This software company says ditching the cloud was worth $10 million in savings — and there’s still more to come
Ditching the cloud for its own hardware has saved 37 Signals two million dollars annually, according to the company’s CTO — and the savings are continuing to grow.
David Heinemeier Hansson said the company had successfully slashed its cloud bill from $3.2 million a year to $1.3 million, well above its original savings prediction, while at the same time recouping all of the investment on its own hardware.
Now, 37 Signals — the SaaS company behind project management platform Basecamp — predicts it will save $10 million over five years, three million dollars more than initially expected.
Last year, Hansson said the company was tired of the “grotesque” costs of cloud computing and believed cloud repatriation made more sense, so it embarked on ditching the cloud in favor of investing in its own hardware.
So far, it seems to be working, though progress has been slow. Hansson said the company pulled seven of its cloud apps onto its own hardware last year, but because of existing contracts, had to wait for the savings to kick in.
“For 2024, we’ve brought the cloud bill down from the original $3.2 million/year run rate to $1.3 million, ” he wrote in a LinkedIn post.
“That’s a saving of almost two million dollars per year for our setup! The reason it’s more than our original estimate of $7 million over five years is that we got away with putting all the new hardware into our existing data center racks and power limits.”
Hansson said the investment in new hardware has already begun paying dividends for the SaaS firm.
“The expenditure on all that new Dell hardware – about $700,000 in the end – was also entirely recouped during 2023 while the long-term commitments slowly rolled off,” he said.
“Think about that for a second. This is gear we expect to use for the next five, maybe even seven years! All paid off from savings accrued during the second half of 2023. Pretty sweet!”
How 37 Signals got things rolling
Back in 2023, 37 Signals said it was ditching cloud services because of rising costs, choosing to repatriate its workloads onto its own on-premise servers.
In 2022 alone, the firm spent $3.2 million on AWS cloud services, of which CTO David Heinemeier Hansson said $2.3 million was spent on simply running “app servers, cache servers, database servers, search servers,” and so on.
Given the “grotesque” costs, Hansson said the company would aim to totally exit the cloud, believing it could save $7 million in server expenses over five years. To achieve that, the company said it would need to invest $600,000 in hardware, as well as increase its spend at its hosting provider to $720,000 annually.
But Hansson said the shift wasn’t just about money, but independence too, as it prevented the company from trying experiments and innovating.
Just a few months later, 37 Signals said that it had already saved more than $1 million in costs, even before it had fully ditched the cloud. From February to September, the company managed to slash its spending from $180,000 a month to $80,000, which worked out to more than a million annually.
Those savings already exceeded what the company had invested in hardware to make it possible, Hansson said. Though costs required to make the shift were higher than expected, they were “relative peanuts in the grand scheme”, he said at the time.
The move from 37 Signals came at a time of rising concerns over cloud computing costs, with reports emerging in early 2023 that a widespread shift away from the cloud could be looming for enterprises looking to reduce spending.
While this ‘cloud slowdown’ never quite materialized to the extent that some industry stakeholders predicted, some enterprises nonetheless made the shift.
What’s next?
The company hasn’t managed to entirely ditch the cloud yet, largely because file storage was locked into a four-year contract, while other aspects were limited to one-year contracts. The file storage contracts are set to expire next summer, and 37 Signals intends to pull out of the cloud at that point, Hansson said.
“We store almost 10 petabytes of data in S3 now,” he explained. “That includes a lot of super critical customer files, like for Basecamp and HEY, stored in duplicate via separate regions. We use a mixture of storage classes to get an optimized solution that weighs reliability, access, and cost.”
Even with the long-term contract apparently coming at a discount, the cost is still over a million dollars annual, he said. Next year, the company will shift to a dual-DC Pure Storage setup with 18 petabytes of capacity. That will cost about a year’s worth of AWS S3, Hansson said, suggesting the spend will be about $1 million.
Beyond the cost savings, Hansson noted the company is “getting faster computers and much more storage.”
37 Signals’ savings suggests cloud may not offer a cost benefit for all companies, though Hansson, and admitted the company’s success may not play out the same for others.
“Now, as with all things cloud vs on-prem, it’s never fully apples-to-apples. If you’re entirely in the cloud, and have no existing data center racks, you’ll pay to rent those as well — but you’ll probably be shocked at how cheap it is compared to the cloud,” he wrote.
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