AWS claims customers are packing bags and heading back on-prem

Cloud behemoth AWS says it is facing stiff competition from on-premises infrastructure, which is a turnaround from its once-proud boast that all workloads would eventually move to the cloud.

In a summary of evidence given to UK watchdog, the Competition and Markets Authority (CMA), AWS denies that customers face any difficulty in switching from its platform. And to demonstrate this, AWS lists examples of customers returning from the cloud to run their IT on site.

In the CMA report, AWS says: "building a datacenter requires significant effort, so the fact that customers are doing it highlights the level of flexibility that they have and the attractiveness of moving back to on-premises."

You read that correctly – customers are finding that moving their IT back on-premises is so attractive compared with remaining on AWS that they are prepared to do this despite the significant effort involved. Hardly a resounding endorsement of the benefits of the cloud.

AWS also says that customers may switch back to on-premises for a number of reasons, including "to reallocate their own internal finances, adjust their access to technology and increase the ownership of their resources, data and security."

In fact, there have been a growing number of cases of companies moving some or even all their workloads back from the cloud – so-called cloud repatriation – and cost often seems to be a factor.

One notable example we have covered before is Basecamp project management developer 37Signals, which decided to go back to on-premises infrastructure after being presented with a $3.2 million cloud hosting bill. By the end of last year, the company claimed it had already made savings of $1 million.

Moving back home...

But is AWS really facing a big challenge from on-premises infrastructure in the UK, or is this just an evasion tactic to deter the regulator from proposing potentially unpalatable remedies? We asked the company if it could tell us how many of its customers had moved back from the cloud.

AWS responded by quoting figures which indicate that of all UK organizations that have switched from cloud infrastructure providers, 29 percent had switched to on-premises services. This, however, includes customers of all cloud providers, and doesn't put specific numbers to those doing it.

Andrew Buss, IDC senior research director for EMEA, told The Register that while cloud repatriation is becoming more common, "we'd put the share of companies actively repatriating public cloud workloads in the single digit percentage sphere."

Organizations are more likely to move to another public cloud provider if the incumbent is not meeting their needs, he said, and they have got more used to the cost economics of public cloud and can compare it to the long-term costs of running private IT infrastructure.

A more important trend in EMEA is that over half of companies still have a preference to deploy workloads into their private IT infrastructure, Buss added, and only around 12 percent are public cloud first.

However, the IDC analyst noted there is a growing trend for enterprises to favor private cloud infrastructure that is standardized and off-the-shelf, such as Azure Stack, AWS Outposts, or VMware Cloud Foundation.

The latest report [PDF] is a summary of the CMA's hearing with AWS as part of its investigation into the UK cloud services market, probing whether the biggest cloud players engage in practices that may limit customer choice.

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In it, AWS claims that some customers tend to use a single cloud provider such as itself because it may be cheaper operationally and easier to maintain and run their workloads that way. Certain customers may not be able to justify investing in staff training to use an alternative cloud provider, it says, which sounds like an admission that there are some barriers to operating a multi-cloud environment.

In fact, AWS at one time seemed to be discouraging customers from using any other cloud provider. Way back in 2016, then CEO Andy Jassy spoke against the idea, telling attendees of a conference that if they wanted to go multi-cloud, they would have to standardize on the lowest common denominator, and other platforms were nowhere close to the same level as AWS.

Now AWS says in the hearing report it "has determined that supporting customers to multi-cloud is the stronger commercial incentive," but goes on to caution the CMA on proposed remedies involving data transfer and interoperability, saying such efforts "may simply result in an unhelpful de minimis standard".

The cloud giant also took a swipe at Microsoft for its cloud licensing restrictions on key applications, and defended the practice of Committed Spend Agreements (CSAs), whereby customers get a discount for agreeing in advance to a certain level of use – identified by the CMA as a potential way of discouraging customers from switching.

AWS said that without CSAs, there would be less predictability in its own revenues, which would likely make the company more cautious in how it invests in the business.

The CMA's next provisional report on the cloud market is due in September or October, and its final report is expected in April 2025. ®