensive than public clouds, especially considering the upfront investment in hardware and infrastructure management. However, as hardware prices continue to decrease due to commoditization, private clouds have become a more cost-efficient solution in the long run. Open-source private cloud solutions can further help mitigate these costs by reducing software expenses and providing flexible customization options.
One downside of the private cloud is the setup and data migration process, which can be both costly and time-consuming. However, organizations such as Kubermatic offer cloud migration services, developing an exit strategy that meets each business’s specific needs, thereby simplifying the transition to a private cloud environment. Furthermore, Kubermatic Cloud Stack (KCS) simplifies and improves the management of private cloud environments. It addresses some of the common challenges associated with private clouds, such as setup and data migration, by providing a more unified and flexible approach to cloud infrastructure.
Recently, Kubermatic implemented KCS for a telecommunications client that was facing significant cost concerns after VMware’s acquisition. By implementing KCS, this telecommunications business was able to adopt a more flexible and cost-effective solution. They improved their customization and integration capabilities, reducing vendor lock-in and allowing integration with other products. This shift not only improved their operational efficiency but also offered better control and adaptability in managing their private cloud infrastructure.
The Main takeaways
For small companies or startups looking for on-demand scalability at a lower cost, the public cloud may be the ideal choice. However, at scale, the public cloud can become cost-prohibitive. If your enterprise deals with large data volumes, sensitive information, or needs greater control over data and configurations, a private cloud is more suitable.
With companies like Kubermatic, the transition to a private cloud is smoother. By leveraging open-source components, KCS can offer seamless cloud infrastructure entirely with Kubernetes. This approach simplifies operations and integrates Kubernetes with virtualized workloads, enhancing networking and storage capabilities. Kubermatic Cloud Stack (KCS) ensures efficient cloud adoption and scalable management, streamlining your infrastructure.
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