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Why the Cloud Is Good for American Entrepreneurs and IT Jobs

I recently ordered a power adapter for an electronic gadget from an online retailer in Hong Kong. The U.S. maker of the gadget charges about $25, plus shipping, for the name-brand version of the adapter. Price from Hong Kong, including shipping: $4.99.

There's no more powerful example of the rock and hard place U.S. manufacturers find themselves caught between. And if that's true of physical products, with all their mass and bulk, how much more true must it be of offerings that consist only of nearly weightless, nearly infinitely speedy electrons? In short, as more and more computer processing power and data storage move to the cloud -- that nebulous network in the sky where we increasingly keep our documents and photos and manage our email and appointments -- won't the same sort of catastrophic declines in employment and opportunity that have decimated U.S. manufacturers descend on the information technology industry?

A lot of people are issuing warnings along those lines. Maybe. But living and reporting through a large number of booms and busts of various intensities has taught me that trees do not normally grow to the sky. You can't reliably take evidence of past trends and apply it to current circumstances, at least not infinitely. The fact that oil went to $100 a barrel doesn't mean it will go to $500 a barrel, or even $200, at least not soon.

So the fact that low-priced off-shore rivals sucker-punched U.S. manufacturers (in the era of cheap energy, it's worth mentioning) doesn't mean that the general move to the cloud that most computing experts expect will do likewise to the domestic IT industry. Here are three reasons why:

First, the Internet only seems infinite in its capacity and connectivity. Mushrooming growth of connected devices, creation of bandwidth-hungry applications and the accelerating expansion of data of all kinds are pushing the Internet against the wall. This has been known for years, but solutions have not kept pace with the problem.

Second, one way to ease Internet stress is to keep data and computing power close. This is one of the elements in a new architecture for cloud-based storage envisioned by a recently formed consortium of 15 European organizations led by IBM. The idea is that if you don't separate data being processed from the computer doing the processing by, say, half the globe, you don't need to rely on an increasingly over-burdened Internet to haul it.

Third, as people and organizations create escalating quantities of sensitive information in digital format, IT security becomes more important. Significant built-in limitations to the ability to secure data stored online exist. For instance, the latest freely available open-source, password-cracking software can suss out the most fiendishly complex passwords in just a few seconds. It's becoming increasingly clear that you can't really secure data unless you have it under physical control. It's hard to do that when your data is a dozen time zones away.

These are potent forces keeping data centers, IT jobs, and opportunities for businesses onshore in the United States rather than offshore in places such as India. As a recent brouhaha in India somewhat ironically indicates, political forces also may help keep data centers in certain geographic locations: The Indian government threatened to shut down RIM's BlackBerry messaging service in part because the servers are not in India and so aren't susceptible to government monitoring.

If nothing else, the truly fantastic -- as in incredibly extreme -- growth in data is likely to sustain U.S. IT opportunity and employment for the foreseeable future. One estimate holds that the quantity of data generated worldwide has climbed from 150 exabytes (billion gigabytes) in 2005 to 1,200 exabytes in 2010. That trend shows every sign of speeding up, too. So, domestic IT entrepreneurs, opportunity isn't going to go away. But I wouldn't try to undercut Hong Kong power adapter suppliers.

Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications. Follow him on Twitter @bizmyths.
Image courtesy of Flickr user Michigan Municipal League, CC2.0

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