In a recent study entitled  Deflating The Cloud, McKinsey & Co analyst, William Forrest share his in-depth analysis of a  financial services company which would be paying 150% more for cloud-based services versus owning the infrastructure.

Extremely critical of the cloud for this client he says:

"Much of cloud computing's misplaced hype,” contends Forrest, “comes from the assumption that businesses that make the switch will be able to do away with their entire IT department, an expensive collection of personnel.” But in his analysis of McKinsey's financial services client, Forrest found that "only around 15% of the company's 1,700 or so IT employees had hands-on access to hardware and software--most worked in support or other administrative areas. That means moving to Amazon's service would only cut about 200 full-time workers, hardly the savings chief information officers might imagine."

I think he made a critical omission in his analysis.  The issue is not cloud computing in general, but the particular cloud his client selected. Moving data and process to the “self service” environment of the Amazon cloud did not free up the resources they had hoped for.    If they had invested in more of a full service environment, they would have been able to eliminate much more of the support functions on their staff.

Also, there is a completely different economic model for existing companies with investments in infrastructure and new or rapidly growing companies, who are not burdened by investments in legacy systems, but wish to grow rapidly by focusing on their core business.

For other thoughts on this topic check out:

http://cloudinterop.ulitzer.com/node/923640

http://bits.blogs.nytimes.com/2009/04/15/when-cloud-computing-doesnt-make-sense/