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Article

Currency of the Realm

As Many Countries Stress About Money, They Should Think About Cloud

Let's talk about currency valuation and what it has to do with Cloud Computing.

Fundamentally, I think the world needs a new wave of productivity gain. I think that Cloud Computing can bring this about, and I think that today's global economy--and how its currencies are valued--cries out for this to be brought about.

I'll try to draw two things together here, to see if my idea makes sense.

The 80s IT Investment Wave
First, let's go back to 1990 for a few seconds. A report was circulating then (via newspapers as there was no Worldwide Web) that US business had invested $1.2 trillion in IT during the 80s, yet had shown no apparent productivity gain. PCs were ubiquitous in offices, but maybe 15% of them were networked.

"Office productivity" software seemed to be an oxymoron. Word processing just led to sloppy writing and editing, it was thought. Spreadsheets just led to careless business planning, because it was just too easy to change assumptions on the fly and produce the bottom-line results you wanted--on paper. Databases were not the core IT app; financial apps were.

Many of us will remember that time as one in which customer service barely existed, and bills routinely got screwed up "by the computer." In fact, any sort of problem--bank account errors, missing mail-order items, flight delays, hotel reservation screw-ups--were invariably attributed to "a computer glitch," and everyone shook their heads in agreement to this excuse.

Then the stuff started to work. The 90s saw dramatic performance leaps in hardware, as the implications of Moore's Law truly became apparent. Networks proliferated, enterprise software got more sophisticated, and system integration became a successful growth industry. The era of "rightsizing" was born, with a negative initial impact (ie, a lot of people lost their jobs) that was followed by a boom economy, led by new levels of manufacturing and office productivity that transformed the economy.

Today's Crappy Economy
Now, let's look at today. The US is mired in stagnant growth, with unemployment reaching levels far higher than official statistics would report. Europe seems to be in another period of malaise. Fast-growing economies are reported here and there, particularly in China and southern Asia, but these are places that are still characterized by systemic poverty for hundreds of millions of people.

And nobody is happy about the state of their currency. Leaders in many countries--Japan, Australia, and South Africa, for example--think their currencies are too strong.

Leaders in the United States think China's currency is (intentionally) too weak; a rise in the yuan (or RMB, as it's usually called in China) would presumably weaken the US dollar, but Chinese leaders are holding so much US debt that they don't want the US dollar to get any weaker. Japanese leaders think the RMB is too weak, too, and the two nations are exhibiting near-warlike behavior to one another right now over the issue.

Meanwhile, Europeans fret that their currency may just crumble, as the weaker economies in the Eurozone put increased stress upon it.

If your currency is relatively weak, your products and services cost less, and people from other countries will be tempted to buy more of them. If your currency is relatively strong, you can afford more foreign products and services. But no one's interested in doing this now; the problem is that everybody wants to export their way out of the current global economic situation.

The Dismal Science Proves Its Name
The situation defies quick analysis, and maybe defy all analysis. There's an emerging school of thought among economists--maybe it's simply a realization--that people often act irrationally, and that markets are therefore not rational. This flies in the face of a century of economic theory, which held that a market comprised of untold millions of people each acting in their own self-interest would bring an overall rationality to it. Smooth out the edges of competing irrationalities, so to speak.

In our almost ubiquitously wired, globalized economy, it's hard to determine a true national identity for most products (ie, how American is a Honda Accord or an iPhone) and services (what nations' laws really do apply to all those outsourced databases). It's not the 19th century anymore; nor is it the 20th.

Meanwhile, a number of governments are trying to weaken their currencies by intervening in markets, cutting interest rates, and pressuring China to strengthen the RMB. I wish they'd also spend some time on looking at how IT, specifically Cloud Computing, can help improve their national productivity.

For productivity gains are the great economic miracle worker, allowing seemingly competing economies to grow simultaneously. The irony of Nic Carr's question--whether IT matters because everybody has access to the same stuff--is that it matters because of this. IT can be a great leveler of the playing field. In recent years, tiny Ireland and tinier Estonia emerged as first-class economies by embracing technology aggressively. (Ireland's recent problems stem from the same sloppy banking practices that hit the US so hard in late 2008, not from technology.)

Even so, the big players--whether companies or countries--could afford a lot more IT resources than smaller players. And developing nations with teeming populations could ill afford the sort of commitment to technology that lightly populated Ireland and Estonia could undertake. The entire federal budget of the Philippines (where I live), for example, is about $30 billion, with a population of more than 90 million people, and rumors that some of the budget is lost to corruption.

Cloud Computing's Big Chance
Enter Cloud Computing. By promising services-based IT that is priced according to use--as an operating expense rather than a big, upfront capital expense--Cloud Computing takes the leveling potential of IT to a whole new level.

If a particular nation's political and business leaders can stop fighting one another for a few minutes and focus on what they want technology to do, rather than what they can't do because it's too expensive, a new era of IT-driven productivity is in their future. Productivity trumps resources.

A country can live with a currency that it views as too strong if it can improve its internal productivity (and thereby lower the cost of the goods and services it sells). In Asia, a relative paucity of legacy IT is viewed as an opportunity for Cloud Computing deployers to make up for the time they lost in the first IT productivity wave of the 90s. The wealthy countries can also benefit from kicking up their productivity a notch or two, of course.

Doing so requires countries to have a national strategy, to have its leaders in the same book (if not on precisely the same page), and assumes that the smell of corruption is not to be found. It also assumes that Cloud purveyors will purvey only the type of Cloud that provides measured services, rather than an UnCloud solution that requires upfront capital expenditure.

Neither every country nor every vendor will rise to these challenges, of course. But those that do will truly reap the rewards of Cloud Computing, and literally provision a new era of productivity, currencies be damned. Cloud Computing is the currency of the realm.

More Stories By Roger Strukhoff

Roger Strukhoff (@IoT2040) is Executive Director of the Tau Institute for Global ICT Research, with offices in Illinois and Manila. He is Conference Chair of @CloudExpo & @ThingsExpo, and Editor of SYS-CON Media's CloudComputing BigData & IoT Journals. He holds a BA from Knox College & conducted MBA studies at CSU-East Bay.