The impact of cloud computing on Italy's economy and businesses

Corrado Passera's editorial

CEO illimity

I was an advisor for some very interesting research conducted by The European House Ambrosetti with the backing of Microsoft Italia about the role cloud computing could play in increase productivity and boosting growth in Italy.

Italy's lack of productivity is a major problem but, to really find solutions, it is important to go beyond the often superficial analyses of this issue.

Looking at the trends for absolute figures (Figure 1 on pg. 77 of the full report) and comparisons with other nations (Figure 3 on pg. 79 of the full report) clearly shows that growth and productivity are real problems.

In many cases, this is where an analysis stops, but in our case we delved into the differing components responsible for this negative trend, and identified the "good" and the "bad" (Figure 5 on pg. 82 of the full report).

Manufacturing proved to be very positive, but the Public Administration was a major burden. So, it would be hugely misleading to lump everything together and simply fail Italy as a whole, without any room for an appeal. Even when exploring productivity, it is clear there are many 'Italies' that differ quite starkly!

Yet, to really come up with good policies, it is necessary to examine matters even further because even in the manufacturing sphere, the trends vary significantly according to company size (Figure 22 on pg. 99 of the full report).

We are genuine champions in certain 'size classes', and this is undoubtedly a source of optimism for our country's potential. But it is urgent to make some decisions about the smallest companies, because small does not sit easily with 'productivity'.

Productivity is the result of numerous structural and microeconomic factors, but new technologies undoubtedly provide formidable leverage for increasing productivity. And looking at such technologies, cloud computing is clearly one of the easiest to use and quickest to adopt.

An initial personal interest in cloud computing has grown into genuine enthusiasm in the last two years as I have been part of conceiving and creating illimity bank.

It was only because cloud computing is natively and integrally a part of the company’s architecture and because Microsoft provided such effective support that illimity has managed to go - in less than two years - from an idea in a PowerPoint presentation to a bank listed on the STAR segment of the Italian Stock Exchange, with over 3 billion in assets, 500 staff members and ROE around 5%. But this is where my plugging illimity ends, by saying the choice to be 'fully in cloud' was absolutely fundamental.

Cloud computing has spread dramatically right across the world in recent years, leading to massive growth in the global market for cloud computing solutions and the expectation of more major investment in the coming years.

But on this front, Italy has lagged behind somewhat, with the number of companies adopting cloud solutions below the European average and the best performer, the UK.

The study really foregrounded the structural advantages of cloud computing. The major benefit, as reported by 20.8% of companies that adopted cloud computing, is the ability to react rapidly to change. During periods of major change, the companies that come out tops are those that adopted most swiftly to the changed scenario. Nearly everyone who was interviewed tagged the cloud as the main enabler of smart working and business continuity in general. This was followed by benefits such as an improved ability to manage work peaks, better cost control and improved ICT security.

The interviews also revealed the major hurdles slowing down the dissemination of cloud computing, with the problem of skills emerging very clearly, closely followed by the initial migration costs.

In short, those companies that adopted cloud computing are largely satisfied and cloud computing users almost all plan to continue investing on this front.

This is the basis for three concrete proposals to help the most critical areas
Proposal 1: Speed up the migration of the public administration to the cloud in order to improve quality and costs. This is the grounds for a - somewhat provocative - proposal to move from the current 11,000 central and local data centres used by the public administration to 11 - from 11,000 to 11 - or at most a few dozen, really investing in the best ones, regardless of whether they are public or private. The annual savings for such a move would be at least €1 billion. But the effects would extend beyond mere cost cutting, as efficacy and efficiency would improve. And it would become far easier to provide open data solutions that could support numerous different ecosystems.

Proposal 2: Encourage the adoption of cloud solutions by SMEs to improve quality and productivity. To achieve this, the recommendation is to provide major incentives to encourage companies, especially SMEs, to adopt cloud computing solutions. Industry 4.0 - now Transition 4.0 - already envisages such investments, but our recommendation is focused incentives to adopt cloud computing. Perhaps this could be done simply using the savings from proposal 1. The Think Tank at European House Ambrosetti estimates that simply getting Italian SME usage of cloud computing in line with the levels for English SMEs would generate a combined increase in GDP of 20 billion in 5 years. But once again the benefits would extend well beyond the mere direct increase in GDP.

Proposal 3: Construct an integrated plan for digital skills. Digital skills, which are in turn dependent on a digital education, are the enabling factor for digital innovation and thus also for the widespread adoption of cloud computing. Today in Italy, hundreds of thousands of jobs in such sectors are not filled because of a lack of people with suitable training. Thus, the proposal is: to systematically introduce digital education into Italy at all levels of education, right from kindergarten, and to also invest in the training of trainers; to provide a technical learning pathway for data and the web at both technical high schools and web academies; to encourage three-year degrees that provide professional skills and dedicated STEM degrees; to disseminate the concept of "long life, long education".

In summary: we believe these proposals are consistent with the priorities that have been identified at government and European level. Perhaps these are some good ideas for using a small portion of the Recovery Fund.