Ghar Wapsi - the IT kind

The cloud is basically someone else's computer

Okay, before you think this post is about changing a person’s religion - it’s not.

I’m talking about “cloud repatriation”.

The story starts with, well not really one of the largest IT companies like Google or Microsoft, but with an e-commerce company. This company had excelled at managing its IT infrastructure in an elastic way to ensure their systems kept up with consumer demand and was always available. And then they realised they have extra capacity that they can sell to IT departments of other companies. Well, that’s a natural progression for a company that basically retailed almost anything you could buy. As of today, they even sell cars online (!).

If you haven’t guessed, it’s Amazon. They started AWS in 2006, Google launched GCP in 2008, and then Microsoft jumped in with Azure in 2010.

The rest, as they say, is history.

Well, almost.

“Cloud” became the buzzword and every CIO wanted to have a ‘cloud strategy’. If you didn’t have one, you weren’t cool. Companies that didn’t have good infrastructure management teams, or those that had extreme requirements of uptime, started moving their infrastructure to these clouds.

Then, because different clouds had data centres in different geographies and had different cost structures (meaning pricing ‘deals’ to lure customers), “multicloud” became the way to go. IT departments were required to pick up new skills and that in itself became an industry. The global cloud infrastructure services market size was valued at USD 128 billion in 2023. The “Cloud Computing In Education” Market size was valued at USD 28 Billion in 2023.

To give you a perspective of how large this market has become, take a look at Microsoft’s revenues in 2023:

Product Line FY2023 | Revenue | %age Share

Cloud Computing Services $80B 38%

Cloud Office Suite Software $49B 23%

Operating Systems $22B 10%

Gaming Consoles $15B 7%

Employment Listing Platform $15B 7%

AI-Enabled Search Engine $12B 6%

Other $19B 9%

Total Revenue $211B 100%

Comprising 38% of total revenues in 2023, Microsoft’s cloud computing services segment earns more than any other by a long shot.

So, you can imagine this must be very profitable, and that means companies pay Cloud Service Providers a lot of money.

So what happened?

Well, the thing with someone else running your servers is that you’re not just paying for the server ‘rent’, but also for the technology that manages the infrastructure, and for uptimes higher than you possibly need. And finally, for the data that you need to transfer out of the cloud (basically downloads).

As we increase our footprint in the cloud, we get used to spinning up virtual machines as we like (like a Swiggy /Zomato order, and forget to power it down), the amount of data transfer needed increases, and costs start escalating.

Also, the economy hasn’t exactly being doing too well - irrespective of what the governments worldwide would have you believe.

Enter “Ghar Wapsi” aka “Cloud repatriation”.

Suddenly, folks who did not have a cloud strategy are the folks with “vision” who could see the future.

CIOs are trying to cut costs and spend it on “AI initiatives”.

Let’s see how that goes…

NB -

1. Cloud companies are still doing well because running AI models requires a lot of firepower and it’s mostly running in clouds.

2. Nvidia became the second largest company by market valuation after Apple by riding this wave.

3. Broadcom acquired VMware (which is what most companies use to run and manage their servers) and jacked up their pricing. And people are coughing it up….