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Nature and benefits of cloud computing




Cloud computing has a range of defining features (which make a general definition elusive5), namely: • hardware (computers, storage devices) is owned by the cloud computing provider, not by the user who interacts with it via the internet; • the use of hardware is dynamically optimised across a network of computers, so that the exact location of data or processes, as well as the information which piece of hardware is actually serving a particular user at a given moment, does not in principle have to concern the user, even though it may have an important bearing on the applicable legal environment; • cloud providers often move their users' workloads around (e.g. from one computer to another or from one data centre to another) to optimise the use of available hardware; • the remote hardware stores and processes data and makes it available, e.g. through applications (so that a company could use its cloud-based computing in just the same way as consumers already today use their webmail accounts); • organisations and individuals can access their content, and use their software when and where they need it, e.g. on desktop computers, laptops, tablets and smartphones;

Consumers can use cloud services to store information (e.g. pictures or e-mail) and to use software (e.g. social networks, streamed video and music, and games). Organisations, including public administrations, can use cloud services to successively replace internally run data centres and information and communication technology (ICT) departments. Companies can use cloud services to quickly test and scale up what they offer to their customers because they can do so without investing in and building physical infrastructures. Overall, cloud computing represents a further industrialisation (standardisation, scaling-up, wide-spread availability) of the provision of computing power (" utility computing") in the same way as power plants industrialised the provision of electrical power. Thanks to standardised interfaces (the equivalent to electrical power plugs) users can leave the details (how to build, power, run and secure a data centre) to experts who achieve much better economies of scale (by serving many users) than individual users ever could. Moreover, cloud services offer very large economies of scale meaning that go-it-alone efforts at national level are unlikely to deliver optimal cost efficiencies. The benefits of adopting cloud computing can be illustrated by a 2011 survey for the Commission which shows that as a result of the adoption of cloud computing 80% of organisations reduce costs by 10-20%. Other benefits include enhanced mobile working (46%), productivity (41%), standardisation (35%), as well as new business opportunities (33%) and markets (32%).6 All available economic studies also confirm the importance of cloud computing which is expected to grow rapidly worldwide.7 The unprecedented increase of data flow and processing of information over the Internet has a significant environmental impact through energy and water consumption, and greenhouse gas emissions. Cloud computing can help mitigate these problems thanks to more efficient use of hardware as well as, more specifically, by building data centres to use low-energy servers and green energy.8 For example, according to some estimates, large companies in the US could save $12.3 billion annually in energy consumption by adopting cloud computing.9

Therefore, substantial efficiency improvements across the whole economy can be expected from cloud adoption by businesses and other organisations, especially SMEs. The cloud could be especially important for small businesses in struggling economies or remote and rural regions to tap into markets in more buoyant regions. For example using broadband infrastructures to overcome the " tyranny of distance", the whole range from high tech startups to small traders or artisans can leverage the cloud to tap into remote markets. This opens up new economic development opportunities to any region that has ideas, talent and a high speed broadband infrastructure. Also, the cloud could bring jobs to ICT-savvy workers rather than uprooting them in pursuit of work, thus bringing jobs and cash to less favoured regions. Many apparently local products and services could get global reach, increase web presence (and discoverability through Internet search engines) and – particularly where small firms group together – achieve the critical mass needed to negotiate preferential terms with key business partners (e.g. delivery/transport, tourism operators and finance companies). Public authorities also stand to gain substantially from cloud adoption both in terms of efficiency savings and in terms of services that are more flexible and tuned to the needs of citizens and business. The most immediate saving would be in terms of lower IT costs by reducing capital and operating expenditure and increasing hardware utilization rates which today can be as low as 10% on public sector infrastructures.10 Further benefits would come from process reengineering through lower cost and more frequent upgrade possibilities and the scope to share infrastructures between agencies. Beyond pure costs savings, cloud computing can help drive the transition to 21st century public services that are interoperable, scalable and in line with the needs of a mobile population and businesses that want to benefit from the European digital single market. The first incremental steps would be improved service performance such as improved security, more user-friendly services, the ability to roll out new services cheaply, fast and flexibly, the relative ease of using cloud computing for creating social engagement platforms or for specific campaigns and the scope to monitor outcomes better. But looking forward ten years cloud could help realise the vision of " Every European Digital", able to enjoy full electronic public services rather than a paper bureaucracy. Cloud computing could help to drive public costs down and push public benefits up and give a broader base for economic activity involving the whole population.


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