Why Startups Begin in the Cloud, and As They Mature Sometimes Repatriate to a Data Center

Cloud, data center, colocation, there's no universal answer.
Cloud, data center, colocation...there's no universal right answer.

For a startup, or a small company looking to grow, the attraction of the public cloud is understandable. Unlimited scalability, unlimited flexibility, spin up some servers in minutes, and you can go from idea to test dev or even a production website in a flash. In the right hands, the public cloud, especially Amazon Web Services (AWS), allows for the proper technologically-focused businesses to move extraordinarily fast.

But the cloud isn’t for everyone. The scalability and flexibility comes with a cost, and the expenses are difficult to project. Your applications may not have been created with the infrastructure of the cloud provider in mind. But for many startups, the public cloud is a sensible place to be.

When a company is launched, they have a finite amount of financial resources, and a great many ways to spend that money. In most instances, operational expenditure (OPEX) is much preferred to capital expenditure (CAPEX) in order to give the startup a longer runway to make things work before they run out of money. Sensibly, given their preference for OPEX, building a data center and even buying a bunch of tech gear to place in a colocation facility isn’t on most company’s radars. As a result, many startups place their IT infrastructure in the public cloud.

Many do well in AWS and Microsoft Azure. But many others find their way back from the public cloud into a more traditional data center environment, where they may utilize traditional IT infrastructure or more commonly, create a private cloud using virtualized infrastructure that they control. They may do so for a number of reasons: budget, security, control, performance, or some combination of those factors.

The trend isn’t new. A 2015 451 Group study found that nearly two-thirds of the enterprises they studied had repatriated applications formerly in the public cloud, usually into an on-premise private cloud. Both Dropbox and Apple have pulled back from AWS this year, for reasons that include economics, performance, and competition. While those firms are far from startups they’ve reached a point in their organizational lifecycle where divesting from the AWS public cloud made sense.

A good resource to understand why some non-enterprises are leaving Amazon Web services is our podcast with Cris Daniluk of Rhythmic Technologies, who has a unique understanding of the strengths and weaknesses of Amazon Web Services. As both an AWS customer and a skeptical AWS realist, Cris has put customers into AWS and helped others unwind out of AWS into a private cloud at a significant cost savings and performance enhancement. It depends on the situation, the application(s), the budget, and numerous other factors.

Amazon, Microsoft, Google, and others are going to be big, big winners in the cloud game due to ever-increasing demand for IT infrastructure services. But the expenses can be difficult to project, you’ll require talented staff familiar with the provider’s infrastructure, and many users report that you need to be a pretty substantial account to gain their attention.

Public cloud or another infrastructure solution? There’s no universal right answer. There’s just the right answer for you and your organization.