New Economy‘, ‘Web 2.0‘, ‘social media‘. These are but a few of the prominent buzz phrases that the internet has produced over the years. Some have deserved the buzz, some haven’t.

One of the rising stars in the buzz phrase-o-sphere over the past couple of years has been ‘cloud computing‘. The concept, at its core, is simple: ‘stuff‘ – be it applications or data – sits on a server on the internet and the users of those applications and data access it over the network.

In my opinion, cloud computing today is really just an evolution of the old client-server driven by new needs and new opportunities, but like all good buzz phrases, its definition is hotly-debated and not exactly clear. Be that as it may, the real question is the importance of the cloud. Will it make rain or will it produce a drizzle?

According to a new report by McKinsey & Company, this may be one storm system that the weatherman shouldn’t have rushed out of bed for. The findings:

  • Cloud computing offers a lot of promise. There’s reduced capex, lower up-front costs and the ability to scale up and down rapidly.
  • It works – “in theory“. McKinsey says that for startups and ‘pet projects‘, cloud computing has proven effective.
  • Cloud computing doesn’t help big companies. What works for the small guys doesn’t work for the big boys and cloud computing is yet to help major corporations deal with their computing challenges.
  • It is a distraction for many. McKinsey writes: “Cloud computing can divert IT departments’ attention from technologies that can actually deliver sizeable benefits; e.g., aggressive virtualization“.
  • It’s overhyped. As in “approaching the top of the Gartner Hype-cycle“.

McKinsey notes that many of the benefits of cloud computing have been promoted by vendors, not users. But this isn’t necessarily an outright criticism.

Cloud computing services do make sense for smaller businesses, according to McKinsey. It’s just that for large ones, cloud computing isn’t cost effective when you run the numbers. Despite all of the costs associated with building and running large datacenters, for instance, cloud computing is not yet cost competitive for hefty big business computing needs. Obviously as the industry matures costs could come down but an effective strategy is still likely to be more complex than ‘put it in the cloud‘.

McKinsey provides a number of suggestions and lays out some interesting technical perspectives about the future of cloud computing that are well worth a read for those interested in this area. But if there’s a key takeaway, it’s this: nothing is perfect and the solution for most big companies is not to bet the harvest on the cloud that has appeared on the horizon, no matter how much rain they think it contains.

Photo credit: notsogoodphotography via Flickr.