McKinsey in the clouds

The consulting company McKinsey has produced a report (Now hidden behind a financial firewall) on the status of cloud computing that’s well worth reading. It provides a much needed discussion on the nature of  “cloud computing” and proposes a sensible definition, including a useful distinction between cloud computing and cloud services.

The report concludes that while cloud computing makes sense for small and medium sized businesses, substantial hurdles need to be overcome before it can be used by large enterprises. In particular it’s claimed that most large enterprises still enjoy lower TCO’s running private data centres. Additionally the report suggests that the cost of private data centres could be even further reduced if CIO’s were to pursue a policy of aggressive virtualization. The impact of such a policy on the sales revenue of sever vendors is not discussed.

Throughout their analysis McKinsey treat cloud computing as essentially an optional deployment strategy. At the moment they are right. However it’s only a matter of time before services are available in a cloud environment that cannot be duplicated in private data centres. Businesses that see these services as providing competitive differentiation will place substantial pressure on CIO’s to migrate to a cloud environment.