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August 3, 2010

Economic Emergence and Cloud Convergence

Nicole Hemsoth

The last few weeks have been packed with estimates, predictions, and survey-driven results from a host of economic and tech-oriented groups pointing to dramatic growth of clouds over the next few years. For instance, just this morning, Wintergreen Research spit out the prediction that by 2016, the cloud market would reach a staggering $17 billion in revenue, an estimate that has been echoed elsewhere, give or take a billion or two.

Cloud-focused markets aside, the real story here seems to be what the cloud might mean for the global economy. Since the great promise of the democratizing power of the cloud lies in its ability to empower the “meek” by permitting access to massive resources that would have otherwise been off limits due to simple startup costs, it serves to reason that the cloud revolution could produce a tidal wave effect over the coming years as the competitive playing field is leveled.

The more specific question becomes, since the key areas of predicted growth over the next decade (healthcare, alternative energy, and technology—cloud in the center) are all areas where the cloud has been making inroads, is it possible that there is a convergence of economic drivers that can kickstart the economy?

In other words, with reduced costs of doing business, can alternative energy and healthcare startups reshape the economic landscape? Is demand for innovation on the tech side of these sectors enough to power us through the tough times?

Robert C. Doll, Vice Chairman and Chief Equity Strategist for Fundamental Equities at BlackRock Inc., just released ten economic predictions for the coming decade that certainly ran the gamut, from the dazzlingly bright and to the grim and foreboding. This seems to be the trend when it comes to economic forecasts, whether they’re addressing the next quarter or the next quarter-century but the one common thread that’s been running through most of them is growth in the tech sector. More specifically, many predictions are citing the cloud as a primary driver for economic possibilities in the future.

While the full list of ten estimations can be perused here for those interested in broader economic trends, it was Doll’s third prediction that is of the most interest, in part because although it invokes a wide range of industries and innovations, much of it can be tied to innovations in cloud computing for the key areas poised for the most growth over the next ten years.

Although it’s not clear that the list of ten is ranked in any particular order, the third predicted trend states that, “healthcare, information technology and energy alternatives will be leading growth areas for the United States” since these are the three sectors that are poised for the most growth and innovation in the coming decade. Doll speculates further:

“Advances in biotechnology, the rise in patient-driven research and an increasing move toward digital healthcare record-keeping are potential growth areas for the healthcare sector”

“Information technology’s impact will be broadened by the sheer growth of new types of computers and devices, advances in microprocessor speed and capacity, innovations such as cloud computing and the emergence of social networking tools as economic growth engines”

Do you see the connection–the topical convergence here?

When we talk about biotechnology, for instance, most of us are aware that this is one area where cloud computing has taken off, especially for research and development purposes. Furthermore, there are an increasing number of signals indicating that healthcare—from research to record-keeping—is moving to the cloud as well. Couple all of this with the innovation that is being driven to research and innovate for better, cleaner, more efficient energy sources (and even in the oil and gas discovery process still) via the cloud and what do we see?

We see a future that is shaped by the cloud—and moreover, that is shaped by HPC in the cloud. Not the publication you’re reading now—but  the process, the science, the advances and the art of HPC being taken to the level of service versus immobile, monolithic installation available only to a select few, those few being those who could afford it.

What the research groups are missing in their expensive, niche reports are these bigger picture issues. What is the global—yes, global—implication of HPC in the cloud on our universal economy? After all, to declare that our (meaning universal, collective) economies are independent of one another would mean shedding the lessons of the West’s Great Recession. If our economies are becoming one, and this may become the case to an even greater extent in the next decade, then our movement toward the cloud should be a collective effort. Research centers, enterprises large and small, individual developers—from everywhere.

The point here is that while the Great Recessions comes to a close (if you choose to believe that is really the case) there is still a Great Convergence underway. What else can explain record profits among cloud-focused or even cloud-serving companies while other tech firms continue to hit rock bottom?

The areas that provide the most hope for economic recovery via the Knowledge Revolution (which is quickly supplanting the Industrial one in the West) are the areas that are the most suitable for cloud computing. And this is good news for the industries who supply the cloud, to the sectors that consume it, and for the economies of those nations who may soon come to rely on it.

This will strike some as being just as much of a sugar-coated opinion as Wintergreen’s report (and the cascade of similar predictative results that echo the same sentiments). I was counting on that as I wrote this—but even if I can concede that I might be too filled with optimism, can you at least see some of the light that blinds me, at least from an economic perspective?