Calling BS on cloud hype: Prediction that cloud will create 14 million new jobs is misleading

More than half will be overseas; few will be in IT or even in cloud services

Microsoft and IDC teamed up this morning to announce a miracle: Cloud computing, by automating much of the manual work of maintaining large computing infrastructures and making more efficient use of existing resources, will actually increase the number of IT jobs in the U.S. rather than reduce it, as every other successful effort to automate human labor has done.

The study "Cloud Computing and Worldwide Job Creation" (PDF) estimates that cloud computing projects have driven more than $400 billion in new revenue and 1.5 million new jobs during the past 12 months.

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By 2015 cloud computing will be responsible for a huge increase in efficiency and cost savings that will allow for the creation of another 8.8 million new jobs – though the total number of jobs attributable to the efficiencies of cloud computing will reach 13.8 million, IDC predicted.

The growth figures, if not job numbers echo other IDC studies that predicted spending on external cloud services alone would take up as much as 46 percent of all new IT spending worldwide by 2015.

That doesn't include spending on internal cloud-computing infrastructures or services or spending on consulting, development or migration to internal cloud structures, which remain, by far, the variety of cloud computing favored by large companies.

So how can something that automates a lot of the work of maintaining computers create that many more jobs working with computers?

It can't. At least, it can't create that many IT jobs. And it can't create than many jobs in the U.S. at all.

At least half the 14 million jobs IDC is predicting will be generated by the cloud will be in other countries; of the others, most will be jobs in business functions, not IT, which ultimately benefits the company and economy more than IT jobs could, but which do nothing for IT people worried about being out of work.

Wait, isn't the cloud supposed to kill the IT department?

Most studies focusing on cloud computing – because they're written for corporate IT executives and vendors selling expensive services to them – have had dour things to say about the future of IT employment.

Cloud computing is so fundamental a change in the economics, use and delivery of computing power that it will change the role and responsibilities of everyone from the CIO to the rawest sysadmin according to analysts at Gartner, Forrester, IDC and other analyst companies.

The greatest benefit of IT automation is not to support a human IT workforce, but to replace it according to a Gartner on the link between cloud computing and jobs presented at a Gartner conference in Orlando in October.

As cloud computing expands and eliminates the need for much of the manual work of systems administration, many of those jobs will either disappear or move from internal corporate IT to external service providers, though it will result in a net loss in those jobs overall, according to Gartner.

Few IT job descriptions will actually disappear, but most will change dramatically as sysadmins expand their role from the health of a few physical servers to the performance and security of applications and virtual servers that cross many geographical and departmental boundaries, according to Rachel Dines, infrastructure and operations analyst at Forrester.

Large companies and small ones are using cloud technologies in very different ways, but the end result is that many IT jobs are being outsourced to specialists – large data centers that support many companies with the same size staff as they once would have for just a few clients – increasing the overall efficiency and making fewer IT jobs necessary, according to Bernard Golden, CEO of cloud and virtualization consultancy HyperStratus and a columnist for CIO.

"If you're an I&O operations person, cloud computing is a threat to your job, whether it's public or private," Golden wrote in June, 2011. "Cloud computing represents virtualization supercharged by automation, and automation always threatens jobs—especially those of lower-skilled employees. Simply put, cloud computing will displace the jobs of those who perform routine operations tasks."

So where will all the jobs come from?

Though almost all the discussion of cloud computing and employment have focused on the impact on the IT job market specifically, the economic miracle IDC and Microsoft predict have nothing to do with jobs in IT.

The new study doesn't say anything about the number of IT jobs increasing, in fact.

What it says is that cloud computing will be so effective in offloading unnecessary work from IT people in small- and mid-sized companies – which will outsource most routine IT to cloud-based service providers – that it will free huge chunks of payroll, operational budgets, capital expense budgets and the mental bandwidth of company managers.

That money and bandwidth won't go into the real or mental bank, IDC predicts.

Cloud computing , the IDC/Microsoft report predicts, will allow managers at small- and mid-sized businesses to spend much less time and effort thinking about how they're going to fix their communications networks, payment-processing systems, supply chains, customer-support efforts and business analytics.

Rather than trying to figure out how a small company with an IT staff of one to five people can deliver business-automation systems comparable to those run by larger competitors, the cloud allows SMBs to offload all those worries onto an external service provider and focus on their core business, not the IT that helps keep it running.

That savings in operational expenses, capital expenses and, just as important, the intellectual capacity of senior managers, cloud computing lets even fairly large mid-sized companies spend more time on business and less on technology.

That makes the overall business process more efficient, lets the company invest more in promising lines of business and expand far beyond the point any company could if it were limited by the IT infrastructure it could build, pay for and maintain itself, the report concluded.

Reducing 'legacy drag,' the 3/4 of IT budgets spent on keeping the lights on=economic growth

That sounds overly optimistic, but this is how IDC does the math:

  • About 75 percent of all effort and spending on IT goes to simply keeping the lights on – maintaining existing apps and systems, paying for upgrades, support, electricity, cooling and all the other costs involved keeping the bits flowing, even without doing anything new or innovative with them at all.
  • Offloading much of that work and those costs onto external service providers whose economies of scale are much higher and whose technical abilities are deeper saves time and money that can be used for other projects.
  • Allowing small- and mid-sized companies that are not terribly good at IT and don't want to be to redirect those resources to business functions will improve those businesses enough to generate an additional $1.1 trillion per year worldwide by 2015, IDC predicts.
  • That $1.1 trillion and the cost-efficiency from all spending on internal and external cloud services will be responsible for as many as 14 million jobs worldwide by 2015.
  • Private cloud infrastructures will have a much lower impact on the total job count and overall economy because they keep a far greater amount of the IT work inside the corporation, reducing the company's ability to eliminate "legacy drag" – the 75 percent of IT spending that goes to keeping the lights on.

Jobs prediction is misleading

Buried far down in the report and hardly mentioned at all in either the press release or most news stories about it are these caveats:

More than 50 percent of those 14 million jobs "generated" by cloud computing will be in small- and mid-sized businesses, especially in banking, communications and manufacturing.

The majority of the new jobs created due to cloud technology "will be found in emerging markets because of their immense workforces – 1.2 billion workers in China and India alone," the report said.

The U.S. is responsible for 35 percent of all IT spending but generated 62 percent of all spending on external cloud services, the report estimated. Nevertheless, North America will get the smallest increase in cloud-enabled jobs, which will land overseas where the cost of labor is lower and workforces are larger.

The Asia/Pacific region – primarily China and India – will get the bulk of the new cloud-generated jobs, IDC predicted. Lower labor costs will be a factor, but lower levels of legacy drag, a greater need to build centralized, efficient IT infrastructures and "immense workforce in the region," the report said.

Where will cloud-created jobs appear?

North America

1.17 million jobs

EMEA

2.07 million jobs

Asia/Pacific (other than China)

2.87 million jobs

China/India

6.75 million jobs

Source: IDC

Big winners of cloud era: China, India, every department other than IT

New York alone will account for 2.8 percent of all the cloud-related jobs generated in the U.S., primarily because of the high percentage of financial- and professional-services companies, and higher-than-average levels of spending on private cloud services, IDC predicted.

Los Angeles will be the second-biggest gainer, with .7 percent of new cloud-related jobs, IDC predicted.

There's no firm prediction in this report of what will happen to the overall market for IT jobs.

Gartner, Forrester and other analyst companies have covered that territory before, however, usually stepping carefully to avoid making the news too bad for the technology managers who buy analyst reports to figure out whether they'll have a job in five years.

Probably, according to Golden, Dines, Gartner's Chris Wolf and other analysts, there will be plenty of IT jobs in five years.

They won't be the same jobs, won't be in the same companies and won't have anything like the same career paths or, in some cases, potential to make a decent living.

Automating complex processes within a business makes everything more efficient; it does nothing to help the people who build the automation systems from losing their jobs when the process is finished.

That's one reason IT departments are more cautious about large-scale cloud migrations than they might be otherwise, according to most analysts.

The cloud offers a bright picture to most of the business; for IT, the cloud comes not with a silver lining, but an overwhelming sense of foreboding.

"Asking an infrastructure and operations (I&O) person what he or she thinks of public cloud computing is like asking a turkey what it thinks of Thanksgiving," Golden wrote.

Read more of Kevin Fogarty's CoreIT blog and follow the latest IT news at ITworld. Follow Kevin on Twitter at @KevinFogarty. For the latest IT news, analysis and how-tos, follow ITworld on Twitter and Facebook.

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