Cloud computing too costly for enterprise

A study into cloud computing by McKinsey has found that cloud computing doesn’t make financial sense for large enterprises.

The study,“Clearing the Air on Cloud Computing,” estimates that shifting the average data centre to a cloud model would nearly double the cost to a company compared to running its own systems.

“Clouds already make sense for many small and medium-size businesses, but technical, operational and financial hurdles will need to be overcome before clouds will be used extensively by large public and private enterprises,” the report states.

“Rather than create unrealisable expectations for “internal clouds,” CIOs should focus now on the immediate benefits of vitalising server storage, network operations, and other critical building blocks.”

The company used data from Amazon’s operations and estimated that total cost of the data centre functions would be US$366 a month per unit of computing output, compared with US$150 a month for the conventional data centre.

The figures take into account the cost of setting up and running a data centre, the tax write offs that the owning company can make as well as the cost of migrating to cloud systems and user support.

The report suggests that companies looking to lower costs should instead look to virtualisation as a way to get more out of their systems. The company suggests that server utilisation at data centres averages at around 10 per cent but this can be almost doubled with virtualisation software.

Cloud computing does however make financial sense for small and medium sized firms, which McKinsey classes as those earning US$500 million or less annually.