Measurable benefit of using cloud is still unclear except for remote use cases

The Productivity Commission has found one clear pattern in its review of Australia’s usage of cloud, which is that companies operating in regional and remote Australia using cloud applications have been able to provide higher average wages to their workers.

“The one pattern that we’ve pulled out so far is that cloud’s positive impacts are for firms in outer regional Australia or remote Australia,” Productivity Commissioner Catherine de Fontenay said at the Economic Implications of the Digital Economy Conference on Wednesday.

The pattern was found as part of a study conduced by the Productivity Commission into whether cloud technology is associated with higher firm turnover per worker and higher wages per worker.

The study was undertaken as there is little empirical evidence about the extent to which cloud services increase a company’s performance and returns to labour, the commissioner explained.

According to de Fontenay, one interpretation of the study is that using cloud services, such as teleconferencing and online storefronts, gives regional and remote businesses access to suppliers and customers that would traditionally only be available with a physical presence in another area.

Beyond this pattern, however, de Fontenay said there is currently no correlation between a company performing well and using cloud services when viewing companies’ turnover per employee and average wages data.

She explained the study found two types of laggards when it came to turnover per employee and average wages performance. The first type is companies that, on average, performed better than their peers but still had yet to adopt cloud technologies. For these companies, cloud technology represents an unexploited opportunity, which raises questions about the factors that have contributed to non-adoption.

The second group of productivity laggards are “naïve leaders” — those that have adopted the technology but have experienced negative impacts. These negative impacts are due to a myriad reasons, de Fontenany said, such as wrong vendor choices, higher-than-expected purchasing and implementation costs, security breaches, or lack of complementary skilled labour at the firm level.

UNSW economics professor Kevin Fox noted during a round table discussion at the conference, however, that it’s unclear whether the lower-than-average performance is only short-term due to cloud still being a relatively new technology.

“It could mean wages growth will outstrip the firms that just kept on doing what they knew how to do,” Fox said.

“I think that’s a really good point. The trouble is that everyone is now on the cloud,” De Fontenay said in response, explaining that it is hard to quantify the merits of the cloud especially given its widespread adoption in recent years.

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