How many enterprises are revisiting on-premises solutions in a cloud-dominated era for better cost management, security, and performance?
In a significant development in the cloud computing industry, AWS, a leading hyperscaler, has recently acknowledged considerable competition from on-premises IT solutions. This admission counters the longstanding belief that enterprises seldom revert to on-premises systems once they transition to the cloud.
AWS’s statement emerged during a Competition and Markets Authority hearing in the United Kingdom, which scrutinized the current state of competition within the cloud market. At the hearing, AWS argued that the prevailing perception must accurately reflect the dynamics of the IT services market. This was obvious to me, and I’m unsure why it had to be said.
Keep in mind that there could be other motivations here. They may be spinning the market so they won’t be concerned with monopolistic players. Europe seems to be looking at the role of public cloud providers with a concern that they may have too much control. If AWS is pointing to traditional solutions as a core alternative solution that companies are using, they are not a monopoly. No public cloud providers are at this point in the market.
A complex cloud market
This is not an AWS issue but a broader cloud market issue that should be analyzed and understood. AWS behaves pretty much like any public cloud provider, examining the market dynamics of 2025 and strategizing how to grow the cloud business best.
The trends are away from a “cloud-or-die” approach to IT. All platforms are sound architectural options, including on-premises and public cloud. It took many of us 10 years to understand this. To me, it’s just common sense.
The cloud market is inherently complex, and cloud providers often emphasize their own solutions’ cost efficiency and innovation capabilities. Nonetheless, cloud providers have denied any allegations suggesting their practices create technical barriers or impose unfair financial burdens on customers, such as egress fees or committed spend discounts. They insist that the cloud services market operates well and meets the needs of U.K. and global customers concerning pricing, innovation, and quality of service.
Despite AWS’s confidence in the competitive fairness of the cloud market, criticism has been directed toward its claims of significant competition from on-premises migrations. However, for many organizations, on-premises and private cloud solutions provide a more reliable guarantee of data sovereignty, an increasingly crucial consideration in today’s data-driven landscape.
The issues to consider
The resurgence of on-premises solutions as a competitive option arises from several factors influencing enterprise IT strategies.
Cost management. Although cloud solutions have been marketed as cost-efficient, particularly with their pay-as-you-go models, the reality can differ. Over time, the cumulative costs of cloud services are often higher than on-premises systems. This is undoubtedly the case for stable workloads that don’t benefit from the elasticity of the cloud. Companies seeking predictable expenses and long-term savings may find value in reverting to or maintaining on-premises infrastructure.
Cheap hardware. Real cheap. I pointed this out about 100 times in my last book. This means the compelling reason to leverage public clouds (cost) is tossed out the window. Storage costs have dropped at a 45-degree angle in the past 10 years, to the point that many companies are planning repatriation projects to take advantage. I’ve done a few dozen myself.
Data security and sovereignty. Regulations, such as General Data Protection Regulation (GDPR) in Europe, are causing concern for many enterprises. On-premises systems give companies more control over their data, reducing the risk of breaches and ensuring compliance with local data protection regulations.
Performance and control. Some applications require high performance and low latency, especially in industries such as finance or gaming. These systems may benefit from the proximity and control of on-premises infrastructure. This setup allows for more fine-tuning and optimization, which public clouds might not offer.
Customizability and flexibility. On-premises systems often provide more significant opportunities for customization. Enterprises with specific infrastructure needs can tailor their on-premises systems more precisely than they might be able to with generic cloud services.
Technological advancements. Recent innovations in on-premises technologies, such as hyperconverged infrastructure and enhanced virtualization capabilities, have made setting up and managing an on-premises data center more efficient.
Hybrid and multicloud strategies. Many enterprises are blending both on-premises and cloud resources to optimize their IT environments. This approach offers the benefits of both worlds: on-premises for stable, predictable workloads, and cloud for scalable, dynamic needs.
Vendor dissatisfaction. Enterprises are not happy with major cloud providers due to service outages, egress fees, or lack of transparency around pricing and service-level commitments. Businesses are rethinking their cloud reliance and exploring on-premises alternatives.
A new way of thinking
I’ve often pointed out that the IT world is moving to heterogeneity and ubiquity, meaning that no approach, cloud or on-premises, will rise to the top and become “the standard.” I view this as a good thing, as long as we’re prepared to deal with the complexity it will bring. Thus far, many enterprises have stubbed their toe on that issue.
I’m now having these conversations often, whereas in the past, it was not spoken about in polite company–and certainly not at cloud conferences. Indeed, the concepts of multicloud and optimization are seeping back into the talks at significant events, when just a few years ago, presenters were pulling those slides out of their decks.
These new conversations reveal a nuanced picture of enterprise IT strategies, where flexibility and adaptability are paramount. Organizations are increasingly discerning, weighing the prowess of cloud computing against the tangible benefits of maintaining or reverting to on-premises solutions. This dynamic landscape signifies a transformative period for the IT industry, compelling cloud providers to continuously innovate and align with customer expectations to retain their competitive edge. We’ll see what 2025 brings.
