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Cloud may generate more jobs than the Internet, studies predict

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Two recent studies -- one sponsored by SAP and the other by Microsoft -- suggest we may be on the cusp of something big, projecting employment growth in the hundreds of thousands to millions.

Are we about to re-live the go-go tech years of the 1990s from an economic perspective? Two recent studies suggest we may be on the cusp of something big, projecting employment growth in the hundreds of thousands to millions.

A study commissioned by SAP and conducted by Sand Hill Group speculates that cloud computing -- fueled by mobile computing, social networking and big data -- may generate more opportunities in the coming years than the Internet itself did in its early years. The study’s authors said cloud computing is already generating a sizable number of jobs in the US today, and based on numerous trends and indicators, has the future potential to create very large business opportunities and hundreds of thousands of new jobs.

For example, the study relates, 11 cloud computing companies added 80,000 jobs in the United States in 2010, and the employment growth rate at these organizations was almost five times than that of the high-tech sector overall. The report cites a previous study out of Bank of America Merrill Lynch Global, which calculated the total number of employees at 11 cloud companies (Amazon, Google, Netflix, OpenTable, Salesforce, Taleo, SuccessFactors, RightNow, Intuit, NetSuite, and Concur) in January 2010 and January 2011. The total number of employees grew 27% during that one-year period, which was an additional 80,000 new jobs. The employee growth at these 11 cloud companies was almost five times the employee growth rate for the high-tech services sector overall, which grew 5.9%, to add about 17,500 jobs during a similar period.

In addition, the report projects, companies selling cloud services are projected to grow revenues by an average of $20 billion per year for the next five years, which has the potential to generate as many as 472,000 jobs in the US and abroad in the next five years. In addition, venture capital investments in cloud opportunities are projected to reach $30 billion in the next five years, which could add another 213,000 new jobs in the US alone.

Even more bullish numbers come from new research conducted by IDC and sponsored by Microsoft Corp., which also looked at the economic benefits of cloud computing in the years ahead. Cloud computing will potentially generate at least 14 million new jobs across the globe within the next three years. Moreover, these new jobs may likely be in many areas outside of IT.

The Microsoft-IDC study also says that many of these jobs will come from outside of IT, encompassing areas such as marketing, sales, finance and administration, production, and service. And this does not even consider all the new types of jobs that may be created as a result of cloud, perhaps with titles such as "virtual resources administrator" or "customer network facilitator."

IDC’s research also  predicts revenues from cloud innovation could reach $1.1 trillion per year within the next 36 months. The analyst firm estimates that last year alone, IT cloud services helped organizations of all sizes and all vertical sectors around the world generate more than $400 billion in revenue and 1.5 million new jobs. In the next four years, the number of new jobs will surpass 8.8 million.

SAP-Sand Hill's report also examined the economic impact on consumers -- companies buying cloud services. Cloud computing could save US businesses as much as $625 billion over five years, the study's authors predict.

Three industry megatrends are propelling the growth of cloud services and employment, the report states:

  • The boom in mobile computing devices such as smartphones and tablets: "Mobile apps will drive massive demand for cloud services on the back end, such as app stores, databases, and storage. The recent success of tablet devices will further expand the demand for cloud services as these mobile devices give users greater access to information."
  • Social networking: "Such massive scalability and elasticity would not be possible without cloud computing technologies to drive these sites."
  • Big Data: "Cloud infrastructure and platforms will play a huge role in accessing, processing, and analyzing such massive amounts of data. This is where cloud-based systems shine."

Government policies and purchasing decisions at all levels will also have a major influence on cloud adoption and job growth, the SAP-Sand Hill report adds. Federal government agencies, in particular, are being urged to partake in the federal government’s shared services initiative, announced in December 2011. Federal agencies are being asked to develop a shared services plan and to identify at least two commodity IT areas for migration to an “intra-agency shared service model” by the end of 2012. The goal is a “federal government that is leaner, more agile and more efficient. Leveraging commodity IT services at the department level within agencies presents quick win opportunities, and is typically less complex to implement and easier to manage than efforts between agencies.”

(Photo credit: Skillshare Community Marketplace.)

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure