What’s in ‘the cloud?’ A look at costs and benefits

Cloud computing has the potential to provide a boost for small- and medium-sized enterprises in Europe, as long as concerns about data privacy can be overcome. That was a key message coming out of a Science|Business’ seminar held at the European Parliament on 9 December.

In the past five years, cloud computing has emerged as a standard industry model: storing data or running software in a ‘cloud’ of servers maintained by someone else, rather than on your own office computers. As the idea has spread, governments have started to consider the policy implications – and the Science|Business discussion focused on the potential economic impact in Europe. The session was held by invitation of Ivailo Kalfin, a Bulgarian member of the European Parliament and vice chair of its budget committee.

So what are the potential benefits of cloud computing? Essentially the cloud provides computing resources that users can access as and when they need them, in the quantities that they require. SMEs can therefore avoid large up-front capital expenditure for data storage capacity or a big network infrastructure and simply pay for what they use. “The cloud helps SMEs proportionately more,“ said Mark Lange, Senior Policy Counsel at Microsoft. “Large companies have had access to some type of large computing infrastuctures for years. But now SMEs with limited computer competences suddenly get access to supercomputers.”

Opportunities in the cloud

The advantages for SMEs were also underlined by Zoran Stančič, Deputy Director-General at the European Commission’s Directorate-General for Information Society and Media. “There are lots of opportunities for SMEs because work done now can be done more cheaply and more effectively in the cloud,” Stančič said, citing as examples database or accounting work.

It is not just SMEs that will benefit from the cloud. Cloud computing is often compared to a utility, which like electricity or water everyone uses and everyone benefits from. One advantage of the cloud is the potential for lowering costs, which is a draw for most companies, organisations and governments.

The cloud is also a potential platform for innovation. Innovations brought about by the cloud could come in the form of products, services or business processes. “Cloud computing is an enabler,” said Martin Przewloka, Senior Vice President-Global Head of Internet Applications & Services at SAP Research. “I dream of the benefits that can be created out of the cloud, business models that have not yet been thought up,” he said.

Data privacy is key

While the benefits of the cloud are already being experienced by some and dreamed of by others, there is no avoiding the fact that it changes the way that data is stored and how that information is used. The issue of protecting data privacy is therefore key as regulators seek to put in place a legal framework that provides the right level of protection without stifling innovation.

For governments and public administrations, the protection of sensitive information is crucial. As Megan Richards, Director of Converged Networks & Services at the Commission’s DG Information Society, pointed out:“a distinction needs to be made between different types of data„. Much public data can be shared usually without any problem, but top-secret information obviously needs to be kept secure, she said.

The question of whether the EU’s concern for protecting data privacy is a plus or a minus for business is a contested one. For the Commission’s Stančič, it is an asset if the EU can provide a framework where “citizens from around the world think: if my data is stored on a European cloud, I know that a high level of data privacy rules apply…If we do it right, strong data privacy is an attraction,” he said.

But Mike Sax, Chairman of the Association for Competitive Technology, which represents more than 3,000 small and mid-size application developers and information technology firms, noted a potential downside. “Without flexibility and harmonisation, data protection could become one of the biggest obstacles for cloud development,” he said. “SMEs need to exchange data with other SMEs. Data protection rules need to allow this flexibility.” Sax also pointed to the importance of avoiding “a patchwork of different rules” across the EU. SMEs simply don’t have the resources to deal with that, he noted.

EU strategy for the cloud

The European Commission is working on a cloud computing strategy, which the Commissioner for the Digital Agenda Neelie Kroes plans to present in 2012. Kroes has already outlined the three broad areas that the strategy will cover: the legal framework concerning data protection and privacy; technical and commercial fundamentals, such as the security and availability of cloud services; and the market, such as supporting pilot projects aimed at cloud deployment. Viviane Reding, who as Justice Commissioner is working with Kroes on related issues, said in a 7 December speech that the Commission aims to lay down “a sound legal foundation for cloud services first and foremost in the area of privacy and data protection.”

Two buzzwords doing the rounds in Brussels are cloud-friendly and cloud-active. The former refers to getting the right legal provision in place, the latter to increasing Europe’s share of the global cloud turnover. Stančič highlighted the importance of both these aims. He cited figures from a recent study that estimated 92 per cent of the global turnover from the cloud is generated in the US, compared with just 7 to 8 per cent in the EU, and the remainder elsewhere.

The Commission wants to see the EU’s share increase, and it believes it can do just that if it continues to support research and innovation in this field while simultaneously developing the European strategy and providing the right regulatory framework. As Commissioner Reding said in her speech, reforming the EU’s data protection laws will “put EU and non-EU service providers on an equal footing. The reform will allow Europe to reap the benefits of cloud services.”

Who uses the cloud? 3 SME profiles

Tradefacilitate: Conor O’Riordan, CEO

One of the consequences of the September 11 attacks in the US was heightened global security, not only for people travelling in and out of airports but also for goods being imported and exported around the world. Conor O’Riordan, who has worked in international trade for 25 years, told the Science|Business seminar that he quickly saw a business opportunity.

O’Riordan’s idea was to have one electronic document, based on global and interoperable standards, to make it easier to comply with new customs and trade requirements. The EU, for example, replaced an administratively burdensome and expensive paper-driven process for exchanging customs data with mandatory paper-free requirements, O’Riordan explained. “Using the knowledge from my paper-based document trading days, I came up with a solution for the online world,” said O’Riordan, the founder and chief executive officer of Tradefacilitate.

The product, which is delivered globally on Microsoft’s Azure Cloud platform, facilitates the exchange of trade data and documents between importers and exporters and to customs officials’ requirements. “Using a global technology provider’s brand and their cloud has allowed our company to provide a seamless, scalable, secure and reliable solution to our clients around the world,” O’Riordan said. “The cloud is a huge economic stimulus and will empower innovation and competitiveness,” he added.

Mobylla: Payam Moini Tabatabai, Founder and Managing Director

Mobylla, founded by Payam Moini Tabatabai at the start of 2010, provides companies with what it terms “mobility solutions” -  IT solutions to enable business people to do their work easily from their smartphone.

As Payam Tabatabai points out, the number of mobile phones is increasing by the minute, and we are becoming ever more dependent on them. We don’t just use mobile phones for making calls, but for checking emails and carrying out our daily work while on the move. In fact a new word has emerged, NoMoPhobia, a fear of being without your mobile phone. There is also a trend known as BYOD, or Bring Your Own Device, for employees using their own mobile phones rather than company-provided models. That  keeps companies happy as it lowers their costs and keeps users happy as they can use a device they’re familiar with. These trends bring with them a set of challenges, for example network connectivity, security issues and browsing policies, Payam Tabatabai explained.

“Don’t worry. Solutions exist,” Payam Tabatabai said, referring to a number of Mobylla’s existing products. In the near future, Mobylla will be adding its new service Cloud Mobility, which will give companies the possibility of doing even more remotely.

Mymicroinvest: Guillaume Desclée, Managing Director and Founder

Mymicroinvest’s mission is to “help early stage entrepreneurs with great business ideas to develop their project and achieve their goal”. To achieve this, it combines the power of the people and the business community.

It’s hard for entrepreneurs to secure financing for their ideas, especially if the people with the ideas are too young or the ideas sound too risky, Mymicroinvest’s Managing Director and Founder Guillaume Desclée told the seminar. The idea behind his company is therefore to bridge the funding gap by reaching out to each and every one of us. The business idea has to win the approval of “the crowd” and of business analysts.

Mymicroinvest has set up a platform where entrepreneurs can pitch their business ideas to the online community. Internet users can select a business pitch they like, vote for it and invest a small amount of money in it. “We’re using the pull of the crowd to select startups,” Desclée said. “You can become a business angel with just $100,” he added. The idea is that lots of small amounts of money eventually make a large amount, at which point professional investors will become interested because the idea has proved popular with “the crowd”.