37signals Cuts Costs by Moving Away from the Cloud

Ditching the cloud can lead to remarkable cost savings, as shown by the software company 37signals, which has had its fill of the cloud hype.

In recent years, businesses have rushed to migrate their IT operations to the cloud, lured by promises of flexibility and convenience. However, David Heinemeier Hansson, CTO of 37signals, has had enough of the cloud's ups and downs. In a candid blog post, he reveals that leaving the cloud behind can deliver substantial financial relief.

In the summer of 2023, 37signals took a decisive step by migrating seven applications from Amazon Web Services (AWS) to its own data center. This move dramatically reduced the company’s annual cloud expenditure from a staggering $3.2 million to a more manageable $1.3 million. For Hansson, this isn't just a cost-cutting measure; it's a rejection of the cloud's inflated promises and unpredictable pricing.

Hansson notes that the initial investment in new Dell hardware, costing around $700,000, was easily justified by the immediate savings from reduced cloud usage. "These devices are going to last us five to seven years," he asserts, casting a skeptical eye on the cloud’s sustainability.

The remaining $1.3 million in cloud costs is tied to an AWS storage system requiring about 10 petabytes of space. Thankfully, this contract is set to expire in the summer of 2025, at which point 37signals plans to migrate its data to a robust in-house system with a capacity of 18 petabytes. The cost of this new hardware is expected to align with what the company currently pays for AWS S3, allowing for even deeper savings down the line. Overall, Hansson predicts that the decision to exit the cloud will save the company "well over $10 million" over the next five years, all while boosting both processing power and storage capabilities.

Moreover, Hansson emphasizes that leaving the cloud hasn’t burdened the IT team any further. "The same team manages everything," he says, dismissing the idea that cloud operations are somehow easier. While overseeing the two data centers is demanding, much of the work is similar to what the team handled when they were reliant on the cloud.

A Warning for Others

However, Hansson sounds a cautionary note for those considering a similar exit. He admits that not every company will find the same level of savings. Organizations without their own data center may face additional costs renting space, and individual hardware needs can shift over time. Yet, for those grappling with substantial cloud bills, it might be time to reconsider their dependency on these nebulous services.

Hansson also points out that the cloud might still suit some businesses—especially those with erratic demand or uncertainty about long-term needs. As the year closes, he plans to publish a FAQ tackling common concerns about abandoning the cloud.

In the end, 37signals’ exit from the cloud is not just about savings; it’s a bold statement against the cloud’s chaotic pricing and operational complexities. Sometimes, going back to basics is the smartest move a company can make.