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Irish Bailout Provides Cloud Computing Opportunity

Let Efficiency Trump These Global Bubblebursts

The center did not hold in the Irish real-estate market. Now, Ireland's leaders have admitted what many suspected; it can't go on without a major loan from its EU partners.  The future of the country itself appears to be at risk, as yet another big disturbance ripples through the tender fabric of the global economy.

The "bailout" relates directly to a real-estate bubble that seems at first blush to have parallels to the similar bubble--and crash--in the United States.

But there's a racial dimension to this discussion in the US; there's a racial dimension to almost any discussion in the US. Ireland has run into the same problem without this dimension. Ireland's housing troubles are far worse than those of the US, although that may be hard for someone from, say Michigan or Nevada to believe.

Big Bailout Blues
Believe it. The bailout, which will take the form of loans (not grants), will be in the neighborhood of $100 to $120 billion. This represents about 50%--yes, half--of the size of the entire Irish economy. A bailout of similar size in the US would run to about $7 trillion, far, far above the most dire numbers that were thrown around during the US economic meltdown in 2008.

The prevalence of 100% loans and some of that pesky corruption in the banking industry seem to be the big causes of the problems in Ireland. Another major factor, if not a blame-worthy one, was the entry of Ireland into the Eurozone in 2002.

Local interest rates dropped significantly as the country became part of the Euro-colossus, which has a larger overall economy than the US and Canada combined. Lower interest rates made housing loans more appealing, and in theory allowed for higher prices.

An irony that most Irish wits would appreciate is the prevailing wisdom that Ireland adopted (and was allowed to adopt) the Euro (replacing the Irish pound) in no small part to tweak the UK, which has steadfastly stuck to the British pound even as it remains an active, willing participant in many Euro-initiatives. Had Ireland stuck to the pound, would the real estate bubble occurred?

Much analysis of the Irish housing bubble has also focused on a combination of relatively low-density housing and strict zoning regulation on one hand, and the popularity of certain neighborhoods driven by cachet and prestige (eg, vanity) on the other.

Hold That Tiger!
The Celtic Tiger of major business media lore was a lot of fun to watch as it roared into life. Visitors to Ireland as late as the 1970s would often comment on the country's economic poverty, symbolized by pathetic little peat fires trying to lessen the chill in the nation's ubiquitous pubs.

That all changed as globalization began to take off in the 1990s, and as outsourcers discovered that the Irish could speak English pretty well and would work cheap.

With a population of only 4.5 million, much of it centered in and around Dublin, it didn't take a lot of jobs to stimulate Ireland's economy. Bring 100,000 new jobs to India and you've filled a nice tablespoon from the ocean; bring the same number to Ireland, and you've employed several percentage points of the entire population.

Even today, as the nation thoals in the early days of what may be a long, dark economic winter, Ireland's per capita income ranks among the top 5 in the world, according to the International Money Fund.

Hope in Quality
Although Irish labor has become expensive, the country retains its reputation as a high-value services provider. Its location can't hurt, as Dublin is easily reached from North America, and flights from Dublin to all major European destinations are widely available.

(On a visit there just a few years ago, I did find the Dublin airport to be a bit dated, and among the most crowded facilities I've ever experienced. I also found central Dublin itself to be remarkably crowded and frenetic; sort of like Tokyo with more piercings and slightly more purple hair.)
Ireland has installed no small amount of IT in recent years, as it has increased its share of the world market for services and continuously upgraded its capabilities.

In a survey I recently made of global IT spending, Ireland did not rank among the Top 25  most vibrant of all IT cultures, in that its relatively high cost-of-living dampens the effectiveness of similar purchases in less-developed countries such as Egypt, Poland, or Malaysia, to name just three.

Yet it did rank 13th per capita in IT spending, and that counts for something. It would seem that much of Ireland's recent IT spending has been to deploy new systems, rather than simply continue the license-driven logrolling that affects about 80% of all IT purchases in the developed world.
So, despite this horrendous problem with its real estate, we should expect the country to maintain its progress in its service sector. This is, of course, unless the current global economic malaise causes everyone to pull on the reins and exacerbate things.

There He Goes Again
It is here where, again, the case for Cloud Computing must be made. And by this I mean real Cloud Computing--outsourced Cloud Computing that relies on third-party providers to deliver platforms and infrastructure.

Business and government have become so inextricably linked in so many parts of the world that some days it seems as if there may be revolutions at hand. Corporate power, arrogant yet blind, has been the subject of numerous books, movies, and conspiracy theories for decades now. Yet it seems as if we are at a point where corporations and countries may be able to help one another.

The big companies that want to be your Cloud services provider--whether Amazon, Cisco, Google, Microsoft, and others of similar heft--have money. They're sitting on billions and billions of dollars, euros, and who knows what else. They can buy a lot of computers if need be. 

Plus, through the wonders of virtualization, they are only now learning how to make the computers they have and the ones that they buy perform at something closer to capacity. Atypical server or storage system is being tapped to about 15% of its potential today; that number can rise to 80% through virtualization. Yes, there are heat and power concerns in doing this, but solving that is a "mere" engineering problem. 

The reality is that currently deployed technology has the potential to deliver some X-factor of what it delivers now, and Cloud service providers have the capability to buy a lot more of it.

Trillions and Trillions
Annual global IT spending is about $4 trillion. Say 20% of that is for servers and storage--$800 billion--and multiply the effectiveness of this by a factor of four or five, and the numbers start to show that even massive bail-outs can be matched by increased efficiency in the use of IT spend.

There are many entire nations, on the other hand, that don't have money but need to keep working. If national strategies were to emerge that focus on the use of outsourced Cloud Computing, then enormous upfront capital costs would disappear, current maintenance costs would simply be rolled into pay-per-use contracts, and concerns about future-proofing and vendor lock-in would disappear.

And Cloud Computing does not have to mean job cuts. Very unfortunate comments about replacing entire floors of people with "three guys in India" are the product of the glib, sarcastic thinking that crops up now and then in the pressure cooker of business. The reality is that Cloud Computing will free IT employees--at least in enlightened organizations--to focus on innovation, whether of the continuous, iterative improvement variety or of the you-won't-believe-this breakthrough variety.

Furthermore, as the move toward interoperable metadata marches forward, lock-in to service providers will be less of a concern as well.
Time to Feel Secure about SecuritySecurity concerns remain the great bugbears of this discussion. My view is that the major Cloud services providers already address the most serious existing security concerns possible, and that they are best equipped to handle them.

But in an era in which it has taken almost 10 years for the American public to finally push back against the brainless, useless, business-killing TSA, it is the easiest thing in the world for a CIO to push back against something new by uttering the single word "security" or for any garden-variety politician to become a demagogue on this issue.

In contrast, if the distressed countries of the world--a group that includes roughly 100% of countries today--would get their best IT people together and outline the advantages of Cloud Computing, then even something as serious as the current Irish bail-out crisis can be seen as being not the end of the world.

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.