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The Castelfranco Charter provides a roadmap to adopting cloud technology to achieve cost efficiency and profits (THE GUARDIAN, April 18, 2012)

Cloud computing is the new revolution in ICT. It’s actually something we are already familiar with: emails and social networks are all services provided to private customers on the cloud, that is through the Internet using data storage and computing capabilities provided online by providers such as Yahoo! or Facebook. But the new idea associated with cloud computing is to bring the same concept into business, and shift data and basic applications to the clouds. This can generate huge cost savings and more efficiency in large areas of the private sector (especially in fields such as services and selected manufacturing sectors where ICT costs are relevant), and also of the public sector, including hospitals and healthcare, education and the activity of government agencies with periodic spikes in usage. Case studies in the private and public sectors suggest that cost savings can be substantial, in the order of 10-50%.

Cloud computing is currently developing along different concepts, focused on the provision of Infrastructure as a Service (renting virtual machines), Platform as a Service (using platforms on which software applications can run) or Software as a Service (renting the full service, as for emails). In preparation for its development, many hardware and software companies are investing to create new datacenters and services. Cloud platforms provide services to create applications in competition with or in alternative to on-premise platforms, the traditional platforms based on an operating system as a foundation, on a group of infrastructure services and on a set of packaged and custom applications. The crucial difference between the two platforms is that, while on-premises platforms are designed to support consumer-scale or enterprise-scale applications, cloud platforms can potentially support multiple users at a wider scale, namely at the Internet scale generating large gains in terms of flexibility cost effectiveness.

The most relevant economic benefit of cloud computing is associated with a generalized reduction of the fixed costs of entry and production, in terms of shifting fixed capital expenditure from IT into operative costs depending on the size of demand and production. This contributes to reducing the barriers to entry especially for SMEs. The consequences on the endogenous structure of the markets will be wide, with entry of new companies, a reduction of mark ups, and an increase in average and total production. In recent research we have adopted a macroeconomic approach to study the effects that this innovation on the cost structure of the European firms investing in IT and consequently the incentives to create and expand new businesses, on the market structure, on the level of competition in their sectors, and ultimately on the effects for aggregate production, employment and other macroeconomic variables. Starting from conservative assumptions on the cost reduction process associated with the diffusion of cloud computing over five years, we have estimated that the diffusion of cloud computing could provide a positive and substantial additional contribution to the annual growth rate (up to a few decimal points), helping to create about a million and a half new permanent jobs in the EU through the development of a few hundred thousand new SMEs. Similar results have been obtained by other research institutes, such as IDC.

Of course, part of the positive effects of cloud computing will depend on the speed of its adoption, so policymakers should promote a rapid adoption, especially in the public sector. The difficulty is to overcome problems of reorganization, data portability and data privacy. All this requires a strategy and public authorities around Europe should coordinate for the purpose. A brilliant idea recently emerged from a small but dynamic Italian local public authority, the Asolo Ulss, near Venice. This public health company has advanced a charter, the so-called Castelfranco Charter (from the place where it started last October), which provides a set of recommendations to help public authorities to adopt cloud computing. The idea, recently launched in an international conference tour, is simple but useful to promote cloud computing adoption, and could apply also to private companies willing to take this step. The sequence of the main recommendations is the following:

1. operate on a redundant broadband network, for the connection between the company, the customers and the service providers;
2. ensure “private cloud” usability as a preliminary step before agreeing to switch to a “public cloud”;
3. establish a roadmap to move systems into cloud computing under sustainable economic, management and security conditions;
4. ensure storage of data in data centers located in a EU country guaranteeing compliance with laws and regulations;
5. request providers to guarantee  interoperability and data portability in the event of transfer to another provider;
6. request providers to guarantee permanent operative continuity of the systems in cloud;
7. specify the vendor’s management policy for data storage/backup activities in cloud
8. formalize the service providers’ liability for data misplacement, loss and/or theft, outages, downtime, and interoperability failures;
9. modify the ICT infrastructure towards service management skills;
10. appoint a Privacy and Risk Manager to supervise data management, protection and security.

Following these steps, local public authorities and small private companies could safely move to the cloud. Economic gains will arrive, for them and for the economy as a whole.