Debating The Cloud Dividend

One of the more fascinating pieces of work that EMC has recently become involved with is working with a leading macroeconomic forecasting consultancy in an effort to quantify the benefits of pervasive cloud computing in terms of macro vs. micro effects.

While there's always room to debate methodology, results (or anything else), there's no arguing that it's a refreshing and unique perspective -- one we'll undoubtedly see more of in the future.

IT As Infrastructure

Those of you who travel in macroeconomic circles understand the fundamental relationship between investments in different forms of infrastructure (water, power, transportation, communications, etc.) and economic growth.

Indeed, much of the discussion in developing economies is causing the right infrastructure investments to be made in an effort to support general growth.

Shouldn't newer forms of IT infrastructure (e.g. "cloud" for convenience) be part of that discussion?  And should the discussion include very developed economies as well as developing ones?

Cloud (in all its various forms) essentially reduces the friction associated with information-based economic propositions.  The proposition is that IT resources are more widely available, easier to consume, reduce costs, and so on.  

Much like a good highway network makes it easier to move goods around, the pervasive access to on-demand IT services (public, private, etc.) makes it easier to create value from information.

Larger organizations who spend a lot on IT are most certainly interested in this proposition.  And more modest organizations are interested in using external services in an effort to get more value from their IT dollar.  

But that's a micro discussion.  Should this be a macro discussion?

Should The Government Care About Cloud?

Not in the more narrow sense of using cloud concepts for running government IT (although that's an interesting topic in itself), but in the sense that governments should have a policy view around accelerating the transition to cloud-like models?

Governments certainly have policy views on other forms of infrastructure: power, water, transportation, communication, etc. -- should IT infrastructure really be all that different?  All of these previous infrastructure topics started as solely private enterprise concerns, but -- over time -- became a matter of public policy.

The Case For Developed Economies

The paper attempts to quantify the "cloud dividend" for five interesting European economies: UK, France, Germany, Spain and Italy.  As these economies have already massively invested in more traditional IT approaches, the primary benefits are assumed from a combination of cost efficiencies (capex and opex), but -- more importantly -- improved productivity and value generation from the organizations served by these IT groups.

So far, so good.

But I think there's more to the discussion.  As Amazon, Salesforce, Intuit and others have begun to show, there is an enormous "under-served market" of smaller IT-consuming organizations who can potentially derive enormous productivity benefits from simply consuming IT as a service, rather than consuming a bunch of products and people.

Much in the way that governments care about tax and labor policies for this important and vital part of any developed economy, should they care about whether or not there is a viable ecosystem of compatible service providers to meet the needs of small-to-medium-sized organizations?

And, going farther, if one takes a more nationalistic view, wouldn't it be preferable for this segment's IT-as-a-service needs to be met by one or more in-country providers, vs. exporting that work to a service provider in another country?

Or, let's put in a big-picture macro perspective.  If the world is shifting to an information economy, what is a developed nation's ideal policy to accelerate and maximize the value of that shift?  

Heavy thinking, indeed.

The Case For Developing Economies

The case is much more clear for developing economies.  I've seen clear evidence that their governments have a strong and vested interest in having one or more "national IT service providers" as a key part of their economic development strategy.  

Often, they come to look at it as consistent with infrastructure investments in other areas: a strong financial system, good transportation and communication infrastructure, energy and so on.  They believe that IT resources should be widely available to businesses and organizations without the associated massive initial startup costs and scarce skills associated with most non-trivial IT environments.

The approaches vary, but the idea remains the same.  Some look at partnering with academia to do this, or creating a new government unit, or partnering with the local telco operators, or in some cases creating tax incentives for established service provider players to set up shop.

For these people, it's not the "cloud dividend".  It's the "cloud investment".

The Debate Just Got More Interesting

The first round of industry debates were around cloud itself: what was it, and what made it different?  Although we never really got closure on this, the bulk of the discussion has (thankfully) moved on.

The second round of industry debates were around the impact of cloud for particular use cases: traditional enterprise IT, newer information-centric business models, knowledge workers, and so on.  Although there's more work to do here, that ground is fairly well understood by many people today.

The third round of industry debates are around transitioning IT from legacy models to new models: new capabilities, new processes, new roles, new skills, new organizations.  That topic burns hot and bright in enterprise IT leadership today, and will likely be that way for the next few years.

In some sense, we've now started a fourth round of debate: is cloud adoption -- and access to IT service providers -- a matter of macroeconomic public policy?  

And that debate has just begun :-)

 

Comments

[Paul Gillin]

Bernard Golden has written an excellent series of articles about how to make the cloud decision. In his latest one, he asserts that waiting for standards to develop is a misguided strategy because it delays the nearly immediate benefits of the cloud. I think it nicely supports your points. http://www.theinfoboom.com/articles/cloud-computing-waiting-too-long-for-standards-will-cost-you/