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Shaping an EU-Wide Cloud Computing Strategy

Submitted by on 09 Mar 2012 – 15:52

Shaping an EU wide Cloud Computing StrategyBy Stephen McGibbon – Chief Technology Officer for Microsoft Europe, Middle East and Africa

Not far from Dublin stands one of the largest and most advanced data centre facilities in the world. As one of a new class of “mega-data centres”, it represented an investment from Microsoft of over €500m when it opened in 2009 and was built to meet the rapidly increasing demand for cloud services. Despite its size, it has delivered breakthrough levels of power and water efficiency, availability and security.

With resources like these, the cloud is already here – European consumers and businesses large and small are enthusiastically embracing the unprecedented benefits it brings. An entrepreneur starting out today has access to resources that only a decade ago would have been the preserve of only the largest enterprises and governments are benefiting from levels of agility that not long ago only start-ups could achieve.

The potential economic impact in Europe from the cloud is huge. For example the EU has over 20 million small and medium sized businesses (SMBs) and cloud computing is up to 40 times more cost-effective for a SMB than running its own IT system. Computing technology is fundamental to the success of SMBs. A recent Microsoft survey of 2,100 SMB owners in 21 countries across Europe studied the attitudes towards growth in 2012-13 and the role of IT and the cloud. The survey found that 60% say that technology will be a key driver of their business growth with 41% of cloud-using SMB owners reporting that it has directly boosted productivity.

Such are the benefits, that in a remarkably short time, a consensus view has developed that cloud computing is indeed a game-changer, and moreover, that it’s already changing the game. Regulators and policy-makers have an important role to play in shaping the regulatory environment accordingly but there are challenges in identifying and prioritising the right issues to address.

Fundamentally, cloud computing is about designing, engineering and operating at scale. As the internet and web grew, so did the need to develop methods and techniques to deliver services that increasingly went far beyond the numbers of users of even the very largest enterprises. The engineering and operational approaches developed to deliver internet-scale services are the core of cloud computing. Understanding this point is vital to understanding whether policy actions will further facilitate cloud and also to the understanding of how cloud changes the current policy landscape.

The economics of the cloud provide positive incentives to anything that drives economies of scale. Larger data centres for example can deploy computational resources at significantly lower cost than smaller ones and achieve higher levels of utilization of these resources. Cloud operators benefit if their services can be used by as broad a group of customers as possible to drive scale.

Companies are using the cloud to drive down their transaction costs, and lower transaction costs translate into competitiveness and economic growth. Cloud also allows many companies to shorten process times as the cost for 1 machine running for 1,000 hours is effectively the same as the cost of running 1,000 machines for 1 hour. Many processes that have traditionally been batch driven are becoming real-time and are creating new economic opportunity and growth as a result.

These examples are worth considering because they illustrate that cloud providers will have incentives to address many of the current concerns policy makers are expressing and it is perhaps more useful for policy to be directed at driving understanding and adoption.

The potential economic benefits flowing from these activities are dramatic. For example, according to the Centre for Economics and business Research (CEBR), the macroeconomic benefits to the EU from cloud computing could include 2.4 million new jobs over the next five years1.

The European single market could and should be a significant enabler of cloud services, however, a plethora of data policy issues at country level means that Europe can often feel more like 20+ different markets. This fundamentally undermines the opportunity to build scale for cloud services and consequently disadvantages European companies. One of the changes that cloud is enabling is a broader move to “as-a-service” pricing models. A side effect of this market fragmentation is that this pricing trend risks being impeded in Europe for the same reasons.

Cloud computing provides a fantastic opportunity for European businesses and consumers. I hope that the forthcoming debate can address some of these issues and avoid seeing the cloud opportunity through the lens of what it’s replacing. Indeed I’d like to suggest that given the rapid rate of adoption of the cloud in Europe; we should be focused on “Shaping an EU-Wide Cloud Computing Strategy” rather than just “working towards” one.

 

1 McWilliams and Hogan, The outlook for the UK information technology sector. Centre for Economics And Business Research Ltd, 20th October 2011.