Public cloud services will boost economy by $3 billion pa after 10 years

Australian businesses could substantially cut capital and labour costs through the use of public cloud services, leading to a yearly $3 billion boost to the economy after 10 years, according to a new report from KPMG.

The report, Modelling the Economic Impact of Cloud Computing, was commissioned by the Australian Information Industry Association (AIIA) and is available for download as a PDF from the KPMG website.

It estimates that adoption of public cloud services across 75% of relevant ICT spending, achieving OPEX and CAPEX savings of 25% and 50% respectively, would result in an increase in long-run GDP after 10 years of $3.32 billion per annum.

At 50% adoption levels, the GDP gain is $2.16 billion per annum, KPMG said.

“There’s a critical need to continue to find ways to improve productivity in Australia,” said Nicki Hutley, Chief Economist at KPMG.

Hutley said that previous governments have improved productivity via “low hanging fruit” such as reforms to industrial relations, tax and savings.

But productivity has slumped over the last 10 years and widespread adoption of cloud services is “the next key area of potential productivity improvement”, Hutley said.

“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,” Hutley said.

On for big and small

The report also found that small and 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 as they could take advantage of the economies of scale offered by large public clouds,” said Hutley.

The report found that there are several barriers to cloud computing adoption and success, including 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,” Hutley said.

But the report also states that cloud-based solutions do not always deliver identifiable, immediate or ongoing cost savings. However, it did say that cloud services could offer intangible benefits such as access to new products that allow business expansion and improved flexibility and timeliness of delivery to market.

Of the organisations interviewed, KPMG found that the financial services, property and business services, education services, and media information and telecommunications sectors had the most robust results.