Study: cloud computing could help transform European economy

Will cloud computing transform the global economy?  That's the question a new report out of the UK's Centre for Economics and Business Research attempts to address, at least for the Eurozone economies. The report, sponsored by EMC, suggests that cloud computing is likely to make Europe more efficient and productive, which will help generate jobs and enhance economic growth.

Douglas McWilliams, chief executive officer of CEBR, puts the EU's current economic challenge in the starkest of terms:

"In the past, economic competitiveness has been largely about competing with economies with a similar cost model,. Now, for the first time, Europe is competing with economies that currently pay themselves (on an hourly basis) about a tenth of what we pay ourselves. Even after differential inflation and likely exchange rate adjustments, it is likely that, in 10 years time, the cost ratio is still going to be around five to one. But, if we intend to pay ourselves five times as much as the Chinese or Indians, we are going to have to work extremely smartly to be competitive."

Adopting cloud computing could be one way to work smarter, the report concludes. The study shows that cloud computing could improve the efficiency of an average employee by an average of 2.1%, while also reducing the amount of investment tied up in underutilized IT capacity.

Economic growth in Europe will depend on exports and smart investment -- and not the traditional levers of consumer and government spending, the report adds. Cloud computing can help improve productivity, as well as spur new types of IT investments:

"Large swathes of capital equipment are IT‐based and become obsolete after a few years. So, as businesses go into recovery mode they will need to make up the backlog of IT underinvestment and take advantage of the latest opportunities for technological advancement. Such investment could well be one of the most powerful engines of economic recovery... Cloud computing will, therefore, as one of the major means of maximizing the bang for buck in modern IT investment, need to be a key driver of European business investment which will, in turn, drive the economy forward."

The CEBR study estimates that across the economies of the UK, Germany, France, Italy and Spain, "widespread adoption of cloud computing has the potential to generate over €763 billion [or $1.2 trillion] of cumulative economic benefits over the period 2010 to 2015. This is 1.57% of CEBR’s estimates of the total cumulative GDP of the five economies over the same period."

By 2015, annual economic benefits are predicted to be in excess of €177 billion [$290 billion], CEBR also calculates. This constitutes a 23% share of the cumulative benefits over a six‐year time horizon. "This is to be expected in light of, not only increasing levels of cloud computing adoption in the latter years, but the progressive shift of increasing numbers of workloads to the cloud by those who have and do adopt it."

CEBR also concludes that widespread cloud computing adoption "has the potential to support significant direct and indirect job creation which, across the five economies, we predict to be in excess of 2.3 million net new jobs on a cumulative basis over the period 2010 to 2015. Cloud computing adoption is expected to yield annual net new jobs of 446,000 across the five economies by 2015."

CEBR based potential employment impacts on a number of factors, including economic activity that arises from the culmination of the cost‐saving, business development and business creation impacts of cloud
computing.

This post was originally published on Smartplanet.com