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Delivering the Fourth Industrial Revolution: The Role of Government

July 11 2017

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Delivering the Fourth Industrial Revolution: The Role of Government

We know that advanced robotics and manufacturing techniques, IoT and M2M connections, autonomous

vehicles, bio-technology, artificial intelligence (AI) and more big data analytics are set to shift economies

and societies. We also know that, like previous technological revolutions, there will be disruption. What

is less understood is how ubiquitous cloud computing – the hypercloud – will underpin this new world.

As we know from previous technological revolutions, there will be disruption, which today will come at

an accelerated pace. We are already seeing new business and technology models develop, some jobs

becoming obsolete, and new occupations forming to replace them because of the hypercloud. To

maximize the benefits of this change and minimize the downside, governments need to step up

immediately to focus on ensuring: 1) the right kind of infrastructure is in place; 2) businesses can leverage

the hypercloud for innovation and growth; and 3) individuals have the skills to excel in the new economy.

Limitless Possibilities and the Role of the Hypercloud

The Revolutionary Difference: Taking Cloud to Hypercloud

Cloud computing today is growing at an explosive pace, and will power the rapid transformations of the

Fourth Industrial Revolution (4IR). The IDC, in its report “Salesforce Economy” estimated that global

spending in the public cloud computing market will grow to USD 162 billion by 2020, more than doubling

relative to 2015. This translates to a compound annual growth rate (CAGR) of 19%.1 Using a slightly

different methodology, Gartner estimates that spending on public cloud services will reach USD 383.4

billion by 2020, up from USD 246.8 billion in 2017, a CAGR of 16.5%.2

The largest cloud providers – such as Amazon Web Services, Microsoft Azure, Google Cloud Platform, IBM

Softlayer, Oracle, and Rackspace – are driving this massive market expansion. They have attained what

some call “hyperscale” proportions: by building data centers that are larger than any enterprise or

1 “The Salesforce Economy: Enabling 1.9 Million New Jobs and $389 Billion in New Revenue Over the Next Five

Years,” IDC (September 2016), http://www.salesforce.com/assets/pdf/misc/IDC-salesforce-economy-study-

2016.pdf

2 “Forecast: Public cloud Services, Worldwide, 2014-2020, 4Q16 update,” Gartner (5 January 2017),

https://www.gartner.com/doc/3562817?ref=clientFriendlyURL

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organization would build for itself and by

designing customized hardware3 and

negotiating utility rates, they are transforming

cloud services into a commodity. Additionally,

while adding each new server reduces costs, a

tipping point is reached once at least 10,000

servers are employed in public cloud.4 This

rapid fall in costs, unique to hyperscale, is a

crucial factor driving affordable public cloud

computing services. This allows them to pass

these benefits onto customers, providing

massive capacity, anywhere, on demand, at a

price-point that is far lower than users could

attain by investing in the capacity themselves.

Further, competition between cloud

providers operating at hyperscale has driven dramatic decreases in the price of cloud computing services.

While direct comparisons are difficult, a snapshot of both storage and processing prices demonstrates

steep declines over time. For example, from when it first entered the market in 2006 through December

2016, Amazon Web Services has cut the price of its first tier S3 storage service by 80%, from USD

0.15/GB/month to USD 0.02/GB/month (Figure 1).5

This decline is not limited to Amazon, or just to storage services. Cloud providers have engaged in

aggressive competitive price cuts for processing as well. In just a little over a year, from October 2013 to

December 2014, the top cloud providers cut monthly costs per GB of RAM by an average of 33%, with

Softlayer, AWS, and Google cutting prices even more sharply (Figure 2).6 Benefitting customers, the price

war has largely continued in the time since. A January 2016 study by Tariff Consulting found that the price

of entry level services dropped 66% since 2013, reflecting fierce competition and converging prices

3 The scale at which many of these hypercloud providers operates allows them to drive efficiencies even in the

design of the servers they procure, and thus enables them to bypass standard off-the-shelf servers.

4 See Federico Etro, “The Economic Impact of Cloud Computing on Business Creation, Employment and Output in

Europe: an Application of the Endogenous Market Structures Approach to a GPT Innovation,” qtd in Gutierréz,

Horacio and Korn, Daniel, “Facilitando the Cloud.”

5 Jeff Barr, “AWS Storage Update – S3 & Glacier Price Reductions +Additional Retrieval Options for Glacier,”

Amazon Web Services, 21 November 2016, https://aws.amazon.com/ru/blogs/aws/aws-storage-update-s3-glacier-

price-reductions/

6 Data from RBC Capital Markets, excerpted from https://gigaom.com/2014/10/02/confused-by-cloud-computing-

price-comparisons-here-they-are-in-one-easy-peasy-chart/; http://www.businessinsider.com/cloud-computing-

price-war-in-one-chart-2015-1

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Figure 1: Price of AWS S3 1st tier, $/GB/Month (March 2006-

September 2016)

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between providers.7 This past October,

Microsoft Azure announced yet more cuts,

slashing the price of A1 and A2 basic virtual

machines by 50%.8

Cisco, using data on annual revenue,

identifies twenty-four hyperscale operators

with a diverse geographic footprint.9 Cisco

projects that the number of hyperscale data

centers will grow from 259 at the end of 2015

to 485 by 2020, a 47% increase, and will

account for the overwhelming majority (86%)

of public cloud workloads.10 This shift will

allow customers to focus on the high-end

business of apps, computer programming,

and product design, rather than building and

managing data centers.

Cisco estimates that 43% of hyperscale data

centers will be located in the United States in

2020, while 33% will be in Asia and 17% in

Western Europe. This broad footprint allows providers to manage their networks as efficiently as possible

to serve diverse customers who are present in different countries and may have different needs.

With hyperscale comes the emergence of the hypercloud. This paper will define the hypercloud as public

cloud computing taken to its purest form: resourced and deployed on a mass scale that allows near

ubiquitous access to high-performance computing services at the lowest cost possible. The economies of

scale also allow the hypercloud investors to make investments in security that an individual customer

would not be able to justify or afford.

As more data is aggregated and analysis becomes increasingly sophisticated, a “little bit of cloud” as

provisioned by private cloud or hybrid cloud will not be enough. Large-scale, truly global cloud computing

7 http://www.computerweekly.com/news/4500270463/Public-cloud-competition-results-in-66-drop-in-prices-

since-2013-research-reveals

8 https://azure.microsoft.com/en-us/blog/new-lower-azure-pricing/

9 The 24 companies named by the Cisco study include: Amazon/ AWS, Microsoft, IBM, Google, Salesforce,

Rackspace, NTT, ADP, SAP, Oracle, Adobe, Intuit, Tencent, Facebook, Baidu, Yahoo, Yahoo!Japan, Apple, LinkedIn,

Twitter, Amazon, Alibaba, eBay, JD.com

10 “Cisco Global Cloud Index: Forecast and Methodology, 2015-2020,” Cisco (November 2016),

http://www.cisco.com/c/dam/en/us/solutions/collateral/service-provider/global-cloud-index-gci/white-paper-

c11-738085.pdf

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Figure 2: Average monthly cost per GB of RAM by provider (October

2013-December 2014)

AWS Google Azure

Softlayer Vmware Rackspace

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power – hypercloud – is what will propel economic benefits and cost savings. This is a critical point for

policy-makers to consider as they create legislation for cloud computing today.

The Hypercloud Unlocks the Benefits of the 4IR

Data and the capacity to analyze it have become new factors in economic production, one that could

never have been anticipated by early modern economists. As with the labor and goods they analyzed,

providing it at scale reduces costs, meaning that data, R&D capacity, and all the things you can do with it,

are suddenly available for individuals and small businesses through cloud computing and more efficiently

through hypercloud. Innovation is no longer the preserve of large corporations.

New technological advances promise to revolutionize society. Artificial intelligence and advanced data

analytics will enable new insights from data, drive innovative services, and automate a wider array of

tasks. Robotics, additive manufacturing, and the Internet of Things promise to automate and improve

industrial production processes, while new biotechnology and ways of designing and creating materials

will transform health and welfare, in addition to manufacturing inputs. A few clear threads connect all of

these seemingly disparate technologies: the centrality of massive amounts of data and the ability to

quickly analyze and process that data – in other words, the hypercloud.11

Widespread deployment of cloud computing and the innovation it enables is already boosting the global

economy. In the European Union, for example, a 2014 study commissioned from the IDC by the European

Commission estimated that by 2020, use of cloud services by the private sector alone would create 1

million new jobs, 300,000 new companies, and EUR 450 billion in new GDP.12 This positive effect will scale

as hypercloud is deployed.

Democratizing Power of Hypercloud

The real power of hypercloud lies in what it enables across the entire economy. By democratizing access

to computing power and enabling access to a global market, hypercloud grows the economy and gives

SMEs the tools to innovate at the scale of large corporations.

When analyzing the benefits of hypercloud for the economy, a common mistake is to focus only on data

center investments. This shortsighted approach fails to recognize the breadth of economic benefits

deriving from the hypercloud. The widespread, affordable access to cloud computing that hypercloud

enables, for example, is a game changer for SMEs. Previously, only large companies had the resources to

invest in data storage and processing capabilities or the scale of operations to fully use such infrastructure.

Cloud computing radically changes this dynamic by allowing small companies to buy capacity only as they

11 Annex 1 provides further information on technologies of the 4IR and the role that cloud plays in enabling them.

12 Bradshaw, David, Gabriella Cattaneo, Rosanna Lifonti, and John Simcox, “Uptake of Cloud in Europe,” IDC, for the

European Commission (2014), https://ec.europa.eu/digital-single-market/en/news/final-report-study-smart-

20130043-uptake-cloud-europe

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need it. A Boston Consulting Group survey of SMEs in five countries, including the United States and

Brazil, found that SMEs using cloud technologies grew jobs nearly two times faster than SMEs not in the

cloud.13

By contrast, the employment directly generated by the data centers powering the cloud is small. Data

centers are capital intensive and, after construction is completed, require few employees to perform

maintenance, provide security, and keep cooling systems operating. Examining data center developments

in the United States, Good Jobs First estimates that the average data center provides just 20-30 full time

employees, and the largest facilities up to 200. Many of these are low-level janitorial or security positions,

with a small proportion of technical occupations. The impact of these data centers on the local economy

is also limited, since they consume few locally-produced goods or services apart from electricity.14

However, at the global scale, the impact of the hypercloud on the rest of the economy is enormous. The

simplest reason is cost-optimization; the cloud drives operational efficiency that keeps companies of all

sizes competitive. However, facilitating business model innovation is also a key feature. In a recent KPMG

study, the number one reason executives cited for their decision to adopt cloud computing was better

agility and responsiveness, which lets them adapt products and services to the changing needs of the

market more quickly. The second reason was improved product development and innovation, which

reduces development time and lowers barriers to enter new markets.15 For these reasons, cloud has

become not just common, but a standard feature of business, leading Gartner to conclude that by 2020,

a corporate “no-cloud” policy will be as rare as a corporate “no Internet” policy today.16

Challenges to Realizing the 4IR: Hard Adjustments

Fully realizing the Fourth Industrial Revolution will not be easy. The speed of transformation is quicker

than most governments are prepared to address. Nevertheless, benefits will not arrive before deep social

and economic transformations are undertaken. Governments must be prepared to undertake challenges

that only governments can address: enabling SMEs to become engines of innovation, investing rapidly and

13 Boston Consulting Group, “Ahead of the Curve: Lessons on Technology and Growth from Small-Business

Leaders,” (5 Oct. 2013),

https://www.bcgperspectives.com/content/articles/technology_software_globalization_ahead_curve_lessons_tec

hnology_growth_small_business_leaders/?chapter=4#chapter4

14 Tarczynska, Kasia, “Money Lost to the Cloud: How Data Centers Benefit from State and Local Government

Subsidies,” Good Jobs First (October 2016), http://www.goodjobsfirst.org/sites/default/files/docs/pdf/data

centers.pdf

15 “Journey to the Cloud: The Creative CIO Agenda,” KPMG (February 2017),

https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2017/02/the-creative-cios-agenda-journey-to-cloud.PDF

16 Qtd in “2016 Top Market Report: Cloud Computing,” U.S. International Trade Administration (April 2016),

http://trade.gov/topmarkets/pdf/cloud_computing_top_markets_report.pdf

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strategically in infrastructure to ensure access to the hypercloud, and arming the population with the skills

needed to adjust to the disruption ahead.

Challenge 1: Lack of investment in infrastructure will hamper adoption

The Fourth Industrial Revolution – and the hypercloud that underpins it – depends on high quality,

reliable, and ubiquitous connectivity that is accessible to all. Broadband connectivity, already the

lifeblood of the global economy, will become essential for customers to access services, for governments

to reach their citizens, and for businesses to provide goods and services. The challenge for governments

is ensuring that investments in infrastructure ensure Internet access for all, as opposed to local data center

investments, which tend to benefit only a few.

Cisco projects that global cloud Internet traffic will reach 14.1 zettabytes (ZB) per month by the end of

2020, a more than threefold increase since 2015, and a CAGR of 30%.17 This explosive growth will strain

existing Internet infrastructure, requiring large investments in order to keep up with demand. Both last

mile infrastructure and backbone networks will face challenges. This traffic will be carried by many

different means that may include fixed fiber networks, mobile cellular networks, and satellite networks.

Demands from wireless services are already placing increasing pressure on limited radio frequency

spectrum resources, putting constraints on future growth.

Many new technologies and platforms are being developed that promise to provide better wireless

broadband access – including 5G mobile systems, new satellite broadband networks, TV White Space

radios, and other experimental wireless local area network technologies. However, these systems still

face many hurdles, such as radio spectrum availability, regulatory awareness and acceptance, and widely

agreed standards that must be addressed before they can be realized.

End users – both individuals and enterprises – also face challenges in getting the high-quality connectivity

that they need to deploy the technologies of the 4IR. Different parts of the world face different challenges

in overcoming this obstacle. In 2016, nearly 4 billion people remained unconnected to the Internet, over

half of the world’s population. While advanced economies such as OECD members often have Internet

penetration rates above 80%, other countries, particularly many in sub-Saharan Africa, have rates of less

than 10% of the population using the Internet. 18

If these infrastructure and accessibility gaps are not addressed, truly global hypercloud deployment will

remain a distant goal, and the benefits it will bring out of reach.

17 “Cisco Global Cloud Index: Forecast and Methodology, 2015-2020,” Cisco (2016),

http://www.cisco.com/c/dam/en/us/solutions/collateral/service-provider/global-cloud-index-gci/white-paper-

c11-738085.pdf

18 “Global Internet Report 2016,” Internet Society (2016),

https://www.internetsociety.org/globalinternetreport/2016/wp-content/uploads/2016/11/ISOC_GIR_2016-v1.pdf

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Challenge 2: Lack of appropriate incentives for adoption will stifle growth and future

innovation, particularly for SMEs

The hypercloud is a powerful tool of innovation, but to make its full impact felt, government needs to

implement policies that allow users to leverage its capabilities.

A healthy and robust business environment remains a critical component of enabling the investment and

innovation to achieve the benefits of the 4IR. However, there are also policy questions specific to the

hypercloud and the technologies of the 4IR that need addressing. For example, ensuring respect for

privacy rights is a critical component of trust in the digital economy. The rise of the data-driven economy

has laid bare the inadequacies of some privacy laws and regulations. Often designed before the age of

pervasive connectivity and large-scale cloud data processing, they can put up inadvertent barriers to

legitimate and beneficial uses of data. These are most harmful to small companies who have little legal

capacity to navigate the myriad of national and international rules.

Even more challenging to cloud computing are specific restrictions on the international transfer of data.

Several countries maintain onerous consent requirements, procedures, or bans on the international

transfer of personal information. Some countries have implemented blanket requirements that

companies hold certain types of data within a country. Whether these rules grow out of a well-

intentioned (but ill-informed) concern for the security of data or ill-intentioned data protectionism, the

result is the same: the benefits of hypercloud remain out of reach. The economic advantages of cloud

computing derive from their ability to efficiently engineer and manage networks at a global scale.

Consequently, rules that arbitrarily compel data processing or storage within a country – much like the

trade strategy of import substitution – deny individuals and businesses access to hypercloud services,

forcing them to use smaller, local services that may not be as secure or cost-efficient.

At the macroeconomic level, the effect of such policies is a sizeable drag on economic growth. A widely-

cited 2014 study from the European Center for International Political Economy (ECIPE) estimated that

economy-wide data localization requirements would cost the European Union and Korea 1.1% of GDP,

Brazil and India 0.8% of GDP, and Indonesia 0.7%, with even larger negative effects on investment.19 A

more recent 2016 analysis from the Center for International Governance Innovation (CIGI) and Chatham

House constructed a composite index capturing localization and data flow restrictions. It found that a

single standard deviation increase in restriction on international data flows – not even a total localization

requirement – would reduce the total factor productivity of an economy by 3.9%, which would translate

19 Bauer, Matthias, Hosuk Lee-Makiyama, Erik van der Marel, and Bert Verschelde, “The Costs of Data Localisation:

Friendly Fire on Economic Recovery,” European Center for International Political Economy (2014),

http://www.ecipe.org/app/uploads/2014/12/OCC32014__1.pdf

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to a GDP loss of 0.58% in Korea, 0.55% in China, and 0.48 % in the EU. These effects were felt even more

acutely in the service and business service sectors.20

Policy environments such as these – particularly when they inhibit hyperscale cloud – create disincentives

for businesses to innovate, invest, or expand. In the drive for international competitiveness, they put

entire economies – particularly their smallest companies – at a disadvantage, when the right mix of

policies could instead vault them to the top of global business.

Challenge 3: Lack of workforce skills will slow growth and threaten to leave people behind

To build a digital economy that makes full use these new technologies and spreads their benefits

inclusively, governments need to arm citizens with the right mix of skills. The rapid pace of change and

the specialized skills that new industries require pose serious challenges to workers.

We have already seen profound effects on labor markets as certain categories of tasks are automated or

obsolete. In examining these disruptions, many have focused only on the potential job losses. However,

this narrow focus belies the new jobs generated through the revolution. Job displacement is not a new

phenomenon. In previous revolutions, technological innovation has indeed eliminated many jobs, but it

has also offset those losses with new categories of employment. Analyzing over 140 years of census data

from England and Wales, one study by Ian Stewart, Debapratim De, and Alex Cle of Deloitte concluded

that technological progress has consistently been a “great job-creating machine.” As the technologies of

the previous three industrial revolutions were implemented, ‘routine jobs’ did indeed decline, but this

was more than offset by the rise in ‘non-routine’ jobs that require different skills. What is more, they

found that the category of ‘non-routine cognitive jobs’ actually has strong complementarity with

technology which allowed them to re-focus on analytical and creative aspects through leveraging new

tools to increase productivity.21

That’s not to dismiss fears of short-term workforce inequality. An analysis by UBS finds that while the 4IR

may actually increase the demand for work that is focused on caregiving and creativity, it may in the short-

term cause polarization of the labor force as low skill and even middle skill job categories begin to shrink

20 Bauer, Matthias, Martina F. Ferracane, and Erik van der Marel, “Tracing the Economic Impact of Regulations on

the Free Flow of Data and Data Localization,” Centre for International Governance Innovation and Chatham House

(May 2016), https://www.cigionline.org/sites/default/files/gcig_no30web_2.pdf

21 Ian Stewart, Debapratim De, and Alex Cole, “Technology and People: The Great Job-Creating Machine,” Deloitte,

(December 2014), https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/about-deloitte/deloitte-uk-

technology-and-people.pdf, qtd in Ivanschitz, Robert and Korn, Daniel, “Computación en Nube: La Reconversión

del Espacio en Red.”

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while the returns to high skill labor increase. This may increase inequality as the economy and workforce

adjusts to new needs.22

Similarly, new industries also need workers with new types of skills – especially basic digital literacy and

more complex skill sets like data science. A massive skills gap in this particular area already slows the pace

of growth and innovation. In the United States alone, for example, there were an estimated 600,000 open

computing jobs in 2015, but only 40,000 new graduates with four-year computer science degrees.23 In

Brazil, 67% of companies identified the lack of qualifications in the current labor force as a key roadblock

to higher productivity,24 while “a whopping 59% of employers in Argentina said that they faced difficulty

finding skilled labor for open positions.”25

If communities are acutely affected without help adjusting, and inequality increases, people may lose faith

that technology delivers benefits. In many ways this is already happening today, particularly in advanced

economies. Taking the United States as an example, an estimated 5.6 million manufacturing jobs were

lost from 2000-2010, 85% of which were due to technology change according to a study from the Center

for Business and Economic Research at Ball State University.26 While at the same time, millions of new

jobs have been created as a result of new industries like cloud computing, e-commerce, social networking,

and the mobile app ecosystem, these positions are rarely filled by those that have been displaced. Greater

automation and transformation of production processes may also create new types of positions in the

manufacturing industry, but workers are currently poorly equipped to fill them.

However, history has demonstrated how technology unlocks new human capability and can shift social

norms to enable entirely new sectors of the economy. For example, while the invention of the internal

combustion engine and the assembly line was bad for industries associated with horses, the automobile

created both new jobs and new expectations of skills., creating an entire culture around itself that

included mechanics, factory workers, and jobs in travel and logistics. Crucially, this new sector was

22 “Extreme Automation and Connectivity: The Global, Regional, and Investment Implications of the Fourth

Industrial Revolution,” UBS (January 2016),

https://www.ubs.com/global/en/about_ubs/follow_ubs/highlights/davos-2016.html

23 “Promote Computer Science,” Code.org, https://code.org/promote, qtd in Ivanschitz, Robert and Korn, Daniel,

“Computación en Nube: La Reconversión del Espacio en Red.”

24 Fernanda De Negri and João Maria de Oliveira, O Desafio da Produtividade na Visão Das Empresas [The

Challenge of Productivity from the Perspective of Companies], Brazilian Institute of Applied Economic Research

[IPEA], at 54, qtd in Ivanschitz, Robert and Korn, Daniel, “Computación en Nube: La Reconversión del Espacio en

Red”

25 Imogen Reeve-Tucker, “Argentina Has The Highest Shortage Of Skilled Labor In Latin America,” THE BUBBLE.COM

(1 Nov 2016), http://www.thebubble.com/argentina-has-the-highest-shortage-of-skilled-labor-in-latin-america/,

qtd in Ivanschitz, Robert and Korn, Daniel, “Computación en Nube: La Reconversión del Espacio en Red.”

26 Qtd in Cocco, Federica, “Most US Manufacturing Jobs Lost to Technology, Not Trade,” Financial Times (2

December 2016), https://www.ft.com/content/dec677c0-b7e6-11e6-ba85-95d1533d9a62

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supported by the governments of the time, allowing the benefits of enhanced mobility to change the

entire economy.

In short, previous technology revolutions delivered similar disruptions. What is different in this case is

the speed of change and the rapidly widening skills gap. The challenge for government is how to make the

right investments in human capital that close this skills gap quickly and lay the foundation for future

challenges.

A Roadmap for Government Policy

Companies around the world are investing in the technologies that will create the Fourth Industrial

Revolution. By supporting research and development and experimenting with commercialization of new

technology, they are also supporting a broader ecosystem of ideas, innovation, and human capital that

will drive the 4IR. On the other side of the coin, consumers are demanding better products and services,

fueling competition. More entrepreneurial consumers are also experimenting with new types of offerings

and innovating.

However, this is not enough. Previous industrial revolutions unfolded at a slower pace. As such, it was

easier to target government and private sector resources to their most efficient use. Today, however, the

monumental transformations needed to adapt to new technology require more concerted action than in

the past.

The most fundamental task is to promote continued innovation and the tools to unlock it – particularly

to foster the hypercloud. Three key areas for government to address – not surprisingly reflecting the

three key challenges identified above – are: 1) promoting infrastructure; 2) creating the right incentives

for adoption and further innovation; and 3) upskilling the workforce.

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Role No. 1: Support infrastructure required to participate in the 4IR

The hypercloud and the connectivity to access it will be the lifeblood of the economy, supporting all

the technologies of the 4IR. Connectivity, in turn, depends on robust infrastructure, especially

broadband infrastructure. As a result, government policies need to focus on facilitating investment in

high quality broadband access systems. They also need to ensure that this infrastructure is inclusive

and supports affordable access for all.

Invest resources

strategically

Comprehensive infrastructure policies must provide the right incentives

and – where needed – strategic investments that support a robust

Internet infrastructure including backbone, middle mile, and last mile

elements of the network. Governments must also avoid focusing on

attracting data center investments, which are a physical symbol of the

hypercloud but do not result in significant numbers of jobs or economic

growth.

Foster a globally

interoperable Internet

Continued growth of the Internet, and the digital economy it enables,

depends on Internet infrastructure that is not just fast and reliable but

well-integrated at a global level. Policies should facilitate robust and

plentiful international interconnections, maintain global interoperability,

and fight against all forms of fragmentation.

Make high speed

Internet access

affordable

Broadband services need to be not just available, but affordable and

accessible. Policies should focus on enabling access to all citizens and

businesses at reasonable rates, by fostering competition, permitting

innovative uses of the radio frequency spectrum, and, where economic

conditions may require, subsidies or other forms of government support.

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Role No. 2 Ensure businesses have the tools to participate in and

innovate through the hypercloud

For the hypercloud’s benefits to be fully felt, companies of all sizes need the right incentives to invest

and innovate. This process will take years as economies learn how to apply the benefits of hypercloud

technologies. The right mix of conditions to facilitate this is complex, but there are clear policies that

governments should pursue to facilitate the rapid deployment and uptake of the hypercloud.

Encourage participation

in the global

hypercloud market

SMEs and individuals can become their own sources of innovation if they

are able to tap into the global computing power provided by the

hypercloud. Policies and incentives should support SMEs ability to build

solutions using global cloud services and allow SMES to sell to a global

marketplace.

Support global cloud

computing standards

The hypercloud is built on scale, and the ability to seamlessly operate and

sell into many countries. Unique national standards and certifications can

be serious barriers that inhibit global markets from reaching scale, and

prevent customers from accessing the best, most secure, and most

economical services.

Demonstrate the

benefits of cloud with

‘Cloud First’ policies

Governments should set the right tone at the top to support the data-

driven economy. The best way to do this is by demonstrating the value

of the hypercloud by using it. Governments should solicit requests for

proposals for cloud-based solutions – for example to explore new services

for citizen engagement or digitization of government services.

Implement modern

privacy laws

While also preserving trust and security, modern data privacy rules are

indispensable to support SMEs and the growth of the digital economy.

They should provide robust protections while also minimizing barriers to

free cross border transfers of data. Counterproductive data localization

rules that raise costs, especially burdensome on small companies, should

be avoided.

Create light-touch legal

frameworks

A light regulatory framework permits SME innovations to emerge among

companies of all types, as diversity and experimentation find ways to

address emerging consumer expectations. The potential transformations

offered by hypercloud are myriad, and the boundaries for creativity

should only be limited by the ability of innovators – not by regulatory

barriers.

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Role No. 3 Prepare workers for 21st century jobs

A workforce with the skills to excel in the new economy is critical not just to fully realize the economic

potential of the 4IR but also to ensure inclusive growth and broadly enjoyed benefits. Governments

should design strategies with an eye to these long-term goals, while also taking measures to ease

difficult adjustments in the near term.

Build a flexible

workforce with a firm

grounding in general

skills

As some jobs become obsolete and new occupations are created, the

most important attribute workers need is flexibility. Curricula must

effectively arm students with general skills like critical thinking, problem

solving, and communications to be able to better adapt as the conditions

of the labor market change.

Integrate digital skills in

basic education

Governments need to adapt their systems of basic education to position

students for future success. Programs that promote digital literacy as well

as the development of more specific skills like coding and software

development will put students on the right path.

Support computer

science education and

computational thinking

Many jobs in the economy of the 4IR will require highly specialized skills

in science, technology, engineering, and mathematics (STEM).

Governments should begin to build and promote larger and higher quality

STEM education programs – particularly in computer science and data

science – that provide students with the in-demand skills to succeed in

the digital economy.

Retrain and change

mindsets to prepare for

lifelong learning

Amid rapid change, workforce policies need to help older workers adjust.

Programs need to ensure that learning of skills cannot be something that

happens just once in life, but can be a constant and lifelong process that

allows workers to adapt to changing times. Special policies are also

needed to address the acute needs of workers and communities most

negatively impacted by trade and technology substitution.

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Conclusion

As the Fourth Industrial Revolution unfolds, society, business models, and the nature of work as we know

them are poised to change in ways we cannot foresee. The emerging global hypercloud is driving this

revolution as competition and economies of scale in the cloud computing market are lowering costs,

increasing access to secure computing power, and democratizing access to technology.

History has demonstrated economic transformation can be disruptive. All stakeholders – business,

workers, and governments – will be challenged by the rapid change of the hypercloud and the 4IR. But,

as with each previous revolution, this disruption ultimately will deliver critical economic and social

benefits. The difference with this revolution is speed.

Given the pace of change, only governments have the power to alter the fundamental rules of the

transition. With smart policies that enable access to the hypercloud, the right incentives to participate in

it, and the skills to exploit it to its full potential, governments can empower their citizens and drive

innovation and growth for all.

Delivering the Fourth Industrial Revolution: The Role of Government

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Appendix 1

Technologies of the Fourth Industrial Revolution and the Hypercloud

Hypercloud is already unlocking new and previously unforeseeable goods and services. This massive,

global, and pervasive application of hyperscale computing is enabling such applications as industrial

robotics, smart cities infrastructure, precision medicine, and advanced scientific research into new

medicines and materials. There are an array of technologies on the horizon associated with the 4IR at

various stages of development:

Robotics and Automation

Increasing substitution of robots for manual human labor. Better artificial intelligence and mobility will allow increasing role in non-routine tasks. Cloud supports management of complex processes and coordinated control of multiple units working alone or cooperatively.

Bio-technology

Use of genomic and synthetic biological tools to produce materials, medicines, and industrial inputs from biological (non-fossil) sources. R&D depends upon complex analysis of large quantities of data best executed over cloud.

Artificial Intelligence

Through better reasoning, perception, natural language process, learning, and problem solving capabilities, computing power can substitute for cognitive human processes. Cloud is integral to development and wide scale deployment to manage an array of complex tasks.

Nanotechnology and New Materials

Manipulation and production of materials at nanoscale (near level of individual atom) as well as simulation-assisted precision development – not trial and error - of custom, tailored materials. Cloud enables complex, collaborative, and data intensive research processes.

IoT/M2M

Networks of embedded sensors and actuators in physical objects connected to remotely located controls that may operate with or without human intervention. Cloud computing can efficiently and automatically manage large and complex networks.

3D Printing

Production of 3D objects – standard or custom - through computer-controlled accretion of one or several materials. Design and control require complex computing resources most efficiently delivered by cloud.

Hypercloud

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