There was a fascinating article published on TechRepublic a couple of weeks ago headlined "Tech manufacturing: A disaster waiting to happen". The writer of the article, engineer, scientist and futurologist Peter Cochrane, argues the concentration of technology manufacturing in a single region, south-east Asia, has created a brittle supply chain and left the industry vulnerable to man-made and natural disasters.
There are just 10 dominant contract manufacturers producing PCs, laptops, tablets and smart phones, all in south-east Asia, Cochrane claims, and this "concatenation of limited sourcing and manufacture in the supply chain concentrated in just one region" has created a set of circumstances that "amount to a major disaster just waiting to happen".
He believes this situation demonstrates that economic theory and practice isn’t working and it needs to be reformed. "Making judgement calls using simplistic models of supply, demand, price and profit is far too crude a starting point," Cochrane states. "We need to include resilience, survivability, sustainability, people and ecological impact in the equation."
Those disinclined to go along with Cochrane’s argument might be advised to look at the impact of the floods in Thailand last year on the manufacture and supply of hard disk drives. If anything, they show all too clearly how concentrating production of a particular component of computing technology in a small area can have a disproportionately disruptive effect on the entire supply chain.
The decision to close down manufacturing plants in different territories that existed before and concentrate hard disk drive manufacture in Thailand made perfect economic sense if one applied the "simplistic models of supply, demand, price and profit". But it didn’t take into account other factors, including an area’s susceptibility to natural disasters, because they were not part of the formula used to arrive at the original decision.
As one commentator, Kieron Seymour-Howell, pointed out in response to Cochrane’s article, the concentration of technology manufacturing ("clustered manufacturing") which has resulted in shortages of RAM and hard drives, flies in the face of the advice the technology industry is all too happy to give to customers and users when it comes to their data. "Even in IT, we are told never to store all your backups in one location," he notes. Hard to understand then why there is very little backup in place for technology manufacturing if something goes wrong with so much of it concentrated in one location.
Of course, in a small country like Ireland we are unlikely to question the effectiveness of clustered manufacturing until something goes wrong. This island has its own much smaller experience of the phenomenon with the use of generous corporation tax rates to attract technology multinationals to site European operations on these shores. Now, we’re starting to see a concerted effort to position Ireland as a cloud computing hub.
Back in April, jobs and enterprise minister Richard Bruton announced a government investment of €1.2 million in a Cloud Computing Technology Resource Centre, stating Ireland had "distinct advantages compared to other countries" in areas such as cloud computing and was "taking steps necessary to ensure that we realise our potential".
He suggested Ireland’s climate, skills base, telecoms connectivity and existing strengths in IT, gave it the potential "to reap substantial benefits in terms of jobs and growth from the global expansion of this sector". It probably also helps his argument that Ireland is not as prone to natural disasters as many other parts of the world.
The channel also appears to be on board. Research published by Citrix in March found 96% of the channel believed Ireland had the potential to become a cloud computing hub and 76% said it could become the cloud capital within as little as two years.
Yet experience teaches us that it is best to be cautious in these matters. Back in 2006, Michael Martin, then Minister for Enterprise, Trade and Employment, outlined the Strategy for Science, Technology and Innovation, claiming Ireland would become a leading knowledge economy by 2013. The knowledge economy of those Celtic Tiger days was cruelly exposed when the crash revealed far too much of the reality of Ireland’s economic strength was built on the flimsy foundations of property speculation and construction.
I am slightly sceptical of predictions of Ireland becoming a world leader in an area like cloud computing because it feels as if the country’s rulers are jumping on another bandwagon and selling us yet more sunny uplands tomorrow. Besides, those at the top have always been a little bit obtuse about Ireland’s "success" in IT, for example, given that so much of what they refer to is actually the success of foreign multinationals.
And am I the only one that gets confused by the often stated concern by our rulers that those multinationals might jump ship tomorrow if the corporation tax rate were to change? Really? What about Ireland’s so-called skills base, telecoms connectivity and existing strengths in IT that Minister Bruton was so quick to cite as key assets in the country’s potential as a cloud computing centre? Do they count for nothing in the end?
Ireland may not be as susceptible to natural disasters (most of ours are man-made), even if there is an occasional earthquake off the coast of Mayo or in Lisdoonvarna, but my concern is the optimistic vision of Ireland becoming a world leader in cloud computing will, in reality, turn out to be more nothing more than a giant offshore data centre. And while that’s better than nothing, it’s not quite the same as becoming a cloud computing leader.
Ltd
