37signals chose cloud repatriation, slashed costs by 60%, and hasn’t looked back.
37signals — the makers of Basecamp and HEY — never shied away from the hard questions. The team is constantly questioning how things are done, poking holes in longstanding business logic, and finding ways to do business better. It’s no surprise, then, that the doctrine of keeping everything in the cloud with the goal of staying nimble would come under scrutiny — especially when the bills started coming in.
Forward-thinking businesses diligently evaluate their recurring expenses, including the infrastructure costs that quietly balloon out of control. A lot gets excused by the word “growth” but unexpected costs can’t be one of them. At Deft, we help companies assess their current needs and get clear-eyed about their future ones. We examine a company’s workloads, look at the usage patterns, and find the right home for each one. For nearly 15 years, we’ve helped the 37signals team strategize, build and manage their infrastructure. Occasionally, that means tearing it all down.
Unraveling the costs of cloud services: A case study with 37signals
More than a decade ago, the team at 37signals was actively in growth mode. They followed those swings in usage to their logical destination, the cloud. As their data center provider at the time, Deft continued supporting the data and applications stable enough to store on servers. It may not have been a shiny new product, but it was the backbone of the business. We took it seriously.
Today, Basecamp is built into the workflows of huge organizations all around the world. And, after an initial surge in users for 37signals’ email product, HEY, the company’s growth had been steady. All of a sudden, it was paying premium cloud rates for predictable computing loads. It didn’t make sense.
So, they reevaluated.
Knowing when to leave cloud infrastructure behind
When co-founder David Heinemeier Hansson (DHH) shared that 37signals was leaving the cloud for Deft’s data centers, the reaction was, honestly, a lot. In general, infrastructure announcements don’t merit much of a discussion. Not that we weren’t happy to be included in the conversation!
By any metric, the move to owned servers managed by Deft just made sense. Over time, on-prem colocation will always be cheaper than cloud for predictable workloads.
So what happened? The allure of the cloud, with its promise of scalable computing power on demand, led the company down a path it didn’t need to travel anymore. It was never the wrong path, to be clear. It’s just that as the business matured, its infrastructure needs became more predictable and stable. The convenience of the cloud positions you for growth with on-demand power, but does so at a significant cost. By transitioning to an owned model, 37signals initially anticipated operational savings of $7 million over the next five years.
The projected savings have only improved:
“Our cloud spend is down by 60% already, from around $180,000 a month to less than $80,000,” wrote DHH. “We don’t have to squint hard to see the eventual savings climb all the way up to about $2 million a year. That would be $10 million over five years.”
Cloud repatriation isn’t about owning a mistake — it’s about realizing savings
When you don’t overspend on IT, you can devote more resources to other areas — like the literal faces of your business.
“Companies come to us with what they think is buyer’s remorse with the cloud,” said Byron Dill, Principal Solution Architect at Deft. “Usually, we’re like, ‘Actually, the cloud served you really well for what you were doing at the time. It just doesn’t have to be the one tool that you throw at every single problem.’”
Cloud repatriation can feel like a hard shift to make. When planned properly, however, the migration from cloud to on-prem can net you huge savings and improve performance. Where the data comes from doesn’t matter much to employees and end users; they just want instant access to it.
Contrary to the premiums you pay, the cloud isn’t a better service than colocation. Cloud is more expensive because it’s on-demand. You don’t have to predict anything or pay for the compute power you’re not using. You’ll just pay a lot more for the compute power you are using.
When a business like 37signals moves to a data center, it’s about putting the right pieces in the right places at the right prices.
To find the right infrastructure, be honest about your needs
Don’t get us wrong: We love the cloud. 37signals will still use it when it makes sense, and we recommend all of our clients do the same. The cloud excels in scenarios where traffic patterns are unpredictable and demand is spiky. It offers flexibility to scale resources dynamically without forking over substantial, upfront investments in physical infrastructure. And if a company is eyeing near-term exits or otherwise looking to keep capital expenditures down, cloud solutions make sense over colocation.
We all want to be in our growth era. But the reality is that the most profitable and innovative businesses don’t always experience rapid fluctuations in usage. The bigger your user base is, the less meaningful any one spike or drop is going to be.
No one pens odes to the steady and reliable, but they should. Predictable growth is where profit starts to really kick in. It’s also where the costs of cloud can start to erode your margin. It may be hard to admit that it’s not all sharp spikes and blind drops going forward, but when your anxiety starts to decrease, your cloud position probably should as well.
Cloud repatriation just makes sense at a certain point — the same way buying a home can beat out renting. Ownership proves more cost-effective in the long run. And with colocation, you don’t even have to be the one getting up in the night to figure out why the power’s out, or where the water’s coming from, or what to do about it. That’s our job.
Infrastructure costs should match business priorities
When you’re trying to trim operating costs, it’s not about ruthless cuts. It’s about bringing expenses in line with the business priorities. In this way, it helps to extend the home metaphor and think of infrastructure spending like insurance.
Plenty of consumers blithely pay ever-higher premiums for auto and homeowners insurance without shopping around. And if they do decide to make a change, it has more to do with something said by a gecko than a discernible strategy. The same is true for companies and infrastructure spending.
Plenty of companies are paying big cloud bills when they don’t actually need that kind of coverage — either because they have been, or because they heard cloud=good and no one wants to investigate further. Instead, you want to pay for what you’re going to use, and you want to know that if things go wrong, there are experts who have your back.
Managed data centers deliver the ease of cloud with the consistent costs of colocation
For 37signals, a company that’s been remote since before it was cool, managed colocation gave them that security without having to change their fundamental way of working. With it, Deft experts are available 24/7/365, physically on site to make changes on the fly. 37signals doesn’t have to keep a location staffed just to take advantage of dedicated servers.
“I feel like I’m on a mission to break down the misconception that owning your own hardware is this weirdly exotic thing that’s actually super-duper hard and only wizards of old are able to do that. That is just not true,” DHH explained in the second part of a multi-part podcast on the move. “Deft, this is what they do. They help companies like ours make the hardware work.”
You can do the same — you just have to find the right partner.
