This week I spent several days at the Uptime Institute's Symposium 2009, a conference where facilities management meets IT.  The focus for this year's conference was onGreen.  I spoke several times, moderatig a panel on outsourcing versus cloud computing, and giving a mini-keynote on SaaS and Cloud Computing.

At that conference, McKinsey announced a report on Cloud computing, claiming that the economics only made sense for small and medium sized companies but not for enterprises with their own data centers.  The analysis then compared the cost of using Amazon's service with the cost of a typical data center.  McKinsey also assunmed that the firm would move all of its computing to the cloud -- we don't know of any organizations that plan to do that.

As you might guess lots of conversation and controvery ensued.

I guess I'd say they don't understand.  Cloud computing may not be cheaper if all you're looking at is a comparison of hardware and an assumption of people costs.  The value of cloud computing lies elsewhere: 

• In the flexibility of being able to gain immediate access to additional computing (or to shrink your system when you don't need it).
• In the difference in Time to Market for new business opportunities.
• In the additional value (not included in the McKinsey study) provided in clouds that offer to manage the hardware (via systems software and other offerings) or to provide applications (SaaS). There is a brilliant explication of this byBalakrishna Narasimhan which I recommend.

Many large companies are already taking advantage of SaaS -- Workday, for example, has clients for its HR and Financials with more than 20,000 employees.  Public clouds can be ideal places for large companies to use specific applications or obtain additional capacity.  Private clouds (which may not be clouds at all, in the sense that the organization may own the hardware and software rather than temporarily rent its use) are intended primarily for large enterprises.  I am certain that schemes which will make these private clouds into capital-free propositions (if not available on a month-to-month basis) is available to any customer who requires it. 

I expect clouds to be popular under any circumstances.  Given our current financial probems, I expect them to appeal to a broader audience, especially to large enterprises.

Please read Amy Wohl's original blog entry here..