Welcome!

Microservices Expo Authors: Liz McMillan, Pat Romanski, Elizabeth White, Yeshim Deniz, Zakia Bouachraoui

Related Topics: @CloudExpo

@CloudExpo: Article

McKinsey Slams the Cloud

Cloud computing can divert IT department's attention from technologies that actually deliver sizeable benefits

McKinsey & Company says that outsourcing your typical big corporate or government data center to a cloud service would cost double what it costs to keep the thing in-house.

The mighty consultant has run up what it figures is a "hype-free" study called "Clearing the Air on Cloud Computing" that recalls the dot.com bubble and warns of the dangers of investing in hype.

Its conclusion is that "cloud computing has shown great promise for start-ups and pet projects for large corporations. However, cloud computing can divert IT department's attention from technologies that actually deliver sizeable benefits."



McKinsey used Amazon's pricing as its point of comparison and determined that the total cost of the data center's functions would be $366 a month per unit of computing output while keeping the work at home only costs $150 a month.

And as for the CAPEX-saving come-on of the cloud, well, owning hardware is more cost-effective than renting it if you throw in the tax deductions for depreciation.

Labor costs are pretty much the same no matter what you do. McKinsey finds 10%-15% of your headcount can be cut by migrating capacity to the cloud, most of it coming out of facilities and touch labor roles like administrators, but the savings is offset by the difference in hardware pricing.

Then there are the abiding security and reliability issues of cloud, the fact that applications may have to be re-architected and that business perceptions of increased IT flexibility and effectiveness will have to be managed. McKinsey also notes that enterprises tend to set their SLA uptimes at 99.99%, a figure cloud providers aren't ready to match.

It says the cost of the cloud has to come down about 144% to make outsourcing a complete data center economically sensible.

It allows that the cloud may make sense for some small and medium-sized companies with revenues of no more than $500 million - if they limit themselves to pre-paid Linux servers.

It advises big enterprises to use virtualization, the more aggressive the better. It reckons they can get server utilization rates similar to cloud providers.

It figures going in that a typical big-time data center has 10% capacity utilization. That number, it claims, can be increased to 18% or even 35%.

And best practices, it says, can drive down server TCO by more than 50%.

The study includes a definition of cloud computing and says the publicly announced private clouds aren't clouds at all because the enterprise can't avoid capital expenditures. It says they're essentially aggressive virtualization on top of traditional enterprise IT stacks.

McKinsey defines a cloud as hardware-based services offering compute, network and storage capacity where hardware management is highly abstracted from the buyer, buyers incur infrastructure costs as variable OPEX, and infrastructure cost is highly elastic (up and down).

See here.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


Microservices Articles
CloudEXPO New York 2018, colocated with DXWorldEXPO New York 2018 will be held November 11-13, 2018, in New York City and will bring together Cloud Computing, FinTech and Blockchain, Digital Transformation, Big Data, Internet of Things, DevOps, AI, Machine Learning and WebRTC to one location.
DevOpsSummit New York 2018, colocated with CloudEXPO | DXWorldEXPO New York 2018 will be held November 11-13, 2018, in New York City. Digital Transformation (DX) is a major focus with the introduction of DXWorldEXPO within the program. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive over the long term.
Enterprise architects are increasingly adopting multi-cloud strategies as they seek to utilize existing data center assets, leverage the advantages of cloud computing and avoid cloud vendor lock-in. This requires a globally aware traffic management strategy that can monitor infrastructure health across data centers and end-user experience globally, while responding to control changes and system specification at the speed of today’s DevOps teams. In his session at 20th Cloud Expo, Josh Gray, Chie...
Containers and Kubernetes allow for code portability across on-premise VMs, bare metal, or multiple cloud provider environments. Yet, despite this portability promise, developers may include configuration and application definitions that constrain or even eliminate application portability. In this session we'll describe best practices for "configuration as code" in a Kubernetes environment. We will demonstrate how a properly constructed containerized app can be deployed to both Amazon and Azure ...
Most DevOps journeys involve several phases of maturity. Research shows that the inflection point where organizations begin to see maximum value is when they implement tight integration deploying their code to their infrastructure. Success at this level is the last barrier to at-will deployment. Storage, for instance, is more capable than where we read and write data. In his session at @DevOpsSummit at 20th Cloud Expo, Josh Atwell, a Developer Advocate for NetApp, will discuss the role and value...
Modern software design has fundamentally changed how we manage applications, causing many to turn to containers as the new virtual machine for resource management. As container adoption grows beyond stateless applications to stateful workloads, the need for persistent storage is foundational - something customers routinely cite as a top pain point. In his session at @DevOpsSummit at 21st Cloud Expo, Bill Borsari, Head of Systems Engineering at Datera, explored how organizations can reap the bene...
In his session at 20th Cloud Expo, Scott Davis, CTO of Embotics, discussed how automation can provide the dynamic management required to cost-effectively deliver microservices and container solutions at scale. He also discussed how flexible automation is the key to effectively bridging and seamlessly coordinating both IT and developer needs for component orchestration across disparate clouds – an increasingly important requirement at today’s multi-cloud enterprise.
In his session at 20th Cloud Expo, Mike Johnston, an infrastructure engineer at Supergiant.io, discussed how to use Kubernetes to set up a SaaS infrastructure for your business. Mike Johnston is an infrastructure engineer at Supergiant.io with over 12 years of experience designing, deploying, and maintaining server and workstation infrastructure at all scales. He has experience with brick and mortar data centers as well as cloud providers like Digital Ocean, Amazon Web Services, and Rackspace. H...
SYS-CON Events announced today that DatacenterDynamics has been named “Media Sponsor” of SYS-CON's 18th International Cloud Expo, which will take place on June 7–9, 2016, at the Javits Center in New York City, NY. DatacenterDynamics is a brand of DCD Group, a global B2B media and publishing company that develops products to help senior professionals in the world's most ICT dependent organizations make risk-based infrastructure and capacity decisions.
Consumer-driven contracts are an essential part of a mature microservice testing portfolio enabling independent service deployments. In this presentation we'll provide an overview of the tools, patterns and pain points we've seen when implementing contract testing in large development organizations.