McKinsey: Data Centers Are Cheaper Than The Cloud

The McKinsey report doesn't exactly come to that headline conclusion. It says that there is a point where if you have enough servers it becomes more cost effective to run your own data center, simply because can spread the cost of people and enterprise OS licenses across enough CPUs that the cost drops below the similar cost Amazon charges you, minus Amazon's profit. For small and medium sized enterprises, they claim cloud services are cheaper.

Simply put, if you require vast amounts of processing power, it's probably cheaper to just run your own data center because otherwise you end up paying for a cloud-based data center with all the third-party service overhead.

If, on the other hand, you simply require the equivalent of a few machines on the net, it's cheaper to buy a piece of cloud, because the extra per-CPU cost is small compared to the costs in maintenance, personnel, etc that you would have to keep in-house.

You see Nick Carr's response? http://www.roughtype.com/archives/2009/04/the_big_company.ph...

Does it even worth researching? To simplify - provider (let's say Amazon) spends A dollars to build and support data center and makes B dollars profit. It charges you A+B.

DIY cost is very close to A (if you're talking datacenter scale).

A+B > A

This report is kind of obvious. Those of us using AWS and others knew about this a long time ago. Its pretty simple math to be able to see when your cloud will cost more than DIY.