For example, an IT services startup launched operations with 4 employees in a few months. They accessed cloud applications for email, HR, marketing, collaboration and more. In less than a year, the company grew revenues to $5M and added 30 new employees.
They expect to double revenues this year — and add another 30 employees.
A chemical company launched a new specialty business as a US subsidiary. They accessed business applications in a SaaS model, with no up-front capital, and established their operation in only 6 weeks. They employed about 20 workers.
Cloud computing can impact growth at each stage of the business lifecycle – from startup to multi-national. And business growth can produce jobs. Therefore, cloud computing delivers much more than IT cost efficiencies.
According to the Sand Hill study,
- Eleven cloud computing companies added 80,000 jobs in the U.S. in 2010 alone, and the employment growth rate at these organizations was almost five times that of the high-tech sector overall.
- Companies selling cloud services are projected to grow revenues by an average of US$20 billion per year for the next five years, which has the potential to generate as many as 472,000 jobs in the U.S. and abroad in the next five years.
And that’s only the beginning.
Cloud computing enables greater capital efficiency through its unique provisioning of an elastic and cost-effective environment in which to build the applications and systems needed to support a new business.
The venture capital community likes cloud computing because
- their investment risk is reduced when software startups no longer need to spend ~15-20% of their initial working capital to construct their own IT stack to develop applications, and
- “really hot” cloud startups could exceed 100% growth year-over-year for both “greenfield” applications and those that replace on premise ones.
What’s more, the Sand Hill study projects venture capital investments in cloud opportunities to be US$30 billion in the next five years, which could add another 213,000 new jobs in the U.S.
Small-to-medium businesses embrace cloud computing because
- they can launch new operations quickly with little to no up-front investment. This reduces their risk and allows them to scale quickly for surging demand, and
- cloud computing levels the playing field for new companies from emergingmarkets to compete and win against established global leaders.
Large enterprises are moving to cloud computing because
- business partners can define new business models more easily andopportunistically to create customer value,
- cloud computing can streamline supply chains via real-time collaboration around data that was not easily accessible before to predict and respond to factors that get more product to customers, and
- cloud computing can enhance employee collaboration and productivity, leading to business growth.
The most important impact of cloud computing is its ability to fundamentally restructure IT costs that free up working capital for the business – and it is how companies re-invest that capital that leads to new revenue streams – and new jobs.
In its most compelling finding, the Sand Hill study determined that cloud computing could save U.S. businesses as much as US$625 billion over five years.
Consider how many additional jobs US$625 billion could fund!
It’s important to note that the United States is not the only nation who recognizes the impact of cloud computing on job growth.
In her keynote speech at the recent World Economic Forum in Davos, Vice President of the European Commission Neelie Kroes launched their initiativeto establish a European Cloud Partnership, to
- bring government and industry together to advance cloud computing in Europe, and
- promote the adoption of cloud computing in the public sector.
As Vice President Kroes stated, “Cloud Computing will change our economy. It can bring significant productivity benefits to all, right through to the smallest companies, and also to individuals. It promises scalable, secure services for greater efficiency, greater flexibility, and lower cost.
Our flagging economies need us to make the best out of this. We cannot afford anything less. We need to act to support speedy uptake of Cloud Computing in Europe.”
In China, the government is also heavily investing in cloud initiatives, with the equivalent of more than $170 billion planned for the development of key cloud computing hubs.
China looks to cloud computing to accelerate economic activity, deliver citizen services at lower cost, and build more resilient cities to protect citizens from natural disasters.
China has many family businesses and companies that are small-scale manufacturers, who will benefit the most from the utility-based consumption of IT services in the cloud. Both central and local government in China are encouraging the adoption of cloud computing and treat it as a new economic growth point.
Jacqueline Vanacek is vice president and cloud computing evangelist at SAP.