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McKinsey on the cloud: Nick Carr gets it right

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Was thinking about posting a response to the recent McKinsey report on cloud computing for large enterprises, but then came across Nick Carr’s post and he’s spared me the task.  :-)  Nick’s analysis is spot on, and is worth quoting a full paragraph. 

“Nevertheless, the McKinsey analysis is a valuable one, not least because it underscores how early we are in the development of the utility-computing grid - and why we shouldn't expect large companies to begin shutting down their data centers any time soon. Then again, I don't know of any large company that is even considering such a move today or any reasonable analyst that would suggest it. The scenario McKinsey analyzes - the wholesale replacement of a large enterprise computing operation with rented space within an external cloud - is a bot of a straw man. The real opportunity that the cloud offers large companies today is as a supplement or complement to their in-house operations rather than as a complete replacement. The cloud model offers a way to gain access to additional computing and storage capacity, particularly to cover fluctuations in demand or carry out a short-term data-crunching exercise, without having to make capital investments in new equipment or hire more workers. The cloud also, of course, provides a way to tap into powerful software-as-a-service applications that can provide substantial savings, not only in equipment and labor but in licensing and maintenance fees, over the cost of installing an in-house application. (The McKinsey analysis ignores those opportunities.)”

In short, the McKinsey report analyzes a scenario that is grossly unrealistic, and fails to consider much of the value proposition the cloud can create.  To see the full McKinsey report for yourself here.

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