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Bill Bennett


Productivity Commission prefers overseas cloud computing

Patrick Smellie at BusinessDesk says the productivity commission wants government to use offshore cloud providers:

The government should lead the way to cheaper cloud computing services by using offshore providers rather than just New Zealand firms, the Productivity Commission says in its final report on improving productivity in the services industries.

The report goes on to say:

By favouring domestic cloud services, which are significantly more expensive than similar overseas services, the government has missed opportunities for cost savings and technology demonstrations.

More expensive

Offshore cloud providers certainly have economies of scale not possible in New Zealand.

This can mean lower prices. In some cases much lower prices. One cloud customer told me a local supplier charges 11 times as much for storage as Amazon Web Services.

It’s not that simple. The company in question buys reserved international bandwidth to access overseas data centres.

Even taking that into account, local cloud services are many times the cost of using overseas suppliers.

That’s not always true. In some cases local cloud service companies like Revera and Datacom can match international providers thanks to using nimbler technologies.

If government departments export data to overseas cloud services, there’s even less opportunity for local cloud providers to build economies of scale.

Beyond cloud storage

Cloud storage and processing costs are often only a small part of the cost of a computing project. Often they can be tiny compared to other costs.

Paying less for storage may not change the total cost by much. It won’t help much if the human costs of deal with remote service providers are high.

Only two submarine cables linking New Zealand to the rest of the world. The risk of both legs of the Southern Cross Cable Network failing at once may be small, but it is not infinitesimal. Hopefully this will change.

Technology cultural cringe

The Productivity Commission report almost reads like it was written by an overseas cloud service provider.

There’s no question multinationals like Google and Microsoft have government affairs professionals in Wellington. They are paid to lobby politicians and get the company’s position in front of organisations like the Productivity Commission.

They spend millions on lobbying. Local cloud companies have nothing like their budgets. It sounds as if the Productivity Commission hasn’t listened to the locals, although I doubt that’s true.

The problem here could be ‘The wise men from the east” syndrome. Government employees and organisations like the Productivity Commission think when it comes to technology, people who speak with American accents know more than those who speak with New Zealand accents.



10 thoughts on “Productivity Commission prefers overseas cloud computing

  1. The government should be building its own cloud service using it’s own IT department. Two reasons for this:
    1.) The government, by itself, has the scale to support such infrastructure economically and
    2.) It’s going to be far more secure. Firstly because the information won’t be going through all those networks where it could conceivably be intercepted. Secondly, a private business always has the possibility of collapsing and thus removing the governments ability to access it’s own data. There’s millions(? Not sure as to how many people were using MegaUpload) of people around the world who can’t access their data due to the US grabbing it all in their prosecution of KDC. The government should never, ever put themselves in that position.

    A third reason why the government should have their own IT department and cloud service is the massive boost in innovation it will give to the NZ tech sector.

      1. And factor in the win-lose logics that get built in when powerful global locusts are left to manipulate and siphon off as they wish in systems of international trade constructed on their terms.
        On the other hand, simply local/national trade is unduly limited.
        There are management issues here that easily get lost in ideological debates.
        In terms of data services, I have sought to develop proposals that enable all to win, as per my other comments here.

  2. I doubt this has anything to do with the influence of global providers. The commissioner is just reaching the same conclusion that the commercial world has come to too. I’m not sure your point talking about Storage? That is only one part, what about commodity services like email? hence the govt canning the local productivity as a service project, the costs to be delivered locally were just too high. As for “little uncomfortable with only two submarine cables linking New Zealand to the rest of the world.” well the whole of NZ has operated like this for decades .. I think that point is grasping as straws as why not to use offshore cloud.

    As for Mr Bastard (nice name), regarding your points
    1. No they don’t .. not compared to the global providers, and is been proven today (see 4 below)
    2. I think AWS/Google/Microsoft etc spend more on IT security then the entire government sector combined and then some
    3. These “private” companies are not private, they are public, and are far more solvent than any local company
    4. This is already been done with the AoG IaaS service, has that resulted in lower costs? No, in fact the opposite.

    anyway, my 5c

    1. “well the whole of NZ has operated like this for decades”

      That wasn’t such a problem in the pre-internet days and even then not potentially disastrous until the last decade, maybe even more recently than that.

      Today the economy would grind to halt if both links went down at the same time. The chance of that may be small, but not insignificant. It’s widely acknowledged as a risk to the economy. Forcing government into overseas cloud services increases the dependency and the risk.

      Fortunately it looks like the problem may be solved soon.

    2. 1.) Yes they do. The ~4m workers in the country can easily support a few hundred, maybe a couple of thousand, workers to do the job. That’s what increased productivity really means.
      2.) And, technically, Linux doesn’t spend anything and yet it’s still the most secure OS in the world.
      3.) No, they’re private. We certainly don’t seem to be able to hold Talent2 to public account. And I’m sure that our government is far more solvent than any private company. Also, I’m sure that MegaUpload was quite solvent – until the US government attacked it. That latter is a situation that our government should not put itself into which it does immediately if it uses an offshore cloud system.
      4.) I’m sure that, as AoG IaaS matures, costs will come down.

      The economic system that we’re using is inherently delusional. It makes it seem cheaper to get others to do work that we can do just as well if not better. And then, when that system falls down, which it will do, we’ll be left without the capabilities to maintain ourselves.

  3. New Zealand as a small remote backwater, tied to a Great Power, will tend to go where Big Others require it to go.
    Unless it turns these disadvantages into advantages, using them to help build up a critical mass of – broadly-based – international data flows by, for instance:
    1. Making a cool area like the Invercargill region, handy to large source of electricity, a site for international cloud data services. (Have plans well ready for when that smelter closes down).
    2. Creating another international cable that comes from somewhere like India, and around the West Coast of Australia, rather than run another one through Hawaii (for a number of good reasons).
    3. Thence at the same time also creating more reliable internal NZ flows from south to north, complementing the present north to south ones (What if Auckland goes down to a natural disaster, or for that matter Welliington/the Cook Strait cable?)
    4. Enabling also thence more even, ICT-supported development throughout the country, including in small South Island centres (some great lifestyles opportunities in some of these!).
    5. Recognize New Zealand’s dependence on maintaining good relations with both China and the United States and not getting off-side with either by acting as a neutral broker (of diplomacy and thence, also, reliable cloud data services for all) through the ups and downs in their relationship
    6. Making backup available also for data in places like Singapore, which might feel under threat if conflict looks like breaking out in the South East Asia region.

  4. “Creating another international cable that comes from somewhere like India, and around the West Coast of Australia”

    Wouldn’t it be simpler to run a link across the Tasman and piggyback off a Australia-Asia cable? The ping time difference would be negligible.

  5. OK as a more immediate option, but for ‘gold standard’ longer-term option, take account of the fact that Aus with its geographic location and US its military entanglements has more potential to get embroiled in conflicts with neighbors to the North. This is where a ‘neutral’ NZ that offers services between rival and potentially conflicting parties can make much-needed constructive contributions while not being drawn into such conflicts.
    cf blog,
    Making Wellington a diplomatic village for the Asia Pacific region – and beyond?

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