A recent study commissioned by the Australian Information Industry Association has suggested positive future effects on the entire economy as more businesses move to cloud-based ICT solutions.

The study (carried out by KPMG) made three key ten-year predictions for the Australian economy as more businesses adopt cloud software:

50% reduction in ICT costs
Significant improvements in business productivity and innovation
Long-run GDP increase of $3.32 billion per year
So why is this the case? What gives cloud software the potential to make such a meaningful, tangible difference to so many peoples’ lives?

Cutting costs by pooling resources

One of the big predictions the study made was that businesses will experience a 50% cut in ICT costs. This represents an enormous amount of money because ICT is such a huge part of any business.

The reason costs are predicted to fall is because cloud software is essentially a pooled resource. When you store your data in the cloud, you’re actually storing it in a large server that’s maintained by a third party, saving you the cost of purchasing and maintaining your own.

It’s the same principle we all use when we plug an appliance into the wall. By sharing the power grid and the power plants it connects to, we all save the cost of building expensive power plants in our homes.

Encouraging innovation with elastic consumption

The study also predicted increased innovation – businesses finding new ways to do things and offering new products and services. The reason for this predicted innovation is elastic consumption and the flexibility it offers.

Elastic consumption is the ability to consume as much or as little of a service as you need. If you think you’re going to need lots of power in the next couple years, you don’t have to take out a multimillion dollar loan and build or refurbish a power plant. Rather, you just pay more in the months you use more power and less in the months you use less power.

The same pricing structure applies to cloud software users. There are no (or small) upfront costs for cloud products, and there are lower (or no) costs associated with ceasing to use cloud products. You pay for it when you need it. And you stop paying when you don’t.

When you can consume elastically, you can move faster, with less risk. The barriers to trying new strategies and offering new services are lowered, thus encouraging innovation.

Boosting GDP

So how will all this boost Australian GDP by more than $3 billion a year? In a nutshell, it boils down to more productivity. One of the report’s conclusions was that “firms are able to produce greater amounts of output with the same level of input.”

Put another way, they’re doing more with less. They’re spending less time and money, and creating more. By boosting productivity, a business can expand into new markets, cut prices and make services more accessible, hire more staff, or make larger profits that end up back in the economy. And that’s a benefit that helps everyone.

What kind of productivity gains have you made by using cloud software?