Welcome!

API Journal Authors: Reinhard Brandstädter, Liz McMillan, Dana Gardner, Cynthia Dunlop, Derek Weeks

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

@ThingsExpo Stories
In his session at 18th Cloud Expo, Bruce Swann, Senior Product Marketing Manager at Adobe, will discuss how the Adobe Marketing Cloud can help marketers embrace opportunities for personalized, relevant and real-time customer engagement across offline (direct mail, point of sale, call center) and digital (email, website, SMS, mobile apps, social networks, connected objects). Bruce Swann has more than 15 years of experience working with digital marketing disciplines like web analytics, social med...
Designing IoT applications is complex, but deploying them in a scalable fashion is even more complex. A scalable, API first IaaS cloud is a good start, but in order to understand the various components specific to deploying IoT applications, one needs to understand the architecture of these applications and figure out how to scale these components independently. In his session at @ThingsExpo, Nara Rajagopalan is CEO of Accelerite, will discuss the fundamental architecture of IoT applications, ...
The essence of data analysis involves setting up data pipelines that consist of several operations that are chained together – starting from data collection, data quality checks, data integration, data analysis and data visualization (including the setting up of interaction paths in that visualization). In our opinion, the challenges stem from the technology diversity at each stage of the data pipeline as well as the lack of process around the analysis.
As cloud and storage projections continue to rise, the number of organizations moving to the cloud is escalating and it is clear cloud storage is here to stay. However, is it secure? Data is the lifeblood for government entities, countries, cloud service providers and enterprises alike and losing or exposing that data can have disastrous results. There are new concepts for data storage on the horizon that will deliver secure solutions for storing and moving sensitive data around the world. ...
What a difference a year makes. Organizations aren’t just talking about IoT possibilities, it is now baked into their core business strategy. With IoT, billions of devices generating data from different companies on different networks around the globe need to interact. From efficiency to better customer insights to completely new business models, IoT will turn traditional business models upside down. In the new customer-centric age, the key to success is delivering critical services and apps wit...
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York and Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty ...
The 19th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit y...
There are several IoTs: the Industrial Internet, Consumer Wearables, Wearables and Healthcare, Supply Chains, and the movement toward Smart Grids, Cities, Regions, and Nations. There are competing communications standards every step of the way, a bewildering array of sensors and devices, and an entire world of competing data analytics platforms. To some this appears to be chaos. In this power panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists will discuss the vast to...
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 19th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo New York Call for Papers is now open.
SYS-CON Events announced today that Enzu, a leading provider of cloud hosting solutions, will exhibit at 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. Enzu’s mission is to be the leading provider of enterprise cloud solutions worldwide. Enzu enables online businesses to use its IT infrastructure to their competitive advantage. By offering a suite of proven hosting and management services, Enzu wants companies to foc...
SYS-CON Events announced today the How to Create Angular 2 Clients for the Cloud Workshop, being held June 7, 2016, in conjunction with 18th Cloud Expo | @ThingsExpo, at the Javits Center in New York, NY. Angular 2 is a complete re-write of the popular framework AngularJS. Programming in Angular 2 is greatly simplified. Now it’s a component-based well-performing framework. The immersive one-day workshop led by Yakov Fain, a Java Champion and a co-founder of the IT consultancy Farata Systems and...
Customer experience has become a competitive differentiator for companies, and it’s imperative that brands seamlessly connect the customer journey across all platforms. With the continued explosion of IoT, join us for a look at how to build a winning digital foundation in the connected era – today and in the future. In his session at @ThingsExpo, Chris Nguyen, Group Product Marketing Manager at Adobe, will discuss how to successfully leverage mobile, rapidly deploy content, capture real-time d...
IoT generates lots of temporal data. But how do you unlock its value? How do you coordinate the diverse moving parts that must come together when developing your IoT product? What are the key challenges addressed by Data as a Service? How does cloud computing underlie and connect the notions of Digital and DevOps What is the impact of the API economy? What is the business imperative for Cognitive Computing? Get all these questions and hundreds more like them answered at the 18th Cloud Expo...
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, will provide an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life ...
SYS-CON Events announced today that ContentMX, the marketing technology and services company with a singular mission to increase engagement and drive more conversations for enterprise, channel and SMB technology marketers, has been named “Sponsor & Exhibitor Lounge Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York City, New York. “CloudExpo is a great opportunity to start a conversation with new prospects, but what happens after the...
SYS-CON Events announced today that 24Notion has been named “Bronze Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. 24Notion is full-service global creative digital marketing, technology and lifestyle agency that combines strategic ideas with customized tactical execution. With a broad understand of the art of traditional marketing, new media, communications and social influence, 24Notion uniquely understands how to con...
The demand for organizations to expand their infrastructure to multiple IT environments like the cloud, on-premise, mobile, bring your own device (BYOD) and the Internet of Things (IoT) continues to grow. As this hybrid infrastructure increases, the challenge to monitor the security of these systems increases in volume and complexity. In his session at 18th Cloud Expo, Stephen Coty, Chief Security Evangelist at Alert Logic, will show how properly configured and managed security architecture can...
When it comes to IoT in the enterprise, namely the commercial building and hospitality markets, a benefit not getting the attention it deserves is energy efficiency, and IoT's direct impact on a cleaner, greener environment when installed in smart buildings. Until now clean technology was offered piecemeal and led with point solutions that require significant systems integration to orchestrate and deploy. There didn't exist a 'top down' approach that can manage and monitor the way a Smart Buildi...
SYS-CON Events announced today BZ Media LLC has been named “Media Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. BZ Media LLC is a high-tech media company that produces technical conferences and expositions, and publishes a magazine, newsletters and websites in the software development, SharePoint, mobile development and Commercial Drone markets.
WebRTC is bringing significant change to the communications landscape that will bridge the worlds of web and telephony, making the Internet the new standard for communications. Cloud9 took the road less traveled and used WebRTC to create a downloadable enterprise-grade communications platform that is changing the communication dynamic in the financial sector. In his session at @ThingsExpo, Leo Papadopoulos, CTO of Cloud9, will discuss the importance of WebRTC and how it enables companies to fo...