Cloud computing brings tremendous opportunities to reduce non-value added costs and create a major positive impact on GDP growth and job creation. It is a new paradigm, where computing services are delivered to users on a pay for use model by cloud service providers, instead of customers having to own and operate their own computing resources such as hardware, software and data centers. For example, a customer can leverage capabilities of a cloud based customer relationship management (CRM) system instead of having to develop and implement a CRM system in their own data center. This shift creates a transformational effect on computing services, where the majority of customers can choose to simply become consumers of information technology (IT) services as opposed to operating IT systems themselves. This evolving paradigm creates new opportunities for public and private sectors to benefit from fast technological advancements, for the benefit of governments, citizens and local economies.

 

Reduction in Non-Value Added Costs:

 

Many government organizations have seen their information technology expenditure grow year over year due to increased demands. While the use of technology has provided tremendous improvements in the government services and functions, many agencies are not able to keep pace with the increases in IT spend, especially in the era of budget cuts and austerity measures.

 

Cloud computing offers an opportunity to reduce capital expenditures, and at the same time delivers the state-of-art technology to governments. Traditional IT projects require significant upfront capital investments on hardware, software and systems development along with on-going maintenance costs. Using a cloud computing, governments can essentially “lease” a cloud based IT system, with the service provider having to make the upfront capital investment. The on-going maintenance and upgrades of the cloud based systems also becomes the responsibility of the cloud service provider – taking government agencies out of the business of expensive and time-consuming system upgrades. Industry literature[i] points to significant cost savings of up to 30% due to use of cloud based IT systems.

 

Many governments have been dealing with a large number of data centers, which are typically a legacy of how organizations and IT systems evolved. The on-going maintenance and upgrades of such under-utilized IT resources create expenditures, which many agencies would like to avoid. By the use of virtualization technologies and private clouds provisioning, agencies can consolidate such disparate data centers and create shared services that can provide superior level of computing services to internal government customers. Using this private cloud approach also provides additional benefits such as a reduced carbon foot print, centralized governance frameworks, improved security as well as improved monitoring and oversight.

 

Managing Information technology can be time consuming for agency executives and it can take focus away from the core mission of the agency. By the use of cloud based services, the service provider manages many of the low value added functions of IT, freeing up precious time for agency executives to focus on core priorities.

 

 

Innovation in Government Services:

 

Traditional IT systems procurement, development, implementation and roll-out can be time consuming. This creates a dilemma for many agency executives who want to ramp-up services and processes quickly. Cloud computing brings the ability to rapidly deploy fast and flexible services, significantly reducing the time to deliver new IT systems. For example, the United States Department of State[ii] was quickly able to develop cloud based online data sharing and reporting system to track disarmament information. Using the traditional IT approach to delivering this capability would have been expensive and time consuming. The use of a cloud computing to develop this capability made it possible to deploy this system quickly and with cost efficiency.

 

The increased bandwidth, proliferation of internet access and connected mobile devices has transformed the way many of us communicate and work. This transformation presents an opportunity for governments to create innovative ways to engage with citizens and provide new services. For example, municipal councils in Great Britain are using an innovative internet service called fixmystreet.com, to engage citizens in the reporting of road problems in their local areas. Such services not only engage citizens in the local municipal affairs in an effective and collaborative way, they also create a level of transparency that was not possible before.  Many governments such as the official website of the Unites States Government and United Kingdom  are actively involved in making government data available to citizens and private enterprises, thus creating transparency and interesting business models around data and information. For example, there are many internet based services available today which use publically available government data sets and allow citizens to rank and compare level of crime, education and other statistics between different cities.

 

As many cloud services, whether public or private, are designed to run as a shared infrastructure or application services, it opens up doors for government agencies to collaborate and build services which can be leveraged across the government eco-system. For example, in the case of the NASA’s Nebula Cloud Computing platform, a single infrastructure cloud computing service is shared across many entities, creating economies of scale and streamlining IT processes.

 

Jobs and Economy:

 

Cloud computing is poised to have a transformational effect on business opportunities around information technology as well as general improvements in productivity. There are many economies across globe, which can benefit tremendously from technology driven economic growth, and cloud computing can be instrumental in achieving this goal. A recent study[iii] by Federico Etro, a professor of economics at University of Milano-Bicocca, estimates that impact of cloud computing on European economies can result in incremental GDP growth of up to .3% and job growth of around 700,000 incremental jobs just in six European countries (United Kingdom, Germany, France, Poland, Italy and Spain).

 

Small to Medium enterprises (SME) are the critical economic engine for many economies in the world. Traditionally SME’s, especially in developing economies, did not have access to state-of-art IT systems, due to the expensive and capital intensive nature of the investments required. Cloud computing provides opportunities for SMEs to mitigate this imbalance and leverage cloud based capabilities to optimize their business process and compete more effectively with larger companies. Access to technology at a fairly low upfront cost can help SME’s grow at a much faster rate. For example, a local design and architecture business now can use the same cloud based CRM system as being used by large and global business, at a much lower upfront cost. The same study by Federico Etro estimates that up to 430,000 SME businesses can be created in 25 EU countries as a result of cloud computing adoption.

 

In the evolving knowledge based global economy, it is essential that the digital divide be reduced to ensure that access to knowledge, information and high-tech  skill set is broadened for local populations. Government policies and investments that increase internet and technology access are critical to achieve such objectives. Using internet and cloud based technologies; governments can increase access to skills development, specifically specialized education in a way which was not possible before. The growth in online education in some economies is a pattern that can be applied to remote and developing regions to allow access to high quality learning.

 

The cloud computing paradigm makes tremendous amount of computing resources available to entrepreneurs without much upfront capital investment. This reduces the barriers to entry for many new and small information technology ventures. This aspect is especially important in developing economies where access to capital can be relatively difficult. For instance, an entrepreneur with skill and passion to develop an innovative internet based service can choose to build it on a variety of commercially available cloud based platforms. For example, Zoopla is an internet based real estate service based in the United Kingdom, built on a commercially available public cloud computing service. The founders of Zoopla found it easier and more cost effective to leverage a cloud service instead of having to invest precious time and capital in building up their own computing infrastructure. Entrepreneurs, especially from developing economies, often had an uphill battle to establish distribution channels to take the goods and services to customers on a global basis. Internet and the advent of cloud based services have significantly changed the landscape; as internet provides a frictionless distribution channel to a potential global customer base.

 

There are many nations in the world that have created tremendous economic opportunity for the local population by becoming a hub for regional economic activities such as finance and high-tech clusters. Cloud computing provides an opportunity for creating a cluster of IT based economic activity. Through the use of appropriate infrastructure development as well as other tools such as investment policies, regional IT hubs can be created which can allow for local job creation. The rendering of data center services, reselling of cloud based services originated in other locations, internet based businesses as well as cloud related professional services are some examples of how an economy can become a high-tech hub for the regional, and perhaps the global economy. For example, Singapore[iv] is emerging as a cloud computing hub for the Pacific Rim region, with the use of strong regulatory framework as well as investment incentives.

 

Cloud computing brings a variety of opportunities to reduce non value added costs, create innovative government services and drive local economic growth leading to jobs and better quality of life. Policy makers are encouraged to carefully consider the opportunities relating to cloud computing in the overall policy framework to fully reap the benefits of the technological advancement.