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McKinsey Sez: Cloud Computing Best For Small Biz
By Marc Tracy
We love cloud computing. We think it is a phenomenal way for smaller businesses to cut back on costs and level the playing field as they compete with larger corporations, for whom cloud computing tends to be more costly, less practical, or both.
Indeed, the emphasis is on more costly as we look at a new report on cloud computing from consulting powerhouse McKinsey & Co. (the occupational alma mater of new Small Business Administration head Karen G. Mills). Because precisely what the report finds is that cloud computing is more costly than is generally thought...for large companies. But there is a flip-side to this news. In the report's words (page 20, for those who've downloaded): "Cloud offerings are currently most attractive for small and medium-sized enterprises...and most customers of clouds are small businesses." You can take a look at the graph to see why.
Now, in case you were wondering, it is likely that cloud computing will get less cheap for large corporations too; or so, anyway, argues TechCrunch (which is how we found the report in the first place, incidentally). TechCrunch argues that innovation will lead to increased competition, which in turn will lead to price-cutting.
Still, however much innovation and price-cutting here will help large corporations, it's hard to conceive of how they wouldn't also help small ones. And it's also hard to conceive how cloud computing hasn't made it ten or one-hundred times easier to start your own business from scratch. Which is why we will continue to sing its praises as long as our fingers have the strength to type.
Comments (4)April 16, 2009 5:28 PM
Comments (4)
I'll have to re-read this to understand on how cloud computing is more expensive for large companies / corporations. Unless they try to simulate the existing Web 2.0 they have the same access as do small businesses. Does Twitter count as part of the cloud? I noticed Ford has a social media person who has quite a presence there. Isn's it true that larger companies have brand advantage over smaller companies?
Thanks for the article, though.
Posted by Karla Rios | April 18, 2009 8:17 PM
Posted on April 18, 2009 20:17
Karla,
The large-firm business case is addressed starting on slide 21.
But there’s a lot more lurking beneath the surface. Large-firm risk can be driven by the total cost of application downtime. McKinsey has separately quantified it as direct + indirect cost (roughly: revenue + reputation). In a banking industry study of Fitch data, McKinsey found indirect costs average 12x direct costs. That’s huge. I’ve strongly recommended that study to my clients: http://bit.ly/1a2aEt (sub required). I’m not affiliated with McKinsey.
Re-architecting of software applications, as mentioned in the current slideware (21 again), is not always required and seldom desired by the client. A new vendor who cites the McKinsey/Fitch study here http://bit.ly/10EwRJ (free with registration) has patented a way to maximize application uptime 99.99%+ in or between clouds, no wholesale re-architecting required.
Best regards,
Posted by Whitney Broach | April 20, 2009 1:17 PM
Posted on April 20, 2009 13:17
Excellent site, keep up the good work
Posted by Bill Bartmann | September 3, 2009 11:09 AM
Posted on September 3, 2009 11:09
Good work, at-least looking at the numbers service providers can plan up their strategies in future. This gives and idea what market sentiments are related to cloud computing. I think this can be taken up as a data for market research before a marketing strategy to enter the cloud computing for SMBs/SMEs.
Posted by Small Business Opportunities | September 7, 2009 7:39 AM
Posted on September 7, 2009 07:39