Members' Research Service By / May 27, 2016

Cloud computing: An overview of economic and policy issues

Written by Ron Davies, Cloud computing is a model for providing information and communication technology (ICT) services (including servers, systems,…

© Melpomene / Fotolia

Written by Ron Davies,

Cloud Computing Concept
© Melpomene / Fotolia

Cloud computing is a model for providing information and communication technology (ICT) services (including servers, systems, storage and applications) over a network such as the internet. By taking advantage of self-service implementation and configuration, and flexible pools of virtual computers based on shared hardware in vast purpose-built data centres managed by third parties, cloud customers can rapidly increase (or decrease) their ICT capacity as needs or demands change, while avoiding capital outlays and paying only for the actual services used.

Cloud computing providers can take advantage of variable demand cycles of different clients and economies of scale to supply computing services at lower cost than would be possible in individual, in-house data centres. More importantly, because cloud customers can ramp up services quickly, they can innovate with new products at low cost or rapidly scale up successful prototype services. Cloud computing is also considered to be more energy efficient than traditional in-house centres, potentially reducing negative effects on the environment. Individual consumers of cloud-based e-mail, file- or media-sharing services get access to their information anywhere, often at little or no cost.

However, because cloud computing uses shared computing environments and relies on the public internet for transmitting information, it raises concerns about security and personal data protection. Also, the lack of interoperability between cloud service products and the absence of standards that would facilitate data portability may make it difficult for customers to switch vendors. Fixed or obscure contract terms that limit liability or service guarantees may also restrict customers’ rights.

The European Commission considers cloud computing central to the EU’s competitiveness and a key to economic growth and innovation. As part of its Digital Single Market Strategy, the Commission has a European Cloud initiative that will propose certification of cloud services, reduce the risks of vendor lock-in, and provide a research cloud for researchers to share access to research data. The Commission has also promised to propose in 2016 a ‘free flow of data initiative’ that will tackle restrictions on where data is located.

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