‘Merchants of Complexity’: Why 37Signals Abandoned the Cloud

A thriving web software company, 37Signals, has moved off the cloud entirely over this past year, and is raising spirited holiday discussions around the comparative virtues of running operations on-premises or in the cloud.

In 2022, the company spent $3.2 million on cloud services (largely on Amazon Web Services), prompting the mission to divest entirely from the cloud, and run everything in-house. This is the company behind the popular Basecamp project management software, as well as the Hey! email service and other products.

And it would do so with its own tooling, rather than spend for overpriced enterprise service contracts, in the words of company co-founder David Heinemeier Hansson (a tech figure so well-known he gets his own acronym: DHH).

The company purchased $600,000 of Dell gear, with the plans to save over $7 million in the next five years.

On Thursday, Kelsey Hightower interviewed DHH on the X Spaces forum to learn more about the move.

The original proposition for cloud computing was that it would make things easier for businesses (think of how Heroku made things easier for the developer). But over time cloud services have gotten so complicated and expensive that the value for mid-sized businesses has diminished, DHH argued.

“The speed of provisioning, for example, is one of those things that truly is magic. The fact that you can buy 100 machines and see them online 30 seconds later is kind of crazy, and kind of amazing,” DHH enthused.

But he qualified that: “It’s just not solving a problem I have that often.”

Liable For Your Own Mistakes

With this ease of cloud computing comes a certain loss of independence. When a cloud provider suffers a massive outage, the customers are helpless to do anything for their own users. Hightower and DHH recalled a series of outages on the Google Cloud Platform that was so bad, it spurred 37Signals to move everything over to AWS.

“The sense of desperation you feel when everything is out of your control, and there’s literally nothing we can do in the moment to fix it, is just so disheartening,” DHH said.

And moving a workload, and its associated data, from one cloud to another is far from a trivial, or inexpensive task. DHH noted that it cost 37signals “hundreds of thousands of dollars” to move 6 to 7 petabytes of data from GCP, due to egress costs (though 37Signals was able to work a deal to use credits to pay for some of the costs).

“This whole idea that the cloud is going to give you mobility was not really true,” DHH said.

Cloud Spend

Hightower and DHH also discussed how cloud finances may be less scrutinized than regular business expenses. DHH related how you can see $600,000 of Dell servers, out there on a loading dock somewhere.

Whereas with the cloud, you are never sure where the money goes. You can click a button to spin up an authorization service (as Hightower used as an example), forget about it and let it run up thousands of dollars in monthly charges on the corporate account.

This is part of why it’s possible to save so much money moving out of the cloud. This formidable sales force is fully paid up AND the business is killing it with ~40% margins. I respect the hell of that accomplishment, but I don’t want to personally pay for it. https://t.co/dPF5bra1CB

— DHH (@dhh) December 21, 2023

The complexity of cloud bills has given rise to an entirely new industry, FinOps, to help organizations optimize their cloud spend.

“It’s really difficult to understand your cloud bill,” DHH said. “When it’s that difficult to understand how you’re spending that much money, someone is getting away with something. That’s how I see it.”

Back to Nature

DHH likened clouds to “merchants of complexity” where they are incentivized to make things as complex as possible to keep customers hooked. He compared that to the original Internet, which was not built on complex cloud services geared for multi-tenancy, but rather on simpler tools such as Linux and PHP, which anyone could use without cost.

This is not to say cloud has zero value for all use cases, Hightower and DHH agreed.

Clouds make perfect sense in many cases, for start-ups that do not know how much infrastructure they will need, and also for enterprises with a lack of expertise and money to burn.

For many companies in the middle, though a lot of profit margin can be recovered by reducing cloud costs and running things in-house instead, the two argued.

Give the whole enjoyably frank discussion a listen here:

This was a really great, nuanced, curious, and courteous discussion about the pros and cons of cloud, self-hosting, simplicity, and first principles. I almost can’t believe it happened here on X 😂❤️ https://t.co/cJZ4A3pJ6g

— DHH (@dhh) December 21, 2023