Cloud Computing

and the
Canadian Environment

Presented at the Global Government Cloud Computing Roundtable.

Ottawa, Ontario, Canada,

October 6.2009

Jirka Danek, CTO at Public Works Government Services Canada

Opportunity:

Today there is a tremendous opportunity for Canada to position itself as a world leader in
Cloud Computing.

Rational:

Many public and private organizations are looking at Cloud Computing as a long-term
software and hardware service source and data storage solution.

Large organizations across Canada and abroad have started to embrace Cloud Computing
and many are currently looking at location options adapted to their needs.

Due to its geographical characteristics, low-density population, IT expertise, quality

construction standards, legislative framework (including the Privacy Act and the Personal
Information Protection and Electronic Documents Act) and low-cost green energy, Canada is
considered a prime location for Cloud Computing.

Major organizations in the Canadian IT industry, as well as the Government of Canada and
the provinces and territories, are beginning to realize Canada’s advantage and the benefits of
positioning Canada as an economical and strategic choice for Cloud Computing.
There is a tremendous opportunity for Canada to position itself as a world leader in Cloud
Computing and to benefit from the economic, environmental and technological returns of this
new public utility.

Background:

Cloud Computing refers to the use of Internet-based computer technology for a variety of
services i.e., software, hardware, data, etc. It incorporates different concepts including:

• Software as a Service (SaaS) – a model of software deployment where an application

is licensed for use as a service provided to customers on demand;
• Web 2.0 – the second generation of web development and design, that aims to
facilitate communication, secure information sharing, interoperability, and collaboration
on the Web;
• Infrastructure as a Service (IaaS) also known as Hardware as a Service (HaaS) – the
delivery of computer infrastructure as a service; and
• Other recent technology trends which provide common business applications online
that are accessed from a web browser, while the software and data are stored on the
servers.

The underlying concept dates back to 1960 when John McCarthy opined that "computation
may someday be organized as a public utility". The term Cloud had already come into
commercial use in the early 1990s to refer to large ATM networks and by the turn of the 21st
century, the term "Cloud Computing" had started to appear.

Amazon.com played a key role in the development of Cloud Computing by modernizing their
data centres after the dot-com bubble and, having found that the new cloud architecture
resulted in significant internal efficiency improvements, providing access to their systems by
way of Amazon Web Services in 2002 on a utility computing basis.

In 2007, Google, IBM, and a number of universities embarked on a large scale Cloud
Computing research project to build data centers that students could tap into over the Internet
to program and research remotely. Cloud Computing became a hot topic by mid-2008 and
numerous related events and conferences started to take place.

In June 2008, Jeffrey Hewitt, vice-president of research with Gartner Inc. concluded that
Canada's abundant and low-cost hydroelectric power, cooler ambient temperature, fibre
cables network and proximity with the United States can help it take advantage of the growing
Cloud Computing trend to provide services and Web applications that are economically sound
and environmentally friendly.

Hewitt also highlights that “the nurturing of a domestic Canadian server infrastructure to
provide web-based resource support could provide long-term growth prospects in terms of
servers and the resulting content and services, as well as could help to push this North
American country well beyond its current server installed base.”

The majority of Cloud Computing infrastructure as of 2009 consists of reliable services

delivered through data centers and built on servers with different levels of virtualization
technologies. The services are accessible anywhere in the world, with the Cloud appearing as
a single point of access for all the computing needs of consumers.

Some countries are already embarking on the Cloud Computing journey. However, large
corporations and governments of all sizes state privacy protection and data security as the
main concerns regarding implementation of data holding centres in Asia, Europe, Russia,
Brazil and other countries that don’t have the legislative framework in place to adequately
safeguard strategic information and assets.

Strategic Considerations:

Cloud Computing

The Cloud Computing trend has intensified as businesses struggling in dismal economic
conditions can reduce costs by using applications online as paid services instead of buying,
installing and maintaining software on their own machines.

Through Cloud Computing, customers can minimize capital expenditure as infrastructure is

owned by the provider and does not need to be purchased for one-time or infrequent
intensive computing tasks.

Device and location independence enables users to access systems, regardless of their
location or what device they are using.

Multi-tenancy enables sharing of resources and costs among a large pool of users, allowing
for:

• Centralization of infrastructure in areas with lower costs (e.g., real estate, electricity,
etc.)
• Peak-load capacity increases (i.e., users need not engineer for highest possible load-
levels)
• Utilisation and efficiency improvements for systems (often utilized at only 10-20%).
• On-demand allocation and de-allocation of CPU, storage and network bandwidth.

Reliability improves through the use of multiple redundant sites, which makes it suitable for
business continuity and disaster recovery. Scalability meets changing user demands quickly
without users having to engineer for peak loads.

Security typically improves in Cloud Computing due to the centralization of data,increased

security-focused resources, and because providers are able to devote resources to solving
security issues that many customers cannot afford.
Sustainability in the Cloud comes about through improved resource utilisation, more efficient
systems, and carbon neutrality. Nonetheless, computers and associated infrastructure are
major consumers of energy.

Maintainability is another characteristic of Cloud Computing as the vendor is able to release

new versions of their service automatically, relieving the client of the hassles related to
installing software upgrades on their local servers with each new release.

Advantage Canada

Due to its geographical characteristics, cooler temperatures and low-density population

(particularly as one moves farther north in Canada), IT expertise, quality construction
standards, legislative framework (including the Privacy Act and the Personal Information
Protection and Electronic Documents Act) and low-cost green energy, Canada is considered
a prime location for Cloud Computing.

Canada has a reputation of being a highly desirable outsourcing location for companies from
around the world because of factors such as our well-educated talent pool, multicultural
population, geopolitical stability and relatively low cost of conducting business.

Canada has a definite advantage over other northern countries like Iceland, Finland, Russia,
Korea and China, to become a world leader in Cloud Computing; namely on the security and
privacy fronts, but also for the reliability of its utility network and electricity supplies, the quality
of its traditional and specialized workforce, and for its environment track record.

Canada’s geographical position next to the United States, in addition to existing trade
agreements between the North American partners, enables Canada to take advantage of a
prosperous regional market and a global market worth 3.5 trillion $US.

The Government of Canada spends approximately $5 billion annually on information

technologies (IT) and Budget 2009 has set aside $12 billion to accelerate and expand federal
investments in different infrastructure projects, including:

• $225 million over three years to develop and implement a strategy on extending
broadband coverage to unserved communities to close the broadband gap in rural and
remote communities.
• $1 billion over five years for the Green Infrastructure Fund to support projects such as
sustainable energy;
• $500 million over the next two years for infrastructure projects in small communities;
• $750 million for leading-edge research infrastructure through the Canada Foundation
for Innovation; and
• $500 million to Canada Health Infoway to encourage the greater use of electronic
health records.
The Government of Canada has created a public-private partnership (P3) Crown corporation,
PPP Canada Inc., to administer the Public-Private Partnerships Fund and work with the public
and private sectors to encourage the further development of Canada’s P3 market.

The Government’s northern strategy aims to strengthen Canada’s sovereignty, advance

economic and social development, promote environmental sustainability, and improve
governance in the region.

Cloud Computing experts agree that privacy and security of personal information is emerging
as the most important hurdle vendors must jump in order to attract customers. Through
federal and provincial legislation, Canada has a strong legislative basis to protect personal
information that is collected. Ontario Privacy Commissioner Ann Cavoukian, who is
recognized as a world leader in IT privacy issues, has been quoted as saying, “User-centric
private identity management in the Cloud is possible, even when users are no longer in direct
possession of their personal data, or no longer in direct contact with the organization(s) that
do possess it.”

Glance into the Future

As real-estate and energy costs rise and as security and privacy concerns increase, public
and private sector organizations, large and small, are expected to seek ways to consolidate
their data centres and desktop application services in a secure, controlled and low-cost
environment.

One of the most significant current IT trends is the advent of the Netbook. This next
generation laptop computer is designed to take advantage of Cloud Computing. The Netbook
allows the user to access, from anywhere in the world, his or her personal infrastructure and
software profile, as well as use different levels of wireless communication and take advantage
of Web 2.0 tools.

Due to its low cost ($250-$400) and its portable size and weight (because it doesn’t need
powerful processors and extensive memory capacity) the Netbook is gaining in popularity with
corporations and their employees, as well as with private users such as students and
families. Approximately 400,000 Netbooks were sold in 2007, an estimated 11.4 million were
sold in 2008 and some 21.5 million units are expected to be sold in 2009. According to
Information Network, Netbook sales are expected to reach 139 million units in 2013.

There are approximately 1.2 million servers in the U.S. Federal Government today and
approximately 120,000 in the Government of Canada. Consolidation of these servers is
inevitable and trust (i.e., the ability to effectively manage privacy protection and security) and
cost efficiency will be the determining factors in consolidations.

As issues such as the carbon footprint left by large cooling-down systems, energy
consumption and the current pressures on an old and outdated grid become more complex
and expensive to address, it is expected that inexpensive green energy IT solutions such as
hydroelectricity and wind power, and the benefits of northern regions will gain pre-eminence.

Web 2.0 is still relatively new, yet Internet experts have already introduced the concept of
Web 3.0. Many compare Web 3.0 to a giant database. While Web 2.0 uses the Internet to
make connections between people, Web 3.0 will use the Internet to make connections with
information.

As our journey through the relatively recent history of the Internet has proved, more and more
information is expected to be provided through the Web, and individuals and organizations
are expected to make use of an ever-increasing number of sophisticated audiovisual tools.

The rising use of the Internet increases server overkill and the need for appropriate data
storage, as well as an increased demand for software and hardware services, mobility and
global access.

Research and Development funding is expected to rise in the coming years, in both the public
and private sector. Many will see Cloud Computing as a sound place to invest and prepare
for future needs. For example, Microsoft announced that it would invest a record US$9 billion
in R&D in 2009. They also stated that Cloud Computing would be a major field of investment.

United States President Obama is renowned for his proactive position on the benefits brought
by technology and R&D. In his first couple of months in Office he introduced an aggressive
agenda on the technology, energy, environment and R&D fronts.

Recent research indicates that 75% of Chief Information Officers (CIO) indicated that they will
need and use Cloud Computing in the near future. Research also identifies that the US
Government would save US$6.6B over the next three years through Cloud Computing. Just
on the energy front alone, it is estimated that $5B in electrical power could be saved in the US
through Cloud Computing.

Way Forward:

The move toward Cloud Computing is inevitable and it is happening across the globe and
Canada has a definite advantage on other countries around the world.

Canadians can benefit through prompt, coordinated and sustained action within Canada,
across jurisdictions, and through private-public partnerships.

Canada also needs to show leadership on the international scene, starting with its southern
neighbour, the United States, who could become one of Canada’s best allies and supporter
since Cloud Computing supports the President’s agenda and Corporate America’s next step.

There exists an opportunity for the Government of Canada to show leadership through the
development of a broader Cloud Computing vision. A coordinated effort with Canada’s
private sector leaders in the field would be beneficial.

The Government of Canada could also engage provincial, territorial and municipal
counterparts in defining Canada’s Cloud Computing position through a comprehensive
Canadian Cloud Computing Strategy.
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