David Heinemeier Hansson, co-owner and chief technology officer of SaaS provider 37signals, is exiting cloud computing and wants everyone to know it. In a series of blog posts, Hansson challenges cloud business models, refuting assumptions associated with cloud computing and arguing that consolidation of power among hyperscale enterprises is not necessarily a good thing.
It may seem counterintuitive for SaaS vendors to publicly rail against the cloud and advise other companies to reconsider their cloud investments. Has Ruby on Rails creator Hansson cheated?
Hansson’s argument was simple: He would save millions by offloading server workloads from Amazon’s AWS infrastructure, buying new hardware from Dell, and running his business in a colocation facility.
He said, “We run extensively in both Amazon’s cloud and Google’s cloud. We run on bare metal, we run on Kubernetes. We’ve seen everything the cloud has to offer and tried most of it. It’s finally here Time to conclude: For a steadily growing mid-sized company like ours, renting computers is (mostly) a bad deal. The promised savings from reducing complexity never materialize. So, we’re making plans to leave plan of.”
He added that cloud computing “makes total sense” for retailers and other companies experiencing sharp traffic spikes. After all, that’s how AWS originally came about, when Amazon built up excess capacity for the holidays and then decided to start leasing out the idle hardware. But workloads have to be “super bursty,” Hansson said.
He believes that for most enterprises with relatively stable workloads, if you spend a lot of money on the cloud and you don’t at least consider comparing the rental bill to buying a server, “you’d be a little reckless.”
Do the math.
37signals sells two SaaS products – Basecamp, a project management app launched in 2004, and HEY, a premium email service launched in 2020. Basecamp operates primarily from a hosting facility, while HEY was entirely cloud-based until Hansson started running the numbers.
The company spent $3.2 million on AWS cloud services in 2022; less than $1 million was spent on Amazon S3 storage, and the remaining $2.3 million was spent on application servers, cache servers, database servers, search servers, etc. The plan is to eliminate the entire $2.3 million in expenditures by 2023 and address 8PB of stored data by 2024.
“It took a lot of thought, a lot of benchmarking, and awe at the speed of AMD’s new Zen4 chips combined with 4th generation NVMe drives,” said Hansson, who ordered about $600,000 for a Dell server.
Amortized over five years, server infrastructure would cost approximately $120,000 per year. He spent an additional $60,000 per month ($720,000 per year) to purchase eight dedicated racks in two data centers operated by hosting provider Deft. “We intentionally overprovisioned our space so we could actually fit all of these new servers in existing racks without requiring more space or power,” Hansson added.
His total annual expenses are $840,000 compared to $2.3 million for cloud computing, resulting in net savings of about $1.5 million per year, or $7 million over five years. “And we’re going to have faster hardware, more cores, very cheap NVMe storage, and room to scale at very low cost,” he added.
Hansson said he has begun migrating applications off the AWS platform and expects the process to be completed by the summer. He added that the actual migration would not be easy. His team had to build their own tools to ensure that the key features and innovations built into his applications could be ported to new hardware and run with the same performance.
The complexity of figuring out the specifics of application repatriation raises the question of whether the experience of a SaaS vendor like 37signals, whose staff roster is filled with technical expertise, is applicable to the average enterprise.
Some questions and Hansen’s answers.
Hansen has been active on social media and participated in conversations about the issue. He seemed to have an answer for every question.
What about maintenance, monitoring, and operations? Do I need to hire more IT staff to run the servers I have now?
Hansen argued that he didn’t need to add any positions to his 10-person operations staff. He said IT teams can manage servers remotely, no matter where they are. He went on to say that cloud vendors have proven that moving to the cloud will allow organizations to reduce IT staff, but Hansson said those savings have never really materialized.
What if the server crashes?
Hanson’s answer may sound glib, but he says you just buy a new one. He noted that the servers he currently runs are 6 or even 7 years old, which means they have all been paid off and are still running. “We run it until it
How should the organization proceed?
Hansen recommends this approach: “I would start by raising the discussion internally. What kind of business do we have? Do we have a highly volatile business where we have these huge surges? We’re a very early-stage business, can we Are we completely off the hook without an operations team? Or maybe we’re somewhere in the middle like 37signals where we might not be spending $3 million a year like they are, but maybe we’re already spending $1 million a year, or we might even be Cost $500,000 a year.”
He said companies should ask themselves, “How much will it cost us to buy some servers? How long will it take us to pay that back? If we end up in the same situation that 37signals is in with Basecamp, they’re still on the servers they bought seven years ago.” How much will our operating profit increase if we run it?”
37signals fights against hyperscaler internet dominance.
Hansen went on to make another, more philosophical argument in favor of moving away from hyperscale platforms. “It’s not just about cost. It’s also about what kind of Internet we want to operate in the future. It’s shocking to me that this decentralized wonder of the world now runs primarily on computers owned by a handful of large companies.”
Hansen said the reaction from his peers has been mostly positive. “I’m just articulating wisdom that already exists,” Hansen said.
One person Hansson has not had direct contact with is Amazon’s Jeff Bezos, who is actually an investor and part owner of 37signals. But Hansson said: “I am 100% confident that he is on our side in terms of keeping costs as low as possible.”