Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam pulvinar orci id neque tristique euismod. Integer tincidunt varius orci, pretium consequat dui suscipit eu. Vestibulum vehicula, ligula eu tincidunt facilisis, enim metus accumsan massa, sed tempus sapien ante eu magna. Suspendisse id nunc non nunc sagittis feugiat. 

Read more

Recent Posts

Post another title here

by Jake Wilson

Post another title here

by Joe Cool

Post another title here

by Jake Wilson

Recent Forum Topics

This front page section will display the latest half dozen forum posts to encourage click-through to the Community Forum.

Latest Video / Whitepaper, etc.

This front page section could display a video tutorial or an interview with a project leader. Visitors are encouraged to visit the Resources section for more learning materials and reference links.

Recent Polls

This section would display a current poll and a list of past polls.

« EU Telecoms Reform Package Agreed | Main | Commission Publishes Decision on Intel »

OCA Comments on the Commission’s Public Consultation on ‘Post-i2010

Cloud Computing ITU Geneva 8th October 2009

The Information, Computing and Telecommunications (‘ICT’) sector is characterized by waves of technological change, which act to periodically shift organizational efficiency, productivity and structure. ICT has the power to shape the way we work and affects all organizations, whether private sector or government, in radical ways.

We believe that the next wave, often referred to as “Cloud Computing”, is with us now and it will have no less of an effect than the previous changes wrought from the adoption of, at first, mainframes, then later, personal computing, and more recently, the linking together of systems and services at a distance over the internet. 

The Size of the Cloud

ICT and Cloud Computing services hold the promise of delivering improvements in efficiency and cost effectiveness in the provision of services. Benefits can be quantified as hundreds of billions of Euros for the 27 Member States taken as whole.

The estimates of the total size of the ICT market vary. However all available analyses agree that the scale of the opportunity for ICT services that can be provided at a distance, or as “Cloud” services, is very significant. The World Bank, in a recent 2009 report, drew on the following estimates of the scale of the opportunity for Cloud services from reputed sources:

a. Mckinsey 2007 who estimate the “Size of the Cloud” at $150bn;

b. Gartner (2008) expects a global market of $171bn in 2008 rising to $239bn in 2012

The direct cost savings from cloud computing come from more efficient use of expensive resources by comparison with legacy computing, due to the greater consolidation and centralization that Cloud Computing permits. To clarify: to date, many customers have purchased systems designed to meet the peak demands that may be placed on them. This has often involved them in buying computers, and a capital cost, to the customer.  Given the uses to which the systems are put by customers, ‘under-provisioning’ of computing power carries a significant risk to the customer’s own activities in terms of lost revenue and the impact on its business system; where there is too little computer power they can become overloaded and systems crashes and failures are a threat to the customer’s ability to do business. Customers have thus often over provisioned for peak usage leading to idle capacity. Cloud computing offerings allow customers to use computing power in servers located outside the customer’s premises. The development of a commercial offering to supply services on-demand as the customer needs the computing power, on a ‘pay as you go’ basis means a lower cost to the customer, and an expense item rather than a capital cost.

The five major types of resources that can be economized by the switch to cloud computing are: labor, energy, computer hardware, data center real estate, and software licenses.

Essentially the capital costs of computing can de done away with if an organisation relies on the public cloud, buying virtual server time and storage space on demand. Expenditure on IT becomes operational, rather than capital. Moreover, the physical space required for racks of servers is no longer necessary and the organisation no longer incurs energy costs for running and cooling its servers.
 For many start-up businesses, cloud computing offers access to computing power that would otherwise be beyond their reach. The entry barrier for large-scale computing tasks is effectively removed by the cloud. As costs are incurred on a per use basis, the risks of committing to large capital purchases are removed. Scalability allows the organisation to add capacity as and when it’s needed and to scale down as well as up, driven by demand.

 John Powell, Leicester Business School.

As can be seen from the above, this is particularly significant for small and medium sized enterprises that are the motor of the European economy.

Impact on Government: e.g The UK

To focus on a particular country for the purposes of example, since the UK is an IT-intensive economy, let's assume it spends a higher share of GDP on IT than the world as a whole, say 5.5% . UK GDP in 2008 was $2.674 trillion (IMF). That would put 2009 UK IT spend (broadly defined to include labor, energy, etc.) at $147 billion. Ovum estimates in a 2006 study that UK Government accounts for 26% of total UK software and IT services spending. Applying that percentage, we get $38.2billion for total UK public sector IT spending in 2009. Assuming that figure will grow at 5% annually, that amounts to $478 billion in UK public sector IT spend over the next decade. If the switch to cloud computing saves just 15% of that cumulative aggregate, the savings from cloud in the UK public sector alone could be $72 billion over a decade. Converting back into GB pounds at today's exchange rate, that's about 44 billion pounds in savings, if a shift to the use of Cloud Computing can be achieved.

Issues have been raised that may act as impediments to using Cloud Computing services. These deserve careful consideration and include compliance with data protection laws, data security and contractual risk reward relationships between suppliers and customers. Depending on how cloud services are offered and implemented, the opportunity exists to reassure the public by allowing greater personal control over personal data. Also, software security can take the place of weak administrative and physical security processes providing perhaps greater assurance than the current position. Close working relationships and risk sharing models will also probably be needed between supplier and government in new forms of public/private contractual relationships in order to make the relationships successful for both sides.

In order to achieve these benefits a ‘two handed” approach is needed, taking into account the importance of ICT to the economy and the significance of the government sector to the ICT market.  I have suggested certain regulatory policy priorities:

  1. Open competitive ICT, and in particular the adoption of Cloud Computing can provide direct and indirect economic efficiency gains and significant contributions to EU GDP growth beyond the European Commission’s estimated 0.2%.
  2. A two handed approach to the market: On the one hand,   government purchasing.  The priority and focus should be on Government purchasing of interoperable ICT. Competitive supply, technology neutrality and non-discrimination, mean ensuring interoperability and the supply of competitive services in government contracts.
  3. On the other hand, careful monitoring and application of the national implementation of the EU competition laws and the telecommunications package of legislation by the Commission is needed: a new, and forward looking approach consistent with the EU merger regulation process, is vital.   The Commission needs to take a more of an end-to end-view of the supply chain rather than looking at aspects of the ICT industry separately.

Regulation of underlying telecommunications services should be seen as a building block for ICT services and a critical enabler of Cloud Services; the nature of competition throughout the supply chain is not static, it is dynamic. Robust anti-trust action and the regulation of monopoly services and facilities at all levels of the technology stack are needed. This is particularly important to keep markets open in relation to government purchasing which is the biggest sector of ICT spend in the EU. Coherence in methodology and process requires a new and forward-looking approach by the family of European regulators and anti-trust authorities who are responsible for keeping markets open to competition and functioning effectively.

Tim Cowen, The Open Computing Alliance, September 2009.

Download the full report here.

Consultation page.

Reference Material

IDC White Paper, Aid to Recovery: The Economic Impact of IT, Software and the Microsoft Ecosystem on the Global Economy, 6 October 2009
This study analyses the impact that IT has on economic growth and job creation and includes a finding that IT spending in 52 countries will grow from $1.414 trillion in 2009 to $1.7 trillion in 2013.

Christine Zhen-Wei Qiang, World Bank Report, July 2009: “Broadband Infrastructure Investment in Stimulus Packages: Relevance for Developing Countries”
This note provides a summary of broadband initiatives of selected OECD countries recently launched during the economic downturn and indicates that “for every 10-percentage point increase in the penetration of broadband services, there is an increase in economic growth of 1.3 percentage points.

DG Information Society and Media Modinis Study on eGovernment
This study examines the importance of  eGovernment expenditure by public administrations as part of an overall measure of the net benefits of eGovernment services  

HM Treasury Operational Efficiency Programme (OEP) Report, May 2009-10-19
The Operational Efficiency Programme, which was launched by the Chief Secretary to the UK Treasury on 3 July 2008 looks at achieving greater efficiency in a number of cross-cutting areas including  in back office operations and IT where a possible 20 to 25 percent annual reduction in costs has been identified.

Neelie Kroes, Being Open About Standards
Speech by DG Competition Commissioner, Neelie Kroes, in which she asserts that “standards are the foundation of interoperability”

Viviane Reding, Digital Europe: A vision for the next five years
Viviane Reding, EU Commissioner for Information Society and Media, explores the impact that ICT can have on economic recovery, stating that cloud computing is “the medicine needed for our credit squeezed economy”.

Digital Britain Report, Final Report, June 2009
This report offers a strategic view of the ICT sector in Britain and a programme of action aimed at maximising the impact of new digital technologies on economic growth. 

Information Technology and Innovation Foundation (ITIF) Report: Driving a Digital Recovery: IT Investments in the G-20 Stimulus Plans, September 2009
This report reviews the benefits and opportunities of including IT investments in a fiscal stimulus package and asses the degree to which the G-20 countries have invested in IT as part of their fiscal

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments

There are no comments for this journal entry. To create a new comment, use the form below.
Editor Permission Required
You must have editing permission for this entry in order to post comments.