McKinsey and the Cloud

McKinsey&Company just released an interesting document on Cloud Computing: Clearing the air on cloud computing. Very interesting thoughts. I agree with the idea that over hyping Cloud Computing (and any other new technology) is risky and when done on purpose, irresponsible. I also liked their Cloud definition, it seemed pragmatic, down to earth.

I was surprised by their conclusion that AWS would not be cost effective for large corporations. I know AMZN has some large customers and I'm sure they will have some follow up commentary. In terms of the cost analysis, I think the author is missing two points. First, I think that the effort to initiate or further deploy virtualization in the corporate data center has a not zero cost. Starting from training and support. It obviously does not happen overnight either. Secondly and more important in my opinion is the opportunity cost. I believe that the financial rewards offered by the Cloud's speed to market far outweigh the potential incremental cost (assuming they are correct and it is more expensive for large corporations--I have my doubts). 

For example, let's take a hypothetical example of a multi-billion dollar media company, that would be a large corporation in my mind. They need to analyze 4 to 6 TB of clickstream data every month to fine tune their advertising efforts. The ability to execute on their strategy could easily bring additional revenues in the 8 digit range. They have two options: 1) go with their current data center 2) deploy MapReduce/Hadoop at AWS. Option 1 would easily take 6 to 8 months to complete. Option 2 could be up and running in days at most. To me that speed to market is priceless. In the short and long term.