NEED TO KNOW: TECHONOLOGY
Silver Lining
Yes, a new data-storage technology could cost jobs. But it could add even more.
Sara Jerome National Journal November 21, 2011
Here is an information-technology plan for the era of austerity: cloud computing. This innovation—namely, systems that store data on remote servers operated by host companies rather than on hardware owned by your employer—does away with expensive equipment and the hassle of maintaining it. So it’s no surprise that the Obama White House declared a “cloud-first” policy two years ago. The Office of Management and Budget said that if each department and agency moved just three projects to the cloud, the government would save $5 billion.
The trade-off, however, seemed to be that, in emancipating themselves from hardware, employers emancipate themselves from staff to support it. “[Our client was] able to eliminate a whole bunch of actually U.S.-based jobs and kind of replace them with two folks out of India to serve a 1,200-person engineering organization,” gloated Richard Marcello, an executive at the IT firm Unisys, at the Cloud Computing Conference & Expo in Santa Clara, Calif. A simple story of cutting spending at the expense of jobs, right?
Not so fast. If the story of cloud computing in the United States plays out as its backers promise, it could become one of the most successful recent job-creation trends. Cloud evangelists promise that a profitable new domestic industry will emerge from the ashes of the traditional IT model. “This is going to be a second version of the rise of the Internet. It’s about to explode,” says David LeDuc, senior director for public policy at the Software & Information Industry Association.
It’s true that, in this revolution, some tech professionals—particularly those focused on buying and running hardware—will lose their jobs. But the cloud isn’t decimating IT departments. Recruiting firm Robert Half Technology found that, in 2009, 43 percent of chief information officers said that their departments are either “very” or “somewhat” understaffed. Unemployment for IT professions was just 5 percent in September, far less than the national average, and in a Microsoft study, 54 percent of IT decision makers said they are “hiring as a result of the cloud.” At any rate, according to a report last year by the consultancy McKinsey, savings from cloud computing don’t come from labor. An average business spends some $107 on labor each month for traditional storage, compared with $207 for Amazon’s cloud, the report said. Lower costs come from less hardware, not fewer people.
Meanwhile, new jobs are sprouting up to service the cloud industry—and not just in the developing world. This new market, valued at $40.7 billion worldwide last year, is expected to reach $241 billion by 2020, according to a report this year by Forrester Research. Sure, some tech companies will base their servers overseas in low-cost environments, but the top cloud companies are American; all told, U.S. firms control 60 percent of the market, according to the latest data from 2009. “The massive computing infrastructure in the United States gives us an edge,” LeDuc says. His trade association predicts that other countries will increasingly outsource their data to the United States, where Google and Microsoft keep many of their cloud servers.
The cloud is already putting Americans to work. Google’s team has more than 1,000 employees, Texas cloud company RackSpace employs 3,700 people, and California-based provider Saleforces.com has 235 open positions, according to The Wall Street Journal. U.S. businesses paid almost $22 billion to move to the cloud last year, and that figure is expected to rise to $80 billion by 2015, according to a study by IT consulting firm IDC.
Economists haven’t yet studied how this will all play out in the United States, but the Center for Economics and Business Research, a British think tank, predicts that the cloud market will create 2.4 million jobs over the next four years in Europe, the Middle East, and Asia, with 300,000 alone in the United Kingdom. “Public and private organizations that preserve the status quo of wasteful spending [on IT] will be punished, while those that embrace the cloud will be rewarded with substantial savings and 21st-century jobs,” Vivek Kundra, the former U.S. chief information officer who pushed the government into the cloud, wrote in The New York Times in August.
The biggest hitch could be protectionism. Cloud providers such as Microsoft and Google are already working hard to prevent foreign governments from enacting laws banning “cross-border data flows.” Such laws could force cloud companies to keep servers in the country where information originates rather than in the storage provider’s country of choice. Kundra supports a global cloud policy “that forces nations to work together and resolve” cross-border issues. “The United States, along with leading nations in Europe and Asia, has an opportunity to announce such an initiative at the World Economic Forum meeting in January,” he wrote in The Times.
Many consumers are already familiar with cloud technology (Gmail stores users’ information on Google’s huge servers rather than eating up the finite space on their laptops), and the federal government’s buy-in has signaled that the cloud—once considered too vulnerable to cyberthreats—is now sufficiently secure for most offices. Washington spends $80 billion on IT each year, and tech officials hope to eventually move a quarter of that sum to the cloud. The payoff may take years, meaning that President Obama’s policy won’t affect today’s unemployment rate. But if the cloud sector catches fire as promised, it will add, not subtract, American jobs.
This article appeared in the Saturday, October 29, 2011 edition of National Journal.
