Korea’s Communications Commission has announced commitment of over US$500 million to the development of Korean cloud computing facilities.
By Steve Hodgkinson
14 Jan 2010
Korea’s Communications Commission has announced commitment of over $500 million to the development of Korean cloud computing facilities. This is a good example of government action to bolster the local IT industry as well as to create a government cloud (g-cloud) to cut its own IT costs. Other countries in the region should take note.
The Korean government has recognised that cloud computing is a double-edged sword
South Korea has long had an interest in public policy interventions aimed at bolstering the competitiveness of its industries. The result has been a country with more than its fair share of powerhouse exporting corporations, such as Daewoo, Hyundai, Kia, LG and Samsung. It is perhaps not surprising then that its policy executives have moved more quickly than many others in the region to ensure that Korea is well positioned to ride the coming cloud computing wave.
We have argued over the past year that cloud computing needs to be seen by governments as a double-edged sword. The cloud is the ultimate globalised market, offering any country the opportunity to export IT services to the world. However, it also creates the potential for parts of a country’s ICT industry to be made redundant. Cloud services offer an unprecedented encapsulation of the full ICT value chain, from hardware through to software and services. Consumption of offshore cloud services creates few jobs in the local economy.
The Korea Communications Commission recently announced that it is partnering with the Ministry of Knowledge Economy and the Ministry of Public Administration and Security to invest over $500 million in cloud computing infrastructure for use by both the government and the local ICT industry. This leverages the insights Korea has gained from the involvement of its Electronics and Telecommunications Research Institute in the OpenCirrus collaborative cloud computing research programme.
The government’s aim is to stimulate the development of the Korean cloud computing market so that Korean companies can pursue export opportunities in the global cloud services market. A further benefit is that government agencies can use the onshore cloud capabilities to reduce in-house ICT costs – overcoming the reluctance of agencies to use offshore clouds.
As an illustration of Korean ambition, the goal is reportedly to capture 10 per cent of the global cloud services market by 2014 and to halve the cost of operating the public sector’s ICT infrastructure.
Governments need to assess what this means for their country
Policy executives need to assess the impact of this announcement on their own ICT industry. What are the consequences for your ICT industry if Korea produces a powerful regional cloud computing services provider – the cloud equivalent of an LG or a Samsung in electronics?
It is essential that all governments develop proactive development strategies for cloud computing, along the lines illustrated by the Korean initiative. In particular, it is essential that the often separate policy levers of industry development and government procurement are operated in unison. Investment to stimulate local industry development needs to be coupled with procurement policy initiatives to put government demand on the table for local cloud providers to create g-clouds.
Cloud computing is a ‘build it and they will come’ game for the brave hearted. Few national players are in the position of Amazon, as legend would have it, of being able to launch global cloud services as a by-product of their core business. Up-front investment is required to kick-start and accelerate the development of a local cloud computing industry. Governments need to think carefully about their role in the development of strong local cloud computing providers – and the consequences of sitting back and letting market forces take their course.
We discuss this in more detail in the forthcoming report Efficient procurement and industry policy coalesce in the cloud.
Steve Hodgkinson is the director of Ovum's government practice in Australia and New Zealand.
