Cloud dividend: distribution, retail, hotel sectors to gain more than EUR233bn in economic benefit by 2015

An estimated EUR763 billion could be generated by 2015, and millions of new jobs created, through the expected adoption of cloud computing across a range of industries in some of Europe's key economies. Standing to benefit most from the rollout of cloud computing services are the distribution, retail and hotel sectors, with more than EUR233 billion in value expected to be created.

The Centre for Economics and Business Research (Cebr) has revealed new findings in part two of EMC Corporation's 2011 Cloud Dividend report, focusing on key industry sectors in France, Germany, Italy, Spain and the UK. Cloud computing enables information and technology to be made available to businesses securely, in a scalable manner, and as a service - when they need it.

This computing and information access model speeds up time-to-market, removes traditional barriers to entry and allows companies to exploit new market opportunities. The study focuses on the three most common cloud computing models today: public cloud, which is controlled by a cloud provider; private cloud, which is controlled internally by an organisation's own IT team; and hybrid cloud, a combination of the two.

The EUR233 billion generated for distribution, retail and hotels - from a combination of accelerated business creation, business development and cost savings - constitutes 31% of the total economic benefit expected to be created across the region, with 77% of the value being derived from private and hybrid cloud solutions.

Distribution, retail and hotels accounted for the largest share of economic benefits in France, Italy, Spain and the UK. In Germany, however, the banking, financial and business services sectors were strongest, with IT capital expenditure (CapEx) savings alone of EUR18.1 billion.

According to the new research, most new employment opportunities stand to be created as a result of cloud computing adoption in the government, education and health sector, where more than 800 000 new jobs are projected to become available. The study shows that the total of new jobs across the five economies will potentially rise as high as 2.4 million by 2015.

Cebr's managing economist, Oliver Hogan, says: “Our research into the impact of cloud computing has uncovered compelling economic benefits attached to the expected and predicted rollout across various industry sectors. 'Distribution, retail and hotels' is projected to generate the largest returns from cloud deployments despite decreased spending power and commodity price pressures. 'Banking, financial and business services' is also one of the stronger sectors in terms of the resulting benefits, but lower relative IT Capex-to-labour ratios in this sector mean its share of the total benefits in EMEA isn't proportional to the sector's powerful contribution to overall GDP.

“One of the key drivers for economic recovery will be job creation and, interestingly, the public sector should gain most here with up to 800 000 positions expected to result from the adoption of cloud services.”

Inana Nkansa, Country Manager of EMC Southern Africa, adds: “The adoption of cloud technologies and services across EMEA brings with it the mission-critical agility that businesses need to survive and thrive in the current economic climate. A hybrid cloud model - a dynamic combination of internal and external resources where a private cloud serves as the gateway and control mechanism for public cloud services - provides organisations with the ultimate flexibility. However, a critical element in businesses achieving the competitive advantage presented by cloud computing, lies in the successful virtualisation of mission-critical and revenue-generating applications. That will be key to realising the full cloud dividend - and to deriving the powerful growth and productivity gains which, as the new report shows, can lead to meaningful job creation across the EMEA region.”

This sector is set to claim the largest overall share of cloud computing's economic benefits - 31% of the total economic benefit created across the region - despite being ranked as only the third or fourth largest contributor to GDP in the five economies.

The Cebr predicts future profitability in the sector will largely depend on efficiency rather than volume growth, due to decreased household spending power and rising commodity prices. Cloud computing provides at least one such opportunity for businesses in this sector to take advantage of the highest total net cost savings across all surveyed sectors, equating to EUR83.3 billion by 2015. The total benefit for the sector constitutes 31% of the value created across the region, with 77% of the value being derived from private and hybrid cloud solutions.

At the EMEA-wide level, the banking, financial and business services sector ranks second in terms of aggregate cumulative benefits, with more than EUR183 billion potentially being generated by 2015, and 60% to 80% of all businesses in the sector employing mostly private and hybrid cloud models (76%), over public cloud offerings, in order to assure security and IT governance mandates can be met.

Despite ranking fourth in terms of the overall economic benefits to be generated, this sector is set to see the highest level of cloud-related job creation, at 800 000 projected new roles, due to smaller average wages compared with other verticals. The net total cost savings projected for the government, education and health sector are more substantial than in banking, financial and business services, coming in at EUR14.5 billion.

While the sector has a mid-level IT-intensity and a mid-level Capex share, high levels of private and hybrid cloud adoption are predicted for the government sectors, meaning bigger cost savings are available.

Manufacturing will see more than half a million cloud-related jobs become open by 2015 - despite being the lowest contributor of macro-economic benefit out of the 'big four' industry sectors (EUR98.5 billion across the five countries).

Despite relatively smaller sector numbers overall, the EUR11.4 billion potential benefit linked to the UK would provide some fiscal relief to the country's ailing manufacturing industry. The Cebr sees powerful business development opportunities resulting from cloud computing adoption for the sector due to increases in total output through better seasonal-demand management. Mid-level productivity gains for SMEs are also anticipated through faster time-to-market, IT scalability and other business development opportunities.

The final sector in the report combines other areas of the economy, including agriculture, forestry and fishing, construction, transport, storage and communications and energy and utilities.

* The energy and utilities sector - where highly proprietary or regulated data requires extremely high computing and storage requirements - could see EUR14.1 billion in benefits from the adoption of cloud computing, and particularly private cloud models.

* Of the five countries, the energy and utilities market in Germany stands to derive the most economic benefit at EUR4.7 billion overall, with IT Capex savings of more than EUR1 billion and 6 000 newly-created jobs.

Part two of The Cloud Dividend report looks at the economic benefit and impact of cloud computing on specific industries across France, Germany, Italy, Spain and the UK.

The report identifies cost savings (Capex and Opex) made by companies adopting cloud computing and measures these against macro and business variables such as business development opportunities; business creation; indirect gross value added (GVA); tax contributions; as well expenditure on cloud services to determine the Euro value of the technology in each country. The full report can be downloaded from: www.emc.com/clouddividend.