While much of the world has been enamored with the promise of cloud computing—where you can simply rent time from applications and systems maintained by a third party somewhere else, McKinsey & Co., the staid management consulting company, has been sounding notes of caution.

I recall speaking with Dilip Wagle, a partner with McKinsey a couple of years back, who warned that cloud computing still required a great deal of integration work, and end users risk losing customization and flexibility. In addition, the “‘good enough’ functionality provided by Software-as-a-Service (SaaS) applications may not be sufficient for a company’s needs, in some cases,” he says. In addition, there is risk in situations in which customers’ data are stored off-premise in a data center owned or contracted by the service provider. “In the event of data center failure on the part of the service vendor, the customer has no recourse but to hope that data were appropriately backed up and managed in a secure fashion,” Wagle added.

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