Is Cloud the Answer for the European Economy?

Grazed from Forbes.  Author: Jacqueline Vanacek.
 

My last blog, Cloud is The World’s Economic Opportunity, profiled the plans of key governments around the world who are investing heavily in cloud computing to enhance economic opportunity and quality of life for their citizens.

Europe is taking an aggressive stance on building a cloud economy, per the scale of the revenue opportunity that can be achieved from the disruptive nature of cloud to the entire industry landscape.

It is estimated that European companies could save 20-50% of their total Information and Communication Technology (ICT) costs, to reinvest in new business models that generate revenue.  Cloud computing alone is expected to contribute about 0.1-0.2% growth in GDP, and a cloud economy would significantly stimulate Europe’s labor market across all industries, with potentially significant job growth (Survival of the Fittest – RolandBerger Strategy Consultants and SAP, 11/2011)…

That fact alone prompts one to ask how a pervasive adoption of cloud computing and its ecosystem of global business relationships might strengthen and spur sustainable economic growth in future – to arm against the kind of economic turmoil currently plaguing numerous countries around the world today.

To explore how Europe could build and benefit from a cloud economy, SAP was honored to contribute some key recommendations to the European Union Cloud Commission in its development of a roadmap to a cloud economy.

Four Success Factors for a European Cloud Economy
In response to EU Cloud Commission Vice President Neelie Kroes’ invitation as above, SAP partnered with RolandBerger Strategy Consultants GmbH to develop a series of recommendations and success factors that would maximize Europe’s potential to build a high growth cloud economy.

The recommendations were delivered recently in the above strategy paper Survival of the Fittest and were well-received for inclusion in the EU’s larger initiative.

In the analysis, 4 key success factors were offered to frame the path to the optimum European cloud opportunity.

First, it must be recognized that the cloud economy is an ever-changing ecosystem, with rapid bursts of technology innovation and new entrants in a continuously changing milieu.  New IT players will be better adapted to serve the changing demands of customers, who will routinely eschew heavy up-front IT investments and deployment times in favor of “pay-as-you-go.”  This paradigm shift will require that traditional IT players reinvent themselves or risk becoming obsolete.

Second, new innovation centers comprised of “application services, content services, B2B integration services, and the operation of components” will form “centers of gravity” to become the strategic hub of cloud ecosystems.  Orchestration of diverse business services in a customer-tailored way will become a new key driver for success.

Additionally, Platform-as-a-Service (PaaS) providers will play a leading role in shaping these new “centers of gravity.” The PaaS opportunity arises from their need to cohesively address technical standards, architecture, integration, and distribution considerations up front, which will impact both applications development and delivery for a customer base hungry to access innovation at the speed and cost of cloud.

Third, the inherent “biodiversity” of the cloud ecosystem will drive dynamic growth when fueled by as many different solution and service providers as possible.  Mobility, big data, and collaboration in particular promise to further fuel innovation and new business models that will lead to greater and greater cloud demand across all businesses.

Small and medium businesses will benefit the most from the IT infrastructure investments of large businesses, offering small businesses a chance to compete more broadly and vigorously per the cloud’s removal of traditional barriers to market entry.

And, since small business is at the heart of the European economy, the cloud’s “biodiversity” bodes well for economic sustainability.

Fourth, perhaps the greatest obstacle to a breakthrough adoption of cloud computing is the lack of transparency and trust in the cloud.  Technical, legal, and commercial standards need to be in place to create the “ideal climate in which a cloud economy can flourish and grow.”

For example, for Europe to attract the best cloud providers to its internal marketplace will require a business environment offering legal certainty for handling personal data.  Therefore, a European “gold standard” for cloud computing was proposed to assure customers in their buy process that key legal conditions and compliance criteria are already met.

The current patchwork quilt of country-specific laws governing the flow of data across borders is a stumbling block not only in Europe, but around the world.  It is a particularly vexing challenge within the EU currently, per its interference with the EU’s internal goal to become a desirable ”incubator and marketplace” in which new cloud providers can locate.

Europe’s concept of a “gold standard” to assure trust and transparency is in close alignment with the requirements of the cloud economy in the United States as well.

In fact, the first recommendation of the US Cloud2 Commission, who issued a report to the Obama administration in July 2011 on how to drive adoption of cloud computing in the public sector and nurture US economic opportunity, calls for government and industry to “support and participate in the development of international, standardized frameworks for securing, assessing, certifying, and accrediting cloud solutions.”

The concept of a European “gold standard” for cloud computing can certainly be expanded to apply to other parts of the world – and per the parallel needs in the US and Europe, perhaps we can join forces to lead the discussion and resolution of the transnational issues that impede full realization of the global economic benefits of cloud computing.

Since SAP is the largest Enterprise applications provider in the world, it is incumbent upon SAP to provide its global customer base with innovative applications that run in the preferred cloud deployment model, with the preferred partner, to support any size business ranging from start-up to multi-national.

That said, SAP is privileged to work with the EU Cloud Commission, the US Cloud2 Commission, and other organizations around the world seeking to resolve the international obstacles that impede the global cloud computing opportunity for all.