Nº 1 2013 > Cloud economics

The cloud’s economic clout

Personal data have huge commercial value, to the extent that they are now being talked about as “the new oil”.

The cloud’s economic cloutThe cloud’s economic clout

The ability to transfer personal data internationally is a vital component of the globalized economy, like international flows of capital and international trade, and should receive the same attention.

According to ITU’s latest report Trends in Telecommunication Reform 2013, “The challenge for policy-makers is to balance the commercial need and individual desire for free flow of information with informed knowledge and effective control by individuals of their personal information. Clear and consistent policies need to be developed based upon current and prospective technologies. The opportunities for growth and development should not be hindered by unnecessary regulatory barriers, administrative burdens or choice of law or applicable jurisdiction issues.”

This article ( like the article https://itunews.itu.int/En/3412-Data-protection-and-privacy-in-the-cloudBR-Whose-cloud-is-it-anyway.note.aspx)  is adapted from “The Cloud: Data Protection and Privacy — Whose cloud is it anyway?”, a chapter authored by Stephanie Liston, Senior Counsel, Charles Russell LLP and the chapter on, “Demystifying Regulation in the Cloud: Opportunities and Challenges for Cloud Computing”, by Professor Ian Walden, Queen Mary, University of London and Baker & McKenzie. Both are part of Trends in Telecommunication Reform 2013.

In this article, we highlight the cloud’s economic importance. But first we consider some definitions of the cloud.

What is the cloud?

Fast and resilient communication networks have made it possible to shift applications and data from personal computers onto remote servers. This trend in networked computing is loosely called “cloud computing” — an umbrella term used to describe a range of different technologies and market offers.

Cloud computing (or, more simply, the cloud) has been defined in various ways. ITU, for example, describes it as “A model for enabling service users to have ubiquitous, convenient and on-demand network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort or service-provider interaction. Cloud computing enables cloud services.”

Some people define the cloud as the use of virtual servers available on the Internet, others as anything consumed outside a firewall (including conventional outsourcing). And cloud computing has been compared to the supply of utilities such as gas and electricity. A definition that captures the essence of cloud computing is that it “provides flexible, location-independent access to computing resources that are quickly and seamlessly allocated or released in response to demand”.

Services (especially infrastructure) are abstracted and typically virtualized, generally being allocated from a pool shared as a fungible resource with other customers. Charging is commonly on an access basis, often in proportion to the resources used.

Cloud service models

There are three primary types of cloud computing service models:

Infrastructure as a service (IaaS): A cloud-based virtual server providing networking and storage services and other infrastructure services. The customer does not manage or control the data centre but may have control over data or operating systems (for example, Amazon web service).

Platform as a service (PaaS): Where customers can use their own applications on the cloud service provider’s infrastructure. The customer can control data, applications and part of the hosting environment.

Software as a service (SaaS): Customers access the cloud service provider’s applications through the Internet. This is the most common form of cloud services, used by Facebook, webmail and other social-networking sites.

Existing service models have been described as private cloud, community cloud, public cloud or hybrid cloud.

Private cloud refers to infrastructure owned by or operated for the benefit of one (typically large) customer. It can be located on or off the customer’s premises.

Community cloud refers to infrastructure owned by or operated for a number of organizations on a shared basis. It supports a limited group of users, such as governments, that have common interests.

Public cloud refers to infrastructure shared among a variety of users with no particular set of interests. It is sometimes described as “multi-tenanted”. The infrastructure is owned by the organization selling cloud services.

Hybrid cloud refers to infrastructure and services that incorporate two or more of the above. An example would be a bank operating a private cloud for sensitive data and putting other data into the public cloud to lower costs and extend capacity.

The benefits

The demand for data storage is expanding dramatically with the exponential growth in data production, digital stores, digital libraries, digital archives, and usage and retention requirements. The use of cloud services by individuals (webmail, social networking sites, e‑commerce) is now part of everyday life in an increasing number of countries. Cloud services are used for wholesale or trade purposes, as well as for personal consumption.

In 2011, the market for IaaS was worth USD 1 billion, and is estimated to be worth about USD 7 billion in 2013. PaaS grew from USD 2 billion to around an estimated USD 8 billion, while SaaS was worth USD 15 billion and is estimated to reach USD 17.5 billion this year.

E-commerce brings people and businesses together internationally, and has the potential to drive economic growth. Governments can bring enormous social benefits to citizens through e‑learning and e‑health. Although there are infrastructure challenges in the developing world, such as lack of broadband access as well as power shortages and outages, the potential to use cloud services to increase educational opportunities and spread health benefits is vast.

Cloud computing is a technology “game changer”. European Commission Vice-President, Neelie Kroes, recognized cloud services, along with e‑health and connected television, as offering huge benefits for citizens and businesses, and an overall boost to the European economy.

Cisco has produced a global cloud index. The company predicts that “Annual global cloud IP traffic will reach 1.6 zettabytes by the end of 2015” and that “Global cloud IP traffic will account for more than one-third (34 per cent) of total data centre traffic by 2015.”

In terms of revenue, the global cloud computing market is forecast to grow 22 per cent annually to USD 241 billion by 2020.

The International Data Corporation (IDC) predicts that the amount of information and content created and stored digitally will grow from 1.8 zettabytes in 2011 to over 7 zettabytes by 2015. Cloud computing is just the latest technological development driven by this expansion.

The commercial advantages of cloud services include lower costs of providing information technology services, access to a wide range of applications (without having to download or install anything), availability of access anytime and anywhere, and flexibility to accommodate changing demand because customers only pay for the services they take.


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