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By Tim Weber Business editor, BBC News website
Widespread adoption of cloud computing could give the top five EU economies a
763bn-euro ( 645bn; $1tn) boost over five years, a report has said.
The CEBR said it could also create 2.4m jobs. The technology gives software and
computing power on demand over the net.
But experts warn that cloud computing can be very disruptive to business, and
companies could end up "disillusioned".
"Nothing kills a new technology better than a poor user experience," said
Damian Saunders of Citrix.
Start Quote
Moving to the cloud is a cultural shift as well as a technology shift
End Quote Dave Coplin Microsoft
The report, by the Centre for Economics and Business Research (CEBR), was
commissioned by EMC, a data storage and IT solutions firm that provides cloud
computing services. The company is just one of many pushing into the sector,
all saying that 2011 will be the year of the cloud, when the technology will
find mainstream adoption.
When a company uses cloud computing, it does not build all IT infrastructure by
itself. Instead, it rents storage, computing power or software services from
other companies. The services are accessed via the internet, which in network
diagrams is shown as a cloud, hence the name.
The cloud turns information technology into a utility, consumed like
electricity or outsourced payroll services, says Chuck Hollis, EMC's chief
technology officer.
However, moving IT services to the cloud is more than just a technical upgrade.
"Moving to the cloud is a cultural shift as well as a technology shift," warns
Dave Coplin, until recently national technology officer at Microsoft UK. "The
cloud is a tool, it's an enabler, but you have to think about the outcome: what
is it that you are trying to do?"
Biggest winners
Google data centre Cloud computing makes more efficient use of servers
Cloud computing does indeed help companies drive down IT costs; studies by
technology analysts such as Nucleus Research have shown that using the cloud
sharply cuts the energy used by computing. Cloud computing also makes it easier
to use fewer computers to do the same amount of IT work, while the workload
itself can be scaled up or down at an instant.
The CEBR report suggests that the rapid uptake of "cloud computing service
offerings [will make them] progressively cheaper as economies of scale take
hold and service offerings increasingly mature".
The authors of the CEBR study acknowledge that their estimates depend on
numerous assumptions and uncertainties, but they forecast that by 2015 the
European Union's top five economies - Germany, France, UK, Italy and Spain -
could get an annual boost of 177bn euro, and create net new jobs of 466,000 a
year.
Start Quote
The UK is the only country to show a disproportionately smaller share of the
cloud computing benefits than the size of its economy might suggest.
End Quote CEBR
The biggest winner in absolute numbers could be Germany, followed by the UK.
However, if the gains are measured in relation to the size of the economy,
Spain comes out on top while the UK comes bottom as "the only country to show a
disproportionately smaller share of the cloud computing benefits than the size
of its economy might suggest," the authors of the CEBR report say.
Cloud disruption
While the cloud is "a really cheap place to do business," according to
Microsoft's Dave Coplin, it forces companies to change their IT culture and
learn that it comes at a price. "People lose full control and flexibility, but
get scalability and power in return," he says.
Damian Saunders, in charge of the data centre and cloud group at software
company Citrix, says there are four key drivers that are now accelerating the
rate of cloud adoption.
For starters, technology has improved, with better connectivity, higher
internet speeds and virtualisation technologies that allow the more efficient
use of servers. Then there are new business models, with companies not charging
a big lump sum per software licence but on an "as-you-consume" basis.
Start Quote
Nothing kills the successful adoption of new technology better than a poor user
experience.
End Quote Damian Saunders Citrix
Consumerisation of IT is another driver. Mr Saunders calls it the "IT civil
war" whereby every January "employees get a gadget for Christmas and then take
it to work and don't understand why they can't use it". The move towards mobile
computing, he says, is also driving the move towards cloud computing, which in
turn is giving companies a competitive edge.
Arguably the biggest driver is the state of the economy. Cloud computing allows
companies to invest in growth while spreading the cost. Instead of a big
up-front costs, IT investment becomes a continuing operating expenditure that
rises and falls with demand.
Until recently, says Mr Saunders, the risks of cloud computing "always
overwhelmed the potential reward". This has changed now, he says, but also
warns that "cloud is just reaching the peak of hype" that will soon end in
disillusionment for those not prepared for the disruption it brings.
Echoing Mr Coplin's warnings about a cultural shift, Mr Saunders says companies
will have to learn that "cloud computing will never replace everything that
went on before". Companies will have to work hard to make cloud computing
user-friendly, because "nothing kills the successful adoption of new technology
better than a poor user experience".
And if companies get their roll-out of cloud solutions wrong, then all the
optimistic forecasts - whether from the CEBR or others - will come to nought.