David Heinemeier Hansson, Ruby on Rails creator and 37Signals CTO, says the company is poised to save more than $10 million over the next five years from its cloud exit.

37Signals was one of the firms that helped lead the tech industry into the cloud and into the arms of software-as-a-service (SaaS), but the company has recently reversed course and is intent on helping companies take back control of their software. The company launched Once.com, with CEO Jason Fried highlighting the problems with SaaS.

Today, most software is a service. Not owned, but rented. Buying it enters you into a perpetual landlord–tenant agreement. Every month you pay for essentially the same thing you had last month. And if you stop paying, the software stops working. Boom, you’re evicted.

In the early 2000s, we were among the early pioneers leading the industry into the SaaS revolution. Now, 20 years later, we intend to help lead the way out. The post–SaaS era is just around the corner.

In a blog post, Hansson says the company stands to reap a handsome reward for its transition away from the cloud.

We finished pulling seven cloud apps, including HEY, out of AWS and onto our own hardware last summer. But it took until the end of that year for all the long-term contract commitments to end, so 2024 has been the first clean year of savings, and we’ve been pleasantly surprised that they’ve been even better than originally estimated.

For 2024, we’ve brought the cloud bill down from the original $3.2 million/year run rate to $1.3 million. That’s a saving of almost two million dollars per year for our setup! The reason it’s more than our original estimate of $7 million over five years is that we got away with putting all the new hardware into our existing data center racks and power limits.

Hansson says all the money spent on in-house hardware was recouped just from savings in 2023.

The expenditure on all that new Dell hardware – about $700,000 in the end – was also entirely recouped during 2023 while the long-term commitments slowly rolled off. Think about that for a second. This is gear we expect to use for the next five, maybe even seven years! All paid off from savings accrued during the second half of 2023. Pretty sweet!

But it’s about to get sweeter still. The remaining $1.3 million we still spend on cloud services is all from AWS S3. While all our former cloud compute and managed database/search services were on one-year committed contracts, our file storage has been locked into a four(!!)-year contract since 2021, which doesn’t expire until next summer. So that’s when we plan to be out.

The company isn’t done, with plans to move its 10 petabytes away from Amazon S3 and to its own hardware.

When we move out next summer, we’ll be moving to a dual-DC Pure Storage setup, with a combined 18 petabytes of capacity. This setup will cost about the same as a year’s worth of AWS S3 for the initial hardware. But thanks to the incredible density and power efficiency of the Pure flash arrays, we can also fit these within our existing data center racks. So ongoing costs are going to be some modest service contracts, and we expect to save another four million dollars over five years.

This brings our total projected savings from the combined cloud exit to well over ten million dollars over five years! While getting faster computers and much more storage.

Hansson goes on to say that 37Signals’ example has sparked interest throughout the industry, with companies increasingly interested in making the same transition.

Since we originally announced our plans to leave the cloud, there’s been a surge of interest in doing the same across the industry. The motto of the 2010s and early 2020s – all-cloud, everything, all the time – seems to finally have peaked. And thank heavens for that!

The cloud can still make a lot of sense, though. Especially in the very early days when you don’t even need a whole computer or are unsure whether you’ll still be in business by the end of the year. Or when you’re dealing with enormous fluctuations in load, like what motivated Amazon to create AWS in the first place.

But as soon as the cloud bills start to become substantial, I think you owe it to yourself, your investors, and common business sense to at least do the math. How much are we spending? What would it cost to buy these computers instead of renting them? Could we try moving some part of the setup onto our own hardware, maybe using Kamal or a similar tool? The potential savings from these answers can be shocking.

There has been growing backlash against the rising cost of cloud services. Reports show that cost visibility is a major issue for many companies, and even the biggest cloud provider struggling to convince customers the cloud can save them money long-term.

With one of the leading SaaS companies turning its back on the very industry it helped pioneer, and saving millions in the process, 37Signals could once again help lead a tech revolution.