Welcome!

Cognitive Computing Authors: Yeshim Deniz, Elizabeth White, Liz McMillan, Pat Romanski, Zakia Bouachraoui

Related Topics: @CloudExpo

@CloudExpo: Article

Cloud Computing Debate: Booz Allen Hamilton Comments on Recent McKinsey & Co. Report

Two Booz Allen Hamilton Principals offer their take on McKinsey & Co. view of cloud computing.

Cloud Musings

(In a recent discussion document titled "Clearing the air on cloud computing", Will Forrest of McKinsey & Co. offered his view on cloud computing. Unedited comments on the report from Mike Cameron and Rod Fontecilla, Booz Allen Hamilton Principals are provided below, published at their request.)

The recent McKinsey report on cloud computing “Clearing the air on cloud computing” has caused a bit of a stir, primarily since it purports to demonstrate that cloud computing can be twice as expensive as traditional data centers in some applications. Since this report makes a claim to an analysis of cloud economics, we would like to weigh in with a couple of comments regarding the report.

The McKinsey report, as presented, seeks to be the “other voice” and offer a contrarian view of cloud computing. The first thing we noted was the statement, on slide 7, that “Cloud computing can divert IT departments’ attention from technologies that can actually deliver sizeable benefits; e.g., aggressive virtualization.” This view seems to be an underlying motif in subsequent discussions, yet it is a premise that is not substantiated.

We are also somewhat taken aback by a management consulting firm is proposing an “industry standard definition” for cloud computing, having rejected, for various reasons, the definitions used by the IT vendors and data center owners that are currently creating cloud computing in the industry, as well as by centers of academic excellence (e.g., the computer science department at Berkeley). We are surprised that McKinsey rejected a definition of cloud computing (slide 11) because the definition doesn’t provide “definitive economic implications.” Webster’s dictionary defines “bicycle” without making any economic implications.

Definitions say what something is. Economic implications are a value judgment. We do not understand how a definition, absent a value judgment. It is also an assertion by McKinsey that the definition fails because it does “not distinguish cloud services from clouds.” Interestingly, on slide 17, a cloud service is defined as having two of the three key requirements of a cloud. This leaves McKinsey’s definition of cloud services to mean “not quite a cloud.” The report does not attempt to define what cloud services are, stating only that “it could run on top of a cloud.”

They state that cloud offerings “are most attractive” to small and medium sized business, and “there are significant hurdles to the adoption of cloud services by large enterprises.” That would come as quite a shock to Target, Eli Lily, the New York Stock Exchange, the American Stock Exchange, NSADAQ, Toyota, E*Trade, Computer Associates, and a host other large enterprises that have been in the cloud for a couple of years.

The “significant hurdles” to cloud adoption by large organizations appear to be McKinsey’s opinions but not supported by hard data. For example, “business perceptions of increased IT flexibility and effectiveness will have to be properly managed.” What perceptions? Managed by whom?

We are trying to figure out how McKinsey got to the numbers they cite, on slide 24, in their comparison of CPU costs per month in the data center versus in the cloud. Taking the $14K/server cited on slide 23, and dividing that out over a three year refresh cycle, costing it out by month, and dividing by 8 to reflect the cost of each processing core, I got to $48/month. But that price does not reflect any power, facilities, or labor, so the “Total Cost of Assets” MUST be higher than the figure cited by McKinsey, unless they changed assumptions between examples. They also make an assumption of an Amazon large instance (discounted by 25% for reasons that are not provided) and calculate a cost per month of $270.

Where this example appears to break down is that, for the data center, they are calculating the cost per core, while for Amazon they are calculating the cost of a Large EC2 instance, which is four cores. On a single-core basis, an EC2 Small instance is only $72 month, running non-stop. Assuming the same 10% utilization used in other examples, the comparison should be $48/month for the data center and $7.20 month for EC2.

Their assertion that moving a data center to the cloud provides a 10-15% savings in labor seems to be well off the mark. In the discussions with cloud providers, we learned that labor went from being one of the largest components of cost to an insignificant component of cost, largely because of virtualization (reduced hardware baseline plus ease of provisioning logical, rather than physical, devices) and elasticity (automated resource management).


( Thank you. If you enjoyed this article, get free updates by email or RSS - KLJ )

More Stories By Kevin Jackson

Kevin Jackson, founder of the GovCloud Network, is an independent technology and business consultant specializing in mission critical solutions. He has served in various senior management positions including VP & GM Cloud Services NJVC, Worldwide Sales Executive for IBM and VP Program Management Office at JP Morgan Chase. His formal education includes MSEE (Computer Engineering), MA National Security & Strategic Studies and a BS Aerospace Engineering. Jackson graduated from the United States Naval Academy in 1979 and retired from the US Navy earning specialties in Space Systems Engineering, Airborne Logistics and Airborne Command and Control. He also served with the National Reconnaissance Office, Operational Support Office, providing tactical support to Navy and Marine Corps forces worldwide. Kevin is the founder and author of “Cloud Musings”, a widely followed blog that focuses on the use of cloud computing by the Federal government. He is also the editor and founder of “Government Cloud Computing” electronic magazine, published at Ulitzer.com. To set up an appointment CLICK HERE

IoT & Smart Cities Stories
Cloud-enabled transformation has evolved from cost saving measure to business innovation strategy -- one that combines the cloud with cognitive capabilities to drive market disruption. Learn how you can achieve the insight and agility you need to gain a competitive advantage. Industry-acclaimed CTO and cloud expert, Shankar Kalyana presents. Only the most exceptional IBMers are appointed with the rare distinction of IBM Fellow, the highest technical honor in the company. Shankar has also receive...
DXWorldEXPO LLC announced today that ICOHOLDER named "Media Sponsor" of Miami Blockchain Event by FinTechEXPO. ICOHOLDER gives detailed information and help the community to invest in the trusty projects. Miami Blockchain Event by FinTechEXPO has opened its Call for Papers. The two-day event will present 20 top Blockchain experts. All speaking inquiries which covers the following information can be submitted by email to [email protected] Miami Blockchain Event by FinTechEXPOalso offers sp...
DXWordEXPO New York 2018, colocated with CloudEXPO 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 at Cloud Expo, taking place November 12-13 in New York City, NY, is co-located with 22nd international CloudEXPO | first international DXWorldEXPO and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time t...
Headquartered in Plainsboro, NJ, Synametrics Technologies has provided IT professionals and computer systems developers since 1997. Based on the success of their initial product offerings (WinSQL and DeltaCopy), the company continues to create and hone innovative products that help its customers get more from their computer applications, databases and infrastructure. To date, over one million users around the world have chosen Synametrics solutions to help power their accelerated business or per...
Charles Araujo is an industry analyst, internationally recognized authority on the Digital Enterprise and author of The Quantum Age of IT: Why Everything You Know About IT is About to Change. As Principal Analyst with Intellyx, he writes, speaks and advises organizations on how to navigate through this time of disruption. He is also the founder of The Institute for Digital Transformation and a sought after keynote speaker. He has been a regular contributor to both InformationWeek and CIO Insight...
When talking IoT we often focus on the devices, the sensors, the hardware itself. The new smart appliances, the new smart or self-driving cars (which are amalgamations of many ‘things'). When we are looking at the world of IoT, we should take a step back, look at the big picture. What value are these devices providing. IoT is not about the devices, its about the data consumed and generated. The devices are tools, mechanisms, conduits. This paper discusses the considerations when dealing with the...
Machine learning has taken residence at our cities' cores and now we can finally have "smart cities." Cities are a collection of buildings made to provide the structure and safety necessary for people to function, create and survive. Buildings are a pool of ever-changing performance data from large automated systems such as heating and cooling to the people that live and work within them. Through machine learning, buildings can optimize performance, reduce costs, and improve occupant comfort by ...
Digital Transformation is much more than a buzzword. The radical shift to digital mechanisms for almost every process is evident across all industries and verticals. This is often especially true in financial services, where the legacy environment is many times unable to keep up with the rapidly shifting demands of the consumer. The constant pressure to provide complete, omnichannel delivery of customer-facing solutions to meet both regulatory and customer demands is putting enormous pressure on...
Bill Schmarzo, Tech Chair of "Big Data | Analytics" of upcoming CloudEXPO | DXWorldEXPO New York (November 12-13, 2018, New York City) today announced the outline and schedule of the track. "The track has been designed in experience/degree order," said Schmarzo. "So, that folks who attend the entire track can leave the conference with some of the skills necessary to get their work done when they get back to their offices. It actually ties back to some work that I'm doing at the University of San...