Great post. This response is totally in line with the grave doubts I've had about McKinsey's financial and functional comparisons of the cloud vs. traditional hosting. A couple additional thoughts: I read the physical server description - $14K price tag (2 CPU / 4 Core) - as describing a system with a total of 8 cores, not a 2x2 system. This math does pencil out to be ~$45/mo over three years (without depreciation), but it is still totally misleading. In my experience, enterprises frequently double (for on-site HA) or quadruple (for local HA, remote replication and remote HA) their CPU purchase for critical workloads. As you have noted, traditional I.T. shops also open their wallet for O/S licenses, HA capabilities (Veritas Clustering, VMWare HA, etc.), shared storage infrastructure, and, potentially, wide-area storage replication technology. Any comparisons that focuses exclusively on monthly price-per-flop is missing the boat. In the wake of the McKinsey report, it's certain that we will see a wave of more comprehensive financial comparisons; ones that accurately represent the costs of satisfying the functional AND non-functional (performance, availability) considerations in both traditional and cloud environments. This is what truly excites me.