Michael Dell: It’s Prime Time For Public Cloud Repatriation

There is a massive repatriation of workloads currently underway from public clouds to on-premise as organizations see huge cost saving, performance and security benefits in software-defined data centers, according to Dell Technologies founder and CEO Michael Dell.

"There is a fairly significant amount of repatriation going on," said Dell, in an interview with CRN. "As much as 80 percent of the customers across all segments – small, medium, large – are reporting that they're repatriating workloads back to on-premise systems because of cost, performance and security."

Dell said he is not surprised by customers moving their IT budgets back on-premise as he predicted it would happen years ago.

"Go back and replay the tapes from 2014 and 2015 when we were talking about this then. It's one of the reasons why we made a big bet on Dell EMC and VMware," he said. "And it's playing out in a way which is consistent of what we thought."

[Related: Michael Dell On China Tariffs Impacts, Public Cloud Backlash And VMware Synergies]

Solution providers agree with Dell, saying they're saving customers millions of dollars in operational costs by moving clients from public cloud to on-premise solutions.

"Some big shops are giving us numbers that they've spent in the public cloud that are just astronomical," said Craig Manahan, practice manager of data center infrastructure for Cincinnati-based RoundTower Technologies. "It's amazing how much money they can save by coming back on-premise – millions and millions of dollars."

Manahan, whose red hot company made CRN's 2018 Fast Growth 150 list, said customers who failed to refactor and optimize applications are now realizing how much money they can save by switching to on-premise software-defined data center solutions such as hyper-converged infrastructure.

"So if you try to forklift an application and put it in the cloud, you may be disappointed with all the performance, security and certainly the cost. People are getting their bills from their cloud provider and going, 'Woah! Where did all this cost come from?' Because it's not always easy to figure out you spending as you go," said Manahan.

VirtuIT Systems, a Nanuet, N.Y.-based solution provider and Dell partner, is saving customers upwards of 20 percent in operational costs by moving them from public cloud to on-premise.

"It seems like public cloud was the rage maybe two or three years ago. In the past year, people are getting sticker shocked with their bills. They're starting to move more of their budget and more of their workloads back on-premise," said Michael Murphy, president of VirtuIT.

Murphy said customers are stunned to discover how much it costs to retrieve their own data from the public cloud.

"People are getting shocked when they go to retrieve that data – it's very very cheap to put it out there, but very expensive to retrieve it. We're seeing that backup data comes more to a hybrid approach where they're tiering that primary data on the stuff that they are more likely to recall," said Murphy. "Software-defined enable the portability of the data. To be able to move it up and down at will."

According to a recent IDC survey, businesses are migrating applications and data away from the public cloud at a staggering rate in favor of on-premises and private cloud environments. A whopping 80 percent of the 400 IT decision-makers who participated in IDC’s 2018 Cloud and AI Adoption Survey said their organization has migrated either applications or data that were primarily part of a public cloud environment to an on-premises or private cloud solution in the last year.

The top reason for businesses moving away from public cloud was security, according to the IDC report, which surveyed decision-makers who represented small, midmarket and large enterprise organizations. In addition, respondents said they plan to move 50 percent of their public cloud installed applications to either a private cloud or non-cloud environment over the next two years.

Scott Miller, senior director of strategic partnerships for Maryland Heights, Mo.-based solution provider powerhouse World Wide Technology, said public cloud spending for many WWT customers has grown in an accelerated fashion with little oversight or awareness.

"I've heard so many times from customers, 'Oh my gosh, I had no idea we were spending that much a month just for that one workload.' You don't have to be a business guru to understand, that in some cases, the true all in cost to run that workload in the public cloud is much more over a three-year period then it would be to do it yourself on-prem. Plus, an argument could be made that it is more secure, compliant and could be higher performing especially if that workload uses other data that you also have within your data center,'" said Miller.

Miller, who's company is ranked No. 7 on CRN's 2018 Solution Provider 500 list, said he isn't anti-cloud as WWT understands it’s a multi-cloud world. "We help people assess which workloads are appropriate and can be more effectively in the cloud," he said. "People are doing public cloud for other reasons. In some cases, they don’t want to tie up capital or people so public cloud is interesting from other perspectives, but it's not more interesting from a pure cost perspective."