Productivity Commission prefers overseas cloud

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 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 has to buy reserved international bandwidth to access overseas data centres. That changes the price equation.

Even taking that into account, local cloud services can cost more than using overseas suppliers.

But that’s not always true. Local cloud service companies like Revera and Datacom can often match overseas rivals 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 fraction 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.

And there is risk.

One submarine cable company links New Zealand to the rest of the world. It has two connections. The risk of both legs of the Southern Cross Cable Network failing at once is small. It is not zero. Hopefully this will change.

Technology cultural cringe

The Productivity Commission report reads like an overseas cloud services provider wrote it.

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.