Cloud computing still too expensive, unreliable for large enterprises: McKinsey
While acknowledging the potential of cloud computing for small and medium companies, a new report by consultants, McKinsey & Company, has identified technical, operational and financial hurdles for the adoption of cloud platforms for large public and private enterprises.
According to the report, entitled “Clearing the air on cloud computing”, current cloud computing offerings are not cost effective compared to large enterprise data centres and lack the security and reliability required by large corporations.
The report compared the current EC2 offerings from Amazon Web Services and the total cost of operating a typical enterprise data centre environments and found that going with the EC2 cloud service can cost enterprises considerably more in most instances. The findings showed that subscribing to on-demand Windows server capacity from EC2 costs in the area of US$180 per CPU monthly, or 4 times the US$45 per CPU per month for operating the typical enterprise data centre.
“Most EC2 options are more costly than TCO for a typical data center,” wrote the author of the report, Will Forrest. “Enterprises could get lower TCO through pre-pay agreements – but only for Linux systems. The cost of cloud must come down significantly for outsourcing a complete data centre to make economic sense.”
In another comparison, the report found that the typical CPN/month cost for a 3GHz dual-core Xeon Windows-based server in a typical data centre would cost up to 144% more if the infrastructure was migrated to the EC2 Windows configuration despite a 10%-15% reduction in labour costs.
Another hurdle that cloud computing providers must overcome to support large enterprises is reliability.
“Most enterprises (necessarily or unnecessarily) set their SLAs uptimes at 99.99% or higher, which cloud providers have not yet been prepared to match,” Forrest said, pointing out that Amazon’s EC2 service only offers an SLA of 99.95% while its sister service, Amazom S3 is limited to 99.9%.
The report adds that CIOs can achieve much of the benefits of cloud services by adoption of virtualisation in their own infrastructure.
“Large enterprises can achieve server utilisation rates similar to those cloud providers are achieving from their platforms and, by adopting data centre best practices, can drive down server TCO by more than 50%,” Forrest said.
Most of the gains are achievable through standard virtualisation, while business level transparency of the actual TCO, improve labour efficiencies and platform standardisation offer further optimisation. In other words, CIOs can create their own private clouds to get the same benefits.
“Publicly-announced private clouds are essentially an aggressive virtualisation program on top of the traditional enterprise IT stack,” Forrest said.
DEFINITION NEEDED
Meanwhile, the report says that a lack of clear definition for cloud services can potentially fragment cloud technologies and services.
Without a clear definition, CIOs of enterprises do not have a standard platform to “make informed investment decisions,” while technology and services vendors will not be able to “build meaningful products, marketing, and sales strategies that translate into real value for their customers,” the report noted, adding that a clear definition is also needed to move towards standards that promote interoperability amongst cloud products.
This article was first published by CommsDay International
Category: Cloud computing, Featured articles
Great post, interesting to see it from this side. Everything you read is the savings that the cloud can offer a business. It appears that the cloud may not be that cheap for larger firms, however what about the small shops? I still see a hybrid of some apps in the cloud with a combination of “on premise” storage. It will be interesting.
Another cost factor is the cost now for available, you still need quality bandwidth for on premise or private clouds, however many small businesses try to accomplish with low cost DSL services.
So some maturity is still to happen in the market, however it will mature.
Stuart Crawford
Calgary, AB
http://blog.itsuccessmentor.com
[...] Lastly, it also describes clouds as pay per use, which is available in most cases, but is often the most expensive option in cloud subscriptions – as a recent McKinsey report found. [...]