Can cloud computing boost GDP?

November 15, 2012

Cloud computing (credit: Davide Lamanna/Wikimedia Commons)

Gross domestic product (GDP) can be boosted by cloud computing, the system in which remote computers on the Internet are used to store, manage and process data rather than the users’ local machines, according to a report to be published in the International Journal of Technology, Policy and Management. 

The report suggests that governments should collaborate to boost the adoption of cloud computing internationally.

Marco Iansiti of Harvard Business School and Gregory Richards of Cambridge-based Keystone Strategy, LLC, have found that cloud computing is likely to extend economic growth by increasing the efficiency of information technology in developed economies and could foster growth in those economies where IT penetration is not yet fully mature.

Additional 0.83% of GDP growth every year

They point out that during the coming decade, cloud computing will give individuals and enterprises access to a vast processing power at a low cost that has not been possible before. The team has now developed a model to link IT capital investment to economic growth and applied their model to 45 countries.

Researchers project that U.S. IT capital stock will increase from $2.3 trillion in 2010 to $3.76 trillion in 2020, 64% growth. If the impact of IT on GDP remains the same as in the recent years, that growth will translate into additional 0.83% of GDP growth every year. As a benchmark, Federal Reserve Board puts yearly GDP growth between 2.5 to 2.8% for the period. This implies that the productivity growth enabled by cloud computing will contribute almost one third of total US GDP growth in the coming decade.

For developing countries, researchers expect even larger gains, because in these countries the adoption of IT there is less mature: the factor share of IT capital in these countries is only 3%, as opposed to 11.7% in the developed one.

“Our findings should have bearing on policy discussions as governments across the world (including both the U.S. and the EU) consider and implement policies concerning the regulation of cloud computing. These regulations and decisions span a vast array of issues that, as we demonstrated, can have enormous impact on a country’s ability to grow and remain competitive,” the team concludes.

Cloud security questions

However, a study by researchers at computer security company RSA has shown that it is possible for software hosted by a cloud-computing provider to steal secrets from software hosted on the same cloud,  MIT Technology Review reports. In their experiment, they ran malicious software on hardware designed to mimic the equipment used by cloud companies such as Amazon. They were able to steal an encryption key used to secure e-mails from the software belonging to another user.

“The attack demonstrated is so complex that it is unlikely to be a danger to customers of any cloud platform today, says RSA, but the experiment answers a longstanding question about whether such attacks are even possible. The proof suggests that some very valuable data should not be entrusted to the cloud at all, says Ari Juels, chief scientist at RSA and director of the company’s research labs. “