The information technology industry has welcomed the release of a report that argues there is a greater opportunity for cloud computing services in Australia, noting a growing demand for services that are not subject to over-bearing government restrictions.
The Potential For Cloud Computing Services in Australia report, which was commissioned by Macquarie Telecom and carried out by Lateral Economics, was launched by innovation minister Kim Carr yesterday.
The report pins the industry’s revenue at over $1 billion for 2010, with 4,300 employees, and notes a wave of investment in the past few years including nearly $1 billion from Macquarie Telecom, Fujitsu and Telstra.
In particular, Macquarie Telecom has invested $60 million to data centre expansion in 2010-11, and is in the process of constructing a second data centre. In 2011, HP also announced a major cloud service and has spent nearly $119 million on its local centre.
Several other companies including Bevan Slattery’s NextDC and Cisco have instead invested in major cloud computing projects.
“There are major issues around risk management, sovereignty, data security, privacy and service quality that need to be thoroughly debated,” Carr said in a statement yesterday.
The article also references data that shows 43% of businesses are now using cloud computing in some form.
“A local cloud capability will give us a say in these issues. Our political stability, and the stability, transparency and integrity of our institutions can set Australia apart in the industry.”
The Australian Information Industry Association has praised the report, saying it proves there is an opportunity for Australia to establish itself as a key destination for cloud computing services.
“Like all technology-driven initiatives, strong engagement between the key stakeholders is essential. In particular, coordination of government regulatory environments with initiatives across the private sector will be central to developing the right outcomes,” AIIA chief executive Suzanna Campbell said in a statement.
The report itself notes that Australia has two key advantages for cloud computing services, highlighting that local customers will be willing to choose domestic solutions rather than slower, overseas services, and also the high level of regulation.
However, it also laments the immaturity of the market, high costs and the lack of scale, with much of the report investigating how different privacy laws and jurisdictions could affect the growth of the domestic market.
It also notes that the time it takes for signals to pass between countries and the cost of underseas cables “cut both ways for the future of a domestic cloud industry”.
Specifically, it notes that a 1Gbps link between Auckland and Sydney costs about $75,000 per month, while a link between Los Angeles and Vancouver would cost about $10,000.
“Given the current state of our international and long-haul communications links and their high cost, the objective of export-driven growth remains a challenge, and there are actions for governments to consider if they wish to ameliorate these.”
“A large and competitive domestic industry will be well placed to seize export opportunities in specific niches,” it says.
It recommends a number of steps for the Government to make in order to improve the cloud computing market, including collaborating with industry to define a code for self-regulation.
The report also says the Government should work with industry in order to develop export-oriented legislation and self-regulatory conditions.
“In particular, where they are servicing export customers, Australian cloud service providers should be able to opt out of certain regulatory structures designed to protect Australian resident people and corporations.”
The issue of regulation in cloud computing is a contentious one. While many businesses enjoy having their data hosted in the cloud, they can run into trouble when they find their data is hosted in a number of different countries and thus, subject to several different jurisdictions.
The AIIA welcomed these recommendations, and highlighted proposals that would see foreign purchasers of Australian services exempt from local regulations that are designed to protect only Australians.
“This will leverage Australia’s a advantages to minimise data security and privacy risks,” said Suzanne. “Self-regulation of industry in close partnership with government will also be important.”
“The Lateral Economics report notes that Australian industry is already proactive in this area, with a number of key companies developing consistent approaches to transparency and accountability.”
Carr said yesterday the Government will take the proposals into consideration, and welcomed an announcement that MacTel chief executive David Tudehope had voluntarily signed up a number of firms to help create a set of industry standards.
“There is certainly robust, ongoing discussion on cloud computing throughout industry and the community and the Government is very much involved in the debate,” he said.
The AIIA said in the fact of international competition, the industry needs to “capitalise on our strengths”.
“This is about systemic change: there is no one issue that will create the desired outcomes. Australia needs to take action on a number of fronts.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
