37 Signals says it saved $1 million by abandoning cloud infrastructure

37 Signals has saved more than $1 million in cloud costs in a matter of months after embarking on a significant cloud repatriation project earlier this year, a company executive has revealed.

The SaaS firm’s shift to hardware has already unlocked sizable cost savings, with more expected to come, CTO David Heinemeier Hansson said in a blog post last week.

Hansson said the firm has managed to reduce cloud spend by around 60% since its shift, down from an average of $180,000 per month to “less than $80,000”.

“That’s a cool million dollars in savings at the year run rate, and we have another big drop coming in September, before the remaining spend will peter out through the rest of the year,” he wrote.

The reported initial cost savings far exceeded what the company invested in hardware earlier this year, according to Hansson.

When it first embarked on the cloud repatriation project, 37 Signals spent $600,000 on eight servers to replace cloud rentals, Hansson said. The move came in response to what he described as “grotesque” costs over the space of a year, with the firm spending $3.2 million for AWS services across 2022.

“While there are some additional other costs associated with the extra servers, it’s relative peanuts in the grand scheme,” he said.

“Which means that by the basic comparison of money saved vs money spent, we'll be in the money on the big purchase with the current monthly savings in less than six months.”

Initial projected savings were initially said to be around $7 million over the space of five years. However, he now believes that the company can increase savings to around $10 million across the same period.

“Let's see where things end up when it's all said and done, but we don't have to squint hard to see the eventual savings climb all the way up to about $2m/year,” he wrote. “That would be ten million dollars over five years. Just absolutely bonkers amount of money straight to the bottomline.”

Cloud repatriation hype

The topic of cloud repatriation came into sharp focus earlier this year during a period of rising cloud costs, with many businesses struggling to contend with heightened spending during challenging economic conditions.

Singaporean SEO firm Ahrefs revealed it had saved more than $400 million dollars across the space of several years by relying on its own on-prem infrastructure rather than cloud computing services, further highlighting potential benefits.

However, the reality for many firms is that cloud repatriation simply isn’t an achievable goal, and may actively inhibit their operations.

René Büst, senior director analyst at Gartner told ITPro in June that cloud repatriation “really isn’t a trend” and represents a reactionary backlash among some firms to rising costs.

The benefits of cloud repatriation are wholly dependent on the individual circumstances of each business, Büst said at the time.

Similarly, the analyst said they did not expect cloud repatriation to gather significant momentum among businesses due to both the complexity of this process, as well as the overall benefits of public cloud.