Cloudonomics: The Business Value of Cloud Computing, + Website

Benchmark Data

Ideally, these arguments help us think better about whether there are economies of scale that drive price advantages, but are somewhat theoretical. What do the actual data show?

McKinsey & Company is perhaps the most prestigious management consulting group in the world, found in the boardrooms of the Fortune 500 on a daily basis. At McKinsey, Will Forrest is a principal and is responsible for the bombshell report “Clearing the Air on Cloud Computing.”7 Forrest and his colleagues continue to do in-depth analyses, relying not only on their strategy insights but also in-depth multiclient studies.

What Forrest showed was that the total cost of assets for a “typical data center” in a larger enterprise was almost always less than on-demand resources from a major cloud provider, regardless of the instance size—small, medium, large, or extra-large—and regardless of the operating system—Microsoft Windows or Linux. The assumption regarding total cost of assets included a very realistic 10% utilization, 10 cents per kilowatt-hour, and $14,000 per server for a two-way, four-core server.

Forrest also showed that for very small compute jobs, with prepaid instances running Linux, this leading service provider could cost one quarter to one half the typical data center price.

Forrest included a 15% reduction in labor costs by moving to the cloud, after looking at a variety of roles: application support and development, architecture, business analysis, client services, database administrators, ...