McKinsey Cloud research kicks up a storm

A research paper on Cloud Computing by McKinsey & Company entitled ‘Clearing the Air on Cloud Computing’ has kicked up a right old storm with various luminaries either for or against it. The premise of the results of the article are that for large organisations, if they adopt the cloud model, then they would be making a mistake and most likely will lose money, as outsourcing from a more traditional data centre will likely double the cost (($150 per month per unit for data center vs $366 per month per unit for Amazon virtual cloud) . The New York times has an excellent summary of the study here.

Many of the complaints focus on McKinsey totally missing the “Private Cloud” and basing their assumptions on Public Clouds only. However there seems to be a general consensus that Amazon is too expensive and will need to adjust to survive. I’m not convinced about this. It is not the first study to suggest that Amazon are more expensive to use than a traditional data centre. Amazon seems to have been doing just fine up to now and they seem to be getting Enterprises to move across. Whether they replace a whole corporate data centre misses the point. I think this is unlikely, but for certain applications and service it makes perfect sense. Also, more competition unfolds then economics suggest that prices will naturally adjust if they need to.

You can download a PDF of the McKinsey presentation on this paper here.

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