Cloud computing to boost economies

Private and hybrid cloud models lead the way in driving business creation, competitiveness and economic growth across the Eurozone, according to The Centre for Economics and Business Research and EMC

December 10, 2010

Private and hybrid cloud models lead the way in driving business creation, competitiveness and economic growth across the Eurozone, according to The Centre for Economics and Business Research and EMC

€177.3 billion per year could be added to Europe’s major economies by 2015 thanks to cloud computing, The Centre for Economics and Business Research (CEBR) has revealed in its 2011 Cloud Dividend report. Sponsored by EMC, the report is the first of its kind to calculate the value of cloud computing adoption, at a macro-economic level, to Europe’s five largest economies.

The CEBR report calculates that €177.3 billion per year will be generated by 2015, if companies across France, Germany, Italy, Spain and the UK continue to adopt cloud technology as expected.

Inana Nkanza, Country Manager of EMC Southern Africa, comments: “Significantly, the research finds that the lion’s share of this value will be provided through the adoption of private and hybrid cloud computing models.”

The CEBR found that the annual economic benefit of cloud computing for each country by 2015 will be:
•    France – €37.4 billion
•    Germany – €49.6 billion
•    Italy – €35.1 billion
•    Spain – €25.2 billion
•    UK – €30.0 billion

€177.3 billion could cover the loans already made to some of the indebted countries in the region, such as Ireland (€85 billion) and Greece (€110 billion), and would comfortably pay for the four-year €95.7 billion cuts to public expenditure recently announced by the UK government.

Cloud computing is a new approach to IT, in which technology is made available to businesses in a scalable manner and as a service, when they need it. This speeds up time-to-market, removes traditional barriers to entry and allows companies to exploit new market opportunities. This ‘business creation’, as a direct result of cloud computing, will have a profound effect on the market structure of many sectors as competition increases and, thus, on global macro-economic performance, according to the CEBR.

The CEBR believes that cloud computing will be a significant driver of economic growth, competitiveness and business creation across the Eurozone. It highlights the important role that this technology will have in the economic recovery of the territory, particularly in facing the increasing threat posed by emerging economies that traditionally benefit from higher levels of competitiveness.

The study focused on the three most common cloud computing models today: public cloud, which is controlled by a cloud provider; private cloud, which is controlled internally by an organisation’s own IT team; and hybrid cloud, a combination of the two.

By 2015 CEBR predicts that €133 billion – or 75% of the total economic benefit of €177.3 billion that year – will be accounted for by the non-public cloud models. The private cloud model offers the best of both worlds: organisations get the dynamic, on-demand, self-service and scalable benefits of the cloud, but control remains with the IT department so security and governance are not compromised.

During the CEBR’s investigations, it also found that the private cloud will increase business development and business creation by €23.8 billion. The indirect and induced investment and general spending that results will generate demand for goods and services, which in turn increases gross value added (GVA) and employment in the economy. The CEBR predicts that the indirect economic benefits will result in additional GVA across all five countries of €280 billion cumulatively – and €60 billion annually – by 2015, and that indirect and induced employment generated between 2010 and 2015 could be as high as 2,396,000.

CEBR Managing Economist Oliver Hogan says: “CEBR’s study shows that not only is cloud computing an issue from the micro perspective of boosting the efficiency of an individual company’s IT investment and, hence, of its corporate productivity, but also that, especially in the present uncertain economic climate, it is likely to be a critical macro-economic factor that will be crucial for boosting Europe’s economic growth. As a driver of enhanced productive performance, cloud computing is likely to be especially important in playing a part to ensure that Europe’s international trading position remains competitive, hence boosting export growth. Moreover, as one of the major means of maximising the ‘bang for buck’ in modern IT investment, cloud computing could also be an important driver of European business investment that will, in turn, drive European economies forward.”

Nkanza adds: “The agility and competitiveness engendered by private and hybrid cloud computing represents a real opportunity for European businesses – one that will help companies to grow their advantage while driving economic recovery across the country. It is widely accepted that economic recovery will be achieved and sustained via a combination of driving down economic debt while encouraging commercial competitiveness. Cloud computing, which will disrupt many current IT technologies by offering more efficient, more flexible and less complex solutions, represents a real way to contribute to this.”

As well as leveraging opportunities for business creation, companies are also able to make dramatic cost savings by employing cloud computing. The pay-as-you-go model means reduced capital expenditure (CAPEX) and operating expenditure (OPEX) costs, quicker ROI, and more valuable re-deployment of resources. These savings can be re-invested, encouraging innovation, nurturing competitiveness and directly improving profitability – all with a measurable impact on the nation’s economy.