The recent McKinsey report “Clearing the air on cloud computing” has caused quite a bit of stir within the cloud community, and I can see why. While it definitely brings a good deal of analysis to the table, I feel it is somewhat generalized, makes assumptions and does overlook some key points.
First and foremost, this article is NOT going to be an analytical discussion of the cost of running or setting up a datacenter vs. an Amazon EC2 Windows instance. I’m not a financial analyst. Honestly, calculating the Total Cost of Assets (TCA) or Total Cost of Operations (TCO) causes my eyes to roll back into my head leaving me gasping for air. Don’t get me wrong, it seems like some good effort was made analyzing data and formulating conclusions. The problem is, I feel that they were on a jetliner, shooting through the clouds with the shades 1/2 down.
Before I start with my own analysis and commentary, I would like to reference a few responses I have read that somewhat chastise McKinsey.
Three “Rebuttal” Articles to Read
The first comes from CIO IT Drilldown’s Virtualization site. In his article “McKinsey Cloud Computing Report Conclusions Don’t Add Up,” Bernard Golden does the major lifting for me in terms of analysis. I have highlighted some key points from the article that I viewed to be particularly important (my highlighted version of the article is here). I particularly enjoyed Golden’s rebuttal to the analysis of cost calculations, namely use of EC2 Windows instances, headcounts that don’t add up and other “less visible” capital expenses for facilities and other assets. Also as Golden points out, McKinsey proposes that better efficiencies and savings can be realized through virtualization within the organization. To me, the McKinsey recommendation seems a bit counter-intuitive: “Don’t go with a vendor whose expertise IS virtualization, hardware, infrastructure, et al. Instead, DO try to do it yourself, with tremendous CapEx & OpEx expense.” Hmmm, makes sense to me, NOT! Lastly, I particularly liked Golden’s 3 recommendations (quoted from article):
- Review your portfolio of applications to understand what cloud computing means to you.
- Create a viable financial model for assessing the true costs of internal hosting.
- Evaluate the potential for an internal cloud even if the numbers don’t work with an external cloud provider.