Is Inflation Part of the Cloud Repatriation Story?
A lot of reasons have been given in support of cloud repatriation, or “cloud exit”, or whatever you want to call the trend of moving public cloud computing workloads back to on-premise datacenters. These include:
Cost
Security
Performance
Compliance
Frustration with cloud outages
Data sovereignty
Normally I would be the one here trying to shoot down most of these objections to public cloud. Here’s a case in point. But today I’d like to explore a possible cloud repatriation motivation that I haven’t heard a lot of discussion about — everybody’s favorite complaint magnet — inflation.
In the world of corporate accounting, public cloud computing spend is usually considered as an operating expense (OpEx). That’s because cloud customers usually pay as they go either through subscriptions or via consumption-based pricing, thereby avoiding the kind of large up-front investments that would be considered capital expenses (CapEx). The advantages this model gives in flexibility, scalability, and cost-efficiency are well-documented, especially when it comes to less predictable computing workloads.
But during a period of higher inflation, businesses might have an incentive to pull forward expenses to mitigate the impact of rising prices. One way to do this in the computing and IT domain is to convert ongoing OpEx — the cloud computing bills — into one-time CapEx by purchasing hardware for on-premise use. This would allow the business go lock in hardware for the next three to five years (or however long you can squeeze life out of the servers) at today’s prices. And this could be an effective hedge against possible future price increases being passed on by cloud providers.
Obviously this would not apply to all businesses. You’d need to have the cash on hand, as well as check some of the other boxes for cloud repatriation (especially the predictable-workloads one). But if you can pull it off, maybe it helps you stay more profitable for longer in a possible economic downturn.
I haven’t yet heard first-hand of any organizations factoring inflation into their cloud repatriation calculations, but maybe you have. If so, reach out and let me know!
