Business Issues, Cloud

Does the Eurozone crisis spell boom or bust for cloud computing?

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When you go to study Economics at degree level they teach you three things; well, at least that’s how my tutors started things out for me at Wolverhampton Polytechnic way back when in the 1980s.

1 - The first rule of economics is there is no such thing as a free meal.

2 - Industry is both an economic regulator and a barometer.

3 - Recessions can be good as they drive out the weak and ailing elements of the economy.

Actually, in Wolverhampton they also teach you to run very fast away from glue sniffers as it’s not the swankiest neighbourhood in the country, but that’s another story.

So to point #3, as the Eurozone crisis takes hold and we see so-termed ‘austerity measures’ implemented across several countries’ economies, what effects will we see in new ‘enabling technologies’ such as cloud computing?

The cloud crisis trade-off

Will we see older less ‘nimble’ and more wasteful computing methods done away with as new more flexible cloud-based models are brought to bear?

Or will the cost of migration to the cloud itself prove to be prohibitively costly such that new and still-nascent hosted virtualisation solutions are left out in the cold before they have even had a chance to bring greater efficiencies, lower total cost of ownership (TCO) and deliver their targeted return on investment (ROI)?

Analyst firm Gartner sits on the more pessimistic side of the fence saying that the opportunities for cloud computing value are valid all over the world and the same is true for some of the risks and costs.

According to Paolo Malinverno, vice president at Gartner, "Some of cloud computing's potential risks and costs -- namely security, transparency and integration – which are generally applicable worldwide, take on a different meaning in Europe."

The problem it seems (or at least, one of the major problems) is that ever-changing data privacy regulations across companies with footprints in more than one European nation are holding us back. The analyst firm goes so far as to suggest that Europe could be as much as two years behind the US in terms of general cloud adoption because of these facts.

Vice president of the European Commission Neelie Kroes has echoed these concerns and been talking openly about data regulations and how this needs to be aligned in Europe to make cloud easier to adopt.

“Where these barriers exist, I am determined to overcome them,” Kroes has said.

The summary truth of the matter here is that regulations are having an impact upon cloud adoption despite its still forward-facing growth. These difficulties are nothing but compounded by these times of austerity, which are further making investments in cloud harder to see through for many firms.

Every cloud has a silver lining

Gartner’s David Mitchell Smith is more upbeat and say that while these inhibitors will certainly slow down cloud adoption in Europe, they will not stop it. “The potential benefits of cloud are too attractive and the interest in its efficiency and agility are too strong to stall it for long," he said.

So it’s not doom and gloom then. EMEA technical marketing director of storage memory platform company Fusion-io Niall McLeod suggests that while budget cuts and austerity can be hugely frustrating, limitations can often spur innovation.

“In good times, there is often not a lot of need to reexamine what can be done more effectively, which can unfortunately often lead to stagnation. Many IT professionals are now looking closely at their infrastructure and moving performance to the server with flash memory to power their applications. Early adopters proved the reliability and value that results from separating storage performance from capacity, and today, many enterprises that need to achieve more with less are rapidly shifting from sprawl to efficiency,” said McLeod.

There are probably almost too many divergent factors here for us to be able to sit on one side of the fence definitively and say whether the current economic downturn has positive or negative effect on cloud computing’s growth.

Yes some short-term purchases may get shelved, but the cloud is here to stay -- whether you hold an Economics degree or not, of that you can be sure.

 

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Discussion
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pcalento
Paul Calento 256 Points | Mon, 06/25/2012 - 18:40

Fear of failure seems to take hold whenever there is a systemic downturn ... but when you look at successes during this period, the companies that make the right investments pay off significantly, since they're quicker to adapt and dealing with less noise (or the 'everyone's doing it' factor). What's interesting with cloud is that in some cases it requires potentially less investment than traditional IT ... certainly from a capital budget perspective. As for pessimism around things like "ever-changing data privacy regulations" ... that's always going to be there, but it gets amplified by fear of failure coming from the Eurozone crisis.

--Paul Calento

(note: I work on projects sponsored by EnterpriseCIOForum.com and HP)

AdrianB
Adrian Bridgwater 22 Points | Wed, 06/20/2012 - 14:09

Thanks John and Pearl -- 

I think we need to level things out a little here before we go too deeply into the "US is so far ahead of Europe in the cloud" argument. There are plenty of "old school" US firms some considerable distance away from any type of cloud deployment and European data centres are springing up like daffodils all over the place.

To address John's point - perhaps it isn't even the multi-nationals we should be watching, surely we can "assume" that their cloud migration plans are already quite mature. The tipping/inflexion (or whatever kind) point is when the small business sector really starts to delpoy cloud solutions and the "total weight" of the sheer number of this kind of firm adopting hosted solutions is really seen.

 

Adrian

jdodge
John Dodge 1396 Points | Wed, 06/20/2012 - 13:22

Obviously, there will be both delay from economic crisis as well as adoption. Which way it will tilt is not clear, but in scenarios like this, companies batton down hatches, i.e. they don't invest in much. But leadership companies will. What I'd like to know, Adrian, is which large multi-nationals are full speed ahead and the extent of their cloud investments.  

pearl
Pearl Zhu 89 Points | Tue, 06/19/2012 - 17:07

HI, Adrian, thanks for bringing up some global perspective, here, in US, cloud is reaching inflection point, from Gartner's hype cycle, then, can we say, in Europe, Cloud is at tipping point, as you said, it might have two year delay compared to US. 

I would say, cloud may well effectively connect the world more seamlessly, as it brings up the same concerns about security, transparency and governance issues, it also open the new gate for business innovation, it might be more critical for Europe to step out of crisis.

How to become more flexible in regulation/policy making to adapte to the rapidly change, either for privacy/GRC or sustainability effort, collective wisdoms worldwide are needed to overcome many challenges facing the humanity today. thanks.