By Jason Kohn, Contributing Columnist
At its core, the cloud promises lower costs for information and communications technology (ICT) and ubiquitous access to information and applications. These benefits look attractive to any business, but for companies in developing economies — companies less likely to have the capital for large, modern ICT infrastructures — the cloud could provide an enormous benefit.
As fixed and mobile broadband connections continue to grow in emerging markets, cloud services could make it possible for entrepreneurs to simplify the launch of new businesses and compete for customers anywhere in the world.
Socioeconomic Benefits from Cloud Services
A 2010 paper by Nir Kshetri of the University of North Carolina, Greensboro, surveyed the research on cloud drivers and effects in developing economies, and outlined the following potential benefits:
In theory, it is possible for the developing economies to catch up with the West as the cloud allows them to have access to the same IT infrastructure, data centers and applications….
[U]nlike client-based computing, which requires installation and configuration of software and update with each new release as well as revisions of other programs with every update, software on the cloud would be easier to install, maintain and update. This benefit is particularly important for the rural users who have less IT training.
These observations have not been lost on policymakers and business leaders in the developing world. In Kenya, for instance, Safaricom recently launched the largest cloud service in Africa. Reporting on the new initiative, David Talbot of MIT’s Technology Review described the potential impact:
In Kenya, traditional IT infrastructure is particularly costly in both absolute and relative terms. Electricity costs about 20 cents a kilowatt-hour — roughly 50 percent more than the U.S. average of 13.5 cents. A server might cost about $5.00 a day to run (more than $1,800 a year), not including cooling and management costs.
Considering that salaries in Kenya average $6,265 for an accountant and $14,588 for an IT manager, that leaves traditional in-house IT infrastructure affordable mainly to well-funded start-ups and to larger businesses, like insurance companies, banks, and large retailers. And all players, no matter their size, must contend with relatively frequent power outages.
Succeeding in a Less-than-Ideal Business Climate
Of course, there are other barriers to entrepreneurship in developing economies. Lack of mature ICT infrastructure combined with complicated (and sometimes corrupt) local bureaucracies make it extremely difficult to start a business. It’s because of these factors, however, that developing economies may realize the greatest benefit from the cloud.
Alex Laverty of the University of California, Los Angeles, who writes for the blog The African File, describes this seeming contradiction:
The process to set up a business in many African countries is difficult and often intentionally prohibitive. This is changing as neo-liberal economic reforms are implemented, but the difficulty remains in many countries. For many people, the desire to migrate is often caused by the lack of employment opportunities for themselves in their home country.
However, if there was a mechanism where they could innovate, create, and market their ideas and their products, perhaps the need to seek pastures anew would be mitigated to an extent, or at least cause more interlinks to be set up due to the connection between producers and electronic sellers. Thus in states that have environments that do not favor new business, there would be a higher likelihood that their producers would move to the cloud or seek out opportunities that allowed them to bypass traditional trade bottlenecks, corruption, and inefficient bureaucracy.
Laverty published an extensive survey of sub-Saharan Africa, attempting to gauge the “cloud readiness” of countries in the region. The study explored the potential for various cloud applications — indexed with ratings of each country’s broadband and mobile subscribership, state of ICT infrastructure, and difficulty and time involved in starting up a new business.
The complete findings, which are fascinating, can be seen on a comparative Cloud Ready Index. The upshot: cloud services hold the potential to jumpstart entrepreneurship efforts in a number of African countries.
It will be interesting to see how this process unfolds in the next decade. Meanwhile, we can thank the service providers for investing in the essential infrastructure for cloud services, and thereby creating the environment where new business ideas can be pursued and entrepreneurs may prosper.