A new report by KPMG shows Australian businesses across many industries could reap substantial benefits through reduced capital and labour costs by adopting public cloud services.
Modelling the Economic Impact of Cloud Computing, which was commissioned by the Australian Information Industry Association (AIIA) and launched by Senator the Hon. Stephen Conroy today, estimates that adoption of Cloud services across 75 percent of ICT spending would result in an increase in long-run GDP after 10 years of $3.32 billion per annum1. At 50 percent adoption levels, the GDP gain is $2.16 billion per annum.
“There’s a critical need to continue to find ways to improve productivity in Australia,” said Nicki Hutley, Chief Economist at KPMG. “Successive governments in the past have improved productivity by implementing a large number of reforms, but these have typically been the ‘low hanging fruit’ – such as industrial relations, tax and savings reforms. However, a number of factors have seen productivity slump over the last ten years. Widespread adoption of Cloud by businesses and government is the next key area of potential productivity improvement.”
“Cloud computing has a lot of potential but in Australia it is at the early stages of adoption when compared to uptake in the US and Europe. However, more businesses are now beginning to realise that the potential benefits of adopting Cloud can be very large in either cost and/or time savings, as well as providing increased potential for innovation.”
Chief Executive Officer of AIIA, Suzanne Campbell, said there was no doubt that Cloud computing was the tool of the future, and one which would ensure businesses could grow and remain viable in an ever-increasingly competitive environment.
“Cloud computing has been shown to not only boost productivity, but it also adds greatly to the flexibility and agility of business which enables them to adapt quickly and cost-efficiently to meet and take advantage of changes in their business environment,” Ms Campbell said.
“There are huge opportunities for businesses in Australia to adopt Cloud computing and set a firm foundation for their future growth and development.”
Between August 2011 and March 2012, KPMG interviewed 29 organisations covering sectors accounting for 80 percent of GDP and ranging in size from 20 employees up to many thousands. Of those interviewed, KPMG found that the financial services, property and business services, education services, and media information and telecommunications sectors had the most robust results.
The report also found that it was not just big business that can benefit.
“We found that small- to medium-sized enterprises could save significantly on operational costs. New companies trying to establish themselves are also more likely to succeed as their start-up costs would be lower by taking advantage of the economies of scale offered by large public Clouds,” said Ms Hutley.
While there is a strong economic case for the adoption of cloud services, there are nevertheless several constraints and natural barriers which need to be overcome. These include the compatibility of an organisation’s internal processes with cloud offerings, connection speeds, location of data and related security issues, business continuity/disaster recovery and integration, and limited knowledge of product offerings including businesses’ lack of familiarity with opportunities.
“These challenges are gradually being overcome and we can look at early adopter countries like the US as government and businesses in Australia navigate their Cloud adoption journey.”
The report also pointed out that cloud-based solutions do not always deliver identifiable, immediate or on-going cost savings. There could be intangible benefits such as access to new products that allow business expansion and improved flexibility and timeliness of delivery to market.
1. Based on the current level of Australian GDP, KPMG estimates that adoption of cloud services across 75 percent of relevant ICT spending, achieving OPEX and CAPEX savings of 25 percent and 50 percent respectively, after 10 years would result in an increase in long-run GDP of A$3.32 billion per annum.