Renting computers a ‘bad deal’ • The Register

Listening to the vendors, the analysts, hell, even the government – the direction of travel is obvious. All your server-side computing resources will move to the cloud, like it or not.

Bucking that inevitable trend, however, is David Heinemeier Hansson, CTO of project management platform Basecamp.

“Renting computers is (mostly) a bad deal for medium-sized companies like ours with stable growth. The savings promised in reduced complexity never materialized. So we’re making our plans to leave,” he explained.

For Basecamp, the cloud made sense in with simple, low traffic applications, where complexity was nixed by starting with fully managed services. The model also offered advantages when there are wild swings or towering peaks in usage. “There’s nothing like the cloud when that happens, like we learned when launching [email service] HEY, and suddenly 300,000 users signed up to try our service in three weeks instead of our forecast of 30,000 in six months,” he said.

However, once users established steady and predictable demand patterns for their applications, the benefits of the cloud evaporated, he said. By continuing to operate in the cloud, Basecamp was sometimes paying an “almost absurd premium” for computing capacity they in all likelihood would never need.

“It’s like paying a quarter of your house’s value for earthquake insurance when you don’t live anywhere near a fault line,” said Hansson, adding, “Yeah, sure, if somehow a quake two states over opens the earth so wide it cracks your foundation, you might be happy to have it, but it doesn’t feel proportional, does it?”

He went on to criticize how cloud companies were making “obscene margins” on the computers they rent out. Given Gartner’s latest analysis that cloud providers won’t cut prices to help recession-hit companies, that’s unlikely to change any time soon.

To get a sense of how Basecamp’s boat is beating against the current, figures from Canalys published in August showed $62.3 billion was lavished on Infrastructure-as-a-Service (IaaS) in the three months ended June, up 33 percent year-on-year.

Meanwhile, leaders AWS, Microsoft, and Google were increasing their dominance, growing ahead of the market as a whole at 42 percent per annum. Together they accounted for 63 percent of market revenues.

Observers with long enough memories will recall Basecamp is no stranger to pulling out of things, including a sensible approach to people management and public relations.

In May 2021, CEO Jason Fried issued a public apology following a major bust-up over new policies that discouraged employees from discussing “societal politics” at work.

“David [Heinemeier Hansson] and I completely own the consequences, and we’re sorry. We have a lot to learn and reflect on, and we will,” he said at the time. ®