Reports that almost all enterprises are moving their workloads from public clouds to on-premises infrastructure are popular. The truth is: the number of repatriations is real and misleading.
By Larry Walsh
In conversations about technology and channels, one number keeps cropping up: 83%. According to a survey by major bank Barclays, this is the percentage of companies moving workloads from public clouds to on-premises or private cloud infrastructures.
This staggering statistic has caused a stir across the industry. It suggests a potential shift away from hyperscalers such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. It also suggests a revival in commercial hardware sales after years of sluggish – if not declining – performance. In addition, this trend means that enterprises will require more software and support services, suggesting potential growth for channel partners.
Barclays is not the only source that inflates this figure. In recent years, the analyst firm IDC has reported that somewhere north of 70% of companies are moving their workloads to the local environment or hybrid cloud infrastructure. This trend is further confirmed by many global system integrators who observe that their customers are seeking advice and support to offload applications and processes from the hyperscalers.
At the VMware Explore event in Las Vegas this week, Broadcom’s leadership repeatedly pushed the 83% figure prominently to its customers and partners as proof of the ability to sell its virtualization software to customers fed up with the high and unpredictable costs of public clouds. Broadcom CEO Hock Tan even noted that companies had developed post-traumatic stress disorder due to the staggering costs of public cloud services.
The figure of 83% has been so well received that Michael DellFounder and CEO of Dell Technologiespublished a photo of the slide shown at the Broadcom-VMware event and called it “not surprising.”
But the question remains: is this number correct?
Several partners have asked me this after hearing the data point repeatedly. While they are seeing customers rethink their public cloud strategies and spend, they are not seeing a mass exodus from hyperscaler infrastructure. In fact, the economics of hyperscalers still make it advantageous to host workloads in public clouds and buy add-ons through their marketplaces.
My answer: I believe the number is real, but I also don’t think it tells the whole story.
Economist Charles Wheelan once said, “Statistics are easy to lie with, but without them nobody will believe you.” The Barclays repatriation statistics are a good example of this axiom. While I am not saying that Barclays or others who use this figure are lying, they are telling convenient stories that are loosely based on reality.
Let’s look at the facts. First, what does this number represent? Simply put, it is the percentage of companies that are repatriating workloads. So, if we talk about 100 companies, 83 of them are moving workloads from public clouds. But how many workloads? What kind of workloads? Are these large, enterprise-wide and mission-critical workloads, or are they relatively smaller applications that are isolated within certain business units? Are these workloads global or regional? And how significant is the associated spend shift?
The problem with the 83% number is that it represents enterprises, not workloads. So if 83% of enterprises decide to move a workload from the public cloud to their on-premises infrastructure, the number remains true. But that doesn’t mean that enterprises are racing for public cloud exits. And we see that in the fact that spending at hyperscalers continues to increase every quarter.
Why are hardware and infrastructure software vendors so excited about cloud repatriation? It’s because of growth. Hyperscalers have been hurting sales of traditional server, storage and other infrastructure hardware. While infrastructure software continues to sell well, hardware sales are weak. Workload repatriation represents a return to growth.
Another factor driving vendors to accept the repatriation figure is artificial intelligence. It is widely accepted that enterprise AI implementations are too compute-intensive for public clouds. It’s not that public clouds can’t handle AI workloads – it’s just that they’re expensive. It’s believed that enterprises will choose to build AI systems locally rather than rely on hyperscalers. That’s why IDC predicted a 10% increase in hardware infrastructure sales driven by AI this year.
I’m not saying repatriation isn’t a trend. It is. And I’m not saying that vendors and those touting this repatriation number are trying to fool people. They’re not. They’re simply telling a story to get partners and customers excited about current and future opportunities. But before we accept numbers like these – especially in a decision-making context – we need to break them down and define what they really represent.
To quote the movie Anchorman, “60% of the time, it works every time.” In this case, 83% of the time, companies are thinking about moving workloads back from public clouds. The safest interpretation is that 83% of companies have the ability to talk about their future infrastructure needs.
Larry Walsh is CEO, chief analyst and founder of Channelnomics. He is an expert in the development and implementation of channel programs, disruptive sales models and growth strategies for companies worldwide.