McKinsey Says Cloud Computing ‘Makes No Sense’

April 16, 2009
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McKinsey, that fine think tank of consulting intellectuals, recently declared that cloud computing doesn’t make sense, an attempt one suspects to throttle in its infancy a paradigm that could make companies across the world more competitive by helping them cut costs precisely when they need it the most.  The attempt to paint cloud as virtualization rather than remote computing is another attempt to cloud (you’ll excuse the pun) the air rather than clear it.  A more honest consulting company would have pointed out industry affiliations and provided disclaimers on which companies they are representing or have represented.

Read other comments at the NYT article

Its study uses Amazon.com’s Web service offering as the price of outsourced cloud computing, since its service is the best-known and it publishes its costs. On that basis, according to McKinsey, the total cost of the data center functions would be $366 a month per unit of computing output, compared with $150 a month for the conventional data center. “The industry has assumed the financial benefits of cloud computing and, in our view, that’s a faulty assumption,” said Will Forrest, a principal at McKinsey, who led the study.

My ta

McKinsey, that fine think tank of consulting intellectuals, recently declared that cloud computing doesn’t make sense, an attempt one suspects to throttle in its infancy a paradigm that could make companies across the world more competitive by helping them cut costs precisely when they need it the most.  The attempt to paint cloud as virtualization rather than remote computing is another attempt to cloud (you’ll excuse the pun) the air rather than clear it.  A more honest consulting company would have pointed out industry affiliations and provided disclaimers on which companies they are representing or have represented.

Read other comments at the NYT article

Its study uses Amazon.com’s Web service offering as the price of outsourced cloud computing, since its service is the best-known and it publishes its costs. On that basis, according to McKinsey, the total cost of the data center functions would be $366 a month per unit of computing output, compared with $150 a month for the conventional data center. “The industry has assumed the financial benefits of cloud computing and, in our view, that’s a faulty assumption,” said Will Forrest, a principal at McKinsey, who led the study.

My take on this is that cloud computing will have lower costs as economies of scale kick in, as they did for nearly all technologies. McKinsey partners must be having a hard time meeting their annual bonuses if they have not factored this basic assumption in their cost projections. Cloud computing just converts this to a mass infrastructure from the present scenario where you pay annual licenses for software that you use for less than 60% of capacity in a day, and hardware that you find obsolete in 3-4 years–which gives accountants a method to help you with depreciation and tax benefits. Renting a computer in the sky is simpler and don’t need any consultant to help advise what configuration you need.

Mckinsey has deep connections with the outsourcing industry in India from their seminal paper in 1999, to their first concept Knowledge Center that helped start it, to their alumni across the outsourcing sector which satisfy a mutual symbiotic relationship, particularly in business research. Cloud computing actually helps with virtual teams, no need for server farms, IT bureaucracies and Indian outsourcing can actually reduce a lot of costs along with American direct users. The intermediaries and consultants would be affected the most.

Indeed, I am speaking on the Cloud Slam 09 precisely on how cloud computing can help narrow the digital divide by giving high power computing to anyone having a thin shell laptop with a browser. Developing countries need access to HPC to better plan their resources and growth in an environmentally optimized manner.

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