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Cloud computing 'could give EU 763bn-euro boost'

2010-12-07 06:17:07

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.