Developing countries face challenges in reaping benefits from cloud computing

03 December 2013

There is nothing nebulous about the "cloud", especially as it applies to developing countries, says UNCTAD's Information Economy Report 2013, subtitled "The Cloud Economy and Developing Countries".

For businesses and governments in poorer nations to benefit from cloud computing's increasingly rapid and more flexible supply of digitized information - the sort of thing that enables online marketers to rapidly scale up their information systems in tune with fluctuations in demand - massive, down-to-earth data processing hardware is required. Also needed is extensive broadband infrastructure, as well as laws and regulations that encourage the investment needed to pay for advanced information and communication technology (ICT) facilities and to protect users of cloud services.

Referring to cloud computing, United Nations Secretary-General Ban Ki-moon states in the preface to the report: "This has considerable potential for economic and social development, in particular for our efforts to achieve the Millennium Development Goals and to define a bold agenda for a prosperous, sustainable and equitable future."

The report shows that cloud computing offers the potential for enhanced efficiency. For example, cloud provisioning may enable small enterprises to outsource some of the information technology (IT) skills that they would otherwise have to provide internally. Companies can benefit from greater storage and computing capacity, as well as the expertise of cloud service providers in areas such as IT management and security.

But the study notes that options for cloud adoption in low- and middle-income countries look very different from those in more advanced countries. While free cloud services such as webmail and online social networks are already widely used in developing nations, the scope for cloud adoption in low- and middle-income economies is much smaller than it is in more advanced economies. In fact, the gap in availability of cloud-related infrastructure between developed and developing countries keeps widening. Access to affordable broadband Internet is still far from satisfactory in developing nations, especially in the least developed countries (LDCs). In addition, most low-income countries rely on mobile broadband networks that are characterized by low speed and high latency and therefore not ideal for cloud service provision.

Figure 1. Distribution of colocation data centres,
by group, 2013
Fig 1
Source: UNCTAD, based on Data Centre Map

The report recommends that governments "welcome the cloud but tread carefully". Within the limits of their resources, infrastructure such as costly data centres must be constructed; at present, developed economies account for as much as 85 per cent of all data centres offering colocation services. (Figure 1)

This growing "data centre divide" is also reflected in the availability of servers; in 2011 there were some 1,000 times more secure data servers per million inhabitants in high-income economies than in LDCs. (Figure 2)

The combination of few national data centres and high costs for international broadband communications further weighs on the net value of relying on cloud services.

Figure 2. Distribution of secure Internet servers
(per 1 million people), 2012
Fig 2

The report says that developing nations should seek the expertise needed to make astute, cost-effective decisions on which infrastructure is needed and on how to mobilize the financial resources. It suggests that development partners contribute to helping poorer countries close the digital divide, perhaps by providing support at the country level via contributions to the financing of cloud-related infrastructure. In addition, they could help developing countries establish appropriate legal and regulatory frameworks.

The Information Economy Report stresses that developing countries should consider addressing legal and regulatory concerns related to cloud computing. While there is no imperative to develop specific laws or regulations on cloud computing, key reform areas include privacy, data protection, information security and cybercrime. Governments of developing countries should adopt and enforce appropriate laws and regulations, the study urges. As of 2013, it notes, some 99 countries had data privacy laws. Although there is no harmonized international privacy framework regulating data transfers across borders, the implementation of strong domestic privacy regimes could benefit developing countries.

The cloud's pros and cons

In simple terms, cloud computing enables users to access a scalable and elastic pool of data storage and computing resources, as and when required. Rather than being an amorphous phenomenon in the sky, cloud computing is anchored on the ground by the combination of the physical hardware, networks, storage, services and interfaces that are needed to deliver computing as a service.

The shift towards the cloud has been enabled by massively enhanced processing power and data storage, and higher transmission speeds. For example, some central processing units today are 4,000 times faster than their equivalents from four decades ago, and consumer broadband packages are almost 36,000 times faster than the dial-up connections used when Internet browsers were introduced in 1993.

The potential advantages of cloud computing include reduced costs for in-house equipment and IT management, enhanced elasticity of storage/processing capacity as required by demand, greater flexibility and mobility of access to data and services, immediate and cost-free upgrading of software, and enhanced reliability and security of data management and services.

But there are also potential costs or risks associated with cloud solutions. The UNCTAD report mentions costs of communications (to telecom operators/Internet service providers) and for migration and integration of new cloud services into companies' existing business processes, reduced control over data and applications, data security and privacy concerns, risks of services being inaccessible to targeted users, and risks of "lock-in" with providers in uncompetitive cloud markets.

Policymakers should waste no time in exploring how the cloud computing trend may affect their economies and societies, UNCTAD recommends. Countries need to assess carefully how best to reap gains from this latest stage in the evolving information economy. In principle, UNCTAD sees no general case for government policy and regulation to discourage migration towards the cloud. Rather, governments should seek to create an enabling framework for firms and organizations that wish to migrate data and services to the cloud, so that they can do so easily and safely. But government policies should be based on a careful assessment of the pros and cons of cloud solutions, and should recognize the diversity of business models and services available. The report underlines that there are multiple ways of making use of cloud technology, including public, private or hybrid clouds, at national, regional and global levels.