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On-premises data storage could gain ground in 2024

Given the rising costs of cloud, companies are reevaluating the benefits of storing their data on premises, a trend that's expected to continue in 2024.

To store data in the cloud or to store data on premises? In 2024, given the recent increase in cloud costs and the ongoing IT recovery from COVID-19, that's still the question for many enterprises.

However, wholesale storage repatriation, where data would reside on premises only, is both rare and also potentially costly. Instead, companies will build or continue to refine a hybrid cloud storage strategy, where some data resides in public clouds and other data remains on premises.

Public cloud providers offer companies ease of access, use and payment with as-a-service models. However, the costs to use these services have gone up. According to November's Producer Price Index, cloud inflation is on the rise, with costs for data processing, hosting and other related services growing by 3.6% year over year.

Using the public cloud also means a lack of control in deciding where data is located geographically and what specific security measures to implement, as well as a lack of choice in determining performance for a given workload.

Customers are also watching their IT bottom lines. While the macroeconomic environment does not show a recession, the tech industry continues to struggle, with Google and Amazon recently announcing layoffs, according to Doug Milburn, co-founder and president of 45Drives, an on-premises data storage vendor. The COVID-19 pandemic led to supply chain issues that led to inflation that led to higher interest rates. These higher cloud costs are leading to more growth for on-premises storage vendors, but not slowing down clouds much.

"Cloud growth continues at the same time," he said. "I think the market is making sense of it."

Milburn said companies are becoming more discerning about the ratio between cost and convenience, as they're finding that easy access to large data sets does not offset the cloud storage costs, while the opposite is true for small data sets.

Cloud costs and control

Cloud cost optimization has been the No. 1 ask from customers over the last few years, according to Anurag Agrawal, CEO of Techaisle, a global SMB and IT channel market research and analyst organization.

"Cloud was sold with the promise that it would reduce costs and drive revenue," Agrawal said.

This promise led to some haphazard adoptions of the cloud where it might not have been optimal. Now, companies want to see proportional outcomes to the amount of money being spent.

Customers are starting to conduct a strategic reevaluation of data storage for a number of reasons, such as better control over costs and security, as well as more control over data, according to Sergey Dvorkin, president of Flex Moving and Transport, a Montreal-based moving company. For logistics companies, when reassessing expenses related to cloud storage, on-premises products are more in line with long-term financial goals.

"This approach to data management is strategic and genuine, and it offers cost-effectiveness as well as improved control over sensitive data," Dvorkin said.

The Chartered Professional Accountants of British Columbia has shifted from a largely cloud-based storage system to include more on-premises storage, according to Anthony Green, manager of IT security operations and compliance at CPABC.

"The decision to alter our path from cloud to hybrid/on-prem arose from a composite of factors, including the financial, security and control nuances," he said.

Moving the data on premises fortified CPABC's sensitive financial data management with better oversight over security and better integration between its governance, risk and compliance and storage systems, according to Green.

Selective repatriation

Companies should consider repatriation on a case-by-case basis, according to Marc Staimer, president of Dragon Slayer Consulting. He cautioned companies about the costliness of moving data from the cloud to an on-premises environment.

"It is very expensive to repatriate," Staimer said. "You have this little thing called egress fees."

Cloud providers are aware of the egress fee criticism, and one has taken steps to respond. This week, Google unveiled a program that would eliminate egress fees when moving off Google Cloud Platform. Customers have to apply to the program to gain approval and would need to transfer their data within 60 days or reapply.

To date, though, Staimer has only seen a handful of examples of repatriation efforts, not a significant wave of them. Even in the cases he's seen, companies aren't considering wholesale repatriation. Instead, they're moving mission-critical applications on premises for better control, but using the cloud as a backup site.

That's what RealGoodSoftware, a New York City-based web tools company founded in 2021, is currently doing.

"Our strategy involves moving sensitive workloads and critical data to on-premises storage while utilizing cloud solutions for less critical functions," said Brian McLintic, CEO and founder of the company.

Hybrid is still the future

While on-premises storage options might be appealing at the moment, customers are not expected to turn away from the cloud completely. Instead, they'll develop a combination of the two in hybrid environments.

For his industry, Dvorkin believes vital and sensitive data will be stored on site, while nonsensitive, scalable data will continue to be stored in the cloud.

"For the best flexibility, scalability and security, a hybrid solution is required due to the particular demands of the logistics sector," he said.

CPABC's Green sees hybrid's path in the financial industry as well, to "leverage the strengths of both paradigms while mitigating their respective weaknesses," he said.

McLintic said storage vendors should play to their strengths to retain or gain customers, given its staying power. On-premises vendors could offer customizable and scalable options that offer tight security and lower costs, while cloud storage vendors could focus on costs and flexible data management options, he said.

Adam Armstrong is a TechTarget Editorial news writer covering file and block storage hardware and private clouds. He previously worked at StorageReview.com.

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