The cloud era is still booming, as is clear from the market’s double-digit growth rate. Yet a backlash is already emerging: Companies are showing renewed appreciation for what’s known as on-premises computing. The recognition that it just doesn’t make sense to hand over certain tasks or data to Microsoft or Amazon.com is creating opportunities for companies that promise to deliver the efficiencies of the cloud from the comfort of your very own data center. “We’re getting to a phase in the hype cycle where there’s a lot more rationality setting into the market,” says Ed Anderson, cloud analyst at Gartner. “You can and should ask hard questions about if I move that workload to a cloud, will I get a meaningful benefit from that? And in some cases, the answer is probably not.”
The Allen Institute for Brain Science in Seattle generates petabytes (1 petabyte equals a million gigabytes) of data through its work creating 3D maps of brains—it started with mice and has made its way up to humans. Last year the research operation costed out a move to the cloud with Amazon Web Services. It turned out the switch would have been five times more costly than keeping the data stored in-house because of the sheer amount of information involved, the difficulty of transferring it, and the speed lost in having the data and related processing located off-site, says Chinh Dang, the institute’s chief administrative officer.
Last month, Igneous Systems unveiled a product it spent three years developing: a storage device about the height and width of a home stereo receiver but three times as deep that the Seattle startup installs in a client’s data center and then maintains. Because the gear is on-site, data transfer is cheaper and faster than the speediest option from AWS, according to Kiran Bhageshpur, chief executive officer of Igneous. “The fundamental problem of off-prem,” says Bhageshpur, using industry shorthand, “is one of physics.” Even though Amazon and Microsoft seem to announce a new data center in a new city almost every month, it still takes time to send data back and forth between those facilities and customer sites.
Igneous, which bills clients on a subscription basis, is initially focusing on customers in industries that tend to store vast amounts of data and need access to it quickly, like hedge funds that engage in high-frequency trading or media and entertainment companies. “On a movie shoot, a week can be a petabyte of data,” Bhageshpur says.
Earlier this year, file-sharing service Dropbox moved 500 petabytes of the data it had stored on Amazon’s cloud back onto its own machines. “We’re very happy with our hybrid solution and the flexibility and cost savings it affords us,” says Aditya Agarwal, the company’s chief technology officer.
VMware and AWS announced last month they were teaming up to build hybrid clouds, which combine VMware’s software for corporate networks with Amazon’s public cloud computing services. Microsoft has sold hybrid systems for years, and Google is working on combo offerings, too, according to the Information, a technology news site.
Some makers of cloud-based software are joining the trend. Atlassian unveiled a version of its HipChat messaging and collaboration software for large enterprises that want to run it themselves, rather than rely on the company’s cloud-based offering. It’s partly an attempt by the Sydney-based startup to differentiate itself from its main rival, Slack, whose software is cloud-only. “We don’t want to preclude any choice from customers,” says Jay Simons, Atlassian’s president. Slack isn’t working on an on-premises alternative, because few of its customers require one, according to CEO Stewart Butterfield.
Gartner’s Anderson expects that some of the concerns companies have about public cloud services will fall away as they become faster, cheaper, and more reliable. “Cloud has hit critical mass,” he says. “That doesn’t mean it’s optimal for every scenario, but over time it will be optimal for more and more scenarios.”
The bottom line: An assortment of tech companies are marketing cloudlike services that run in a business’s own data centers.
To contact the author of this story: Dina Bass in Seattle at dbass2@bloomberg.net.
To contact the editor responsible for this story: Cristina Lindblad at mlindblad1@bloomberg.net.
©2016 Bloomberg L.P.
