Companies experiencing the high cost of cloud services return to colocation

by | Cloud Computing, Colocation, Colocation Consulting, Data Center Efficiency

After the initial euphoria that cloud created the truth that it is no longer cheaper is dawning on most companies. These businesses are now heading back to colocation post haste. A recently conducted survey indicates that although most companies explored the possibilities offered by the cloud, they are now not very happy with the hybrid model. Cloud service costs are quite prohibitive, forcing most of these firms back to colocation.

Hybrid Colocation

Hybrid colocation or Hybrid cloud, an offering that features a little cloud and some on-premises, was the choice of over 90% of the companies. However, the figure now hovers at 18% as the others have hastened back as the primary complaint is that app vendors make it almost impossible to operate in the hybrid model.

App vendors are insisting on lock-ins including ELAs (enterprise licensing agreements) making it very difficult for companies to continue with the hybrid model. However, interest in the cloud has not waned completely and may pick up at a more relaxed pace. Until then it is back to colocation.

Apps return to colocation

There is ample evidence to show that apps are now returning to on-premises because of the unpleasant shock companies got when confronted with the price difference. Companies had to apportion close to 26% of their annual budget for cloud computing. Most of the companies reported that they exceeded their budgets while using public cloud resources.

The primary reason seems to be that after most of the apps took off on the cloud-like Amazon EC2, but could not sustain and had to return to a more permanent abode, more so if it was a high-scaling app.

Cloud incentives that didn’t work

The ploy that cloud service providers adopt is an irresistible upfront discount until businesses realize that the exercise is very expensive and not affordable. The transition of apps to reserved instances is more expensive than what the firms imagined when compared to data center colocation.

It took some enterprises much longer to realize the cost difference. They were in a hybrid cloud for a few years before they could compute some historical data that helped them compare costs. The exercise of moving complete CRM systems was time-consuming and the savings started depleting when they moved to reserved instance mode, forcing them to beat a hasty retreat to an on-premises data center.

More Efficient Colocation Service Providers

Data centers to have realized the need to become more efficient. Colocation service providers have now started using SDN (software-defined networks) that help cut costs substantially. Companies too have realized that after moving back to on-premises, they are able to maintain a balance between capex and operating expenses (while using the cloud), especially in reserved instances.

Note: The survey covered a total of 2,300 respondents from a cross-section of geographies including north and south America, Europe, the Gulf nations, Africa and the Asia Pacific.

About DataCenterandColocation

DataCenterandColocation is a free professional and non-bias service provided to clients for selecting the right data center, colocation, managed hosting or cloud facility for their requirements. DataCenterandColocation is one of the largest colocation site consulting firms in the United States. They represent approximately 3000 data centers and colocation centers in the United States and Canada. At no cost to clients, they identify specific space, location, power and security requirements, solicit proposals, professionally analyze the responses, compare the strengths and weaknesses of each facility, negotiate to price and deliver highly competitive bids for colocation. They also perform a comparative analysis of in-house vs. design-build services, wholesale data center space, and data connectivity.