April 17, 2009, 7:53 PM — The response to McKinsey's recent report, "Clearing the air on cloud computing," has been overwhelming. The report claims that cloud computing doesn't have all the silver linings it claims, and it is particularly a bad deal for larger companies. The report indicates that enterprise companies will actually save money by running their own data centers, and instead recommends that they move towards server virtualization.
Throughout the report, McKinsey calls the excitement around cloud computing "irrational exuberance", saying it is over-hyped, and they're right, it has been. Any new technology is over-hyped, it's the nature of this business. It doesn't mean it's not worthwhile. One potential chink in the armor of their argument though, is that they use Amazon Web Services for comparison purposes, citing that an enterprise using Amazon would actually spend more than they would running their own data center. This business is constantly evolving, and there are dozens of startups and incumbent providers offering cloud services, and it's likely to get a lot more competitive--so just citing Amazon's cost structure just doesn't give the whole cost picture. According to a TechCrunch report, the McKinsey study actually does some hyping of its own, hyping the costs involved in cloud computing, and understating the dynamic changes happening in the cloud market.
The study does agree that cloud computing will deliver benefit for small and medium sized businesses, and smaller customers have always been the sweet spot for vendors selling cloud services anyway--so if you're selling cloud services to SMBs, don't let McKinsey rain on your parade.