John Lyons (Dublin North West, Labour)
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We are in public session. I welcome the delegation from Microsoft Ireland, Ms Cathriona Hallahan, managing director, Mr. Karl O'Leary, public sector director, and Mr. Niall McDonagh, group manager customer service, to discuss the role and potential of cloud computing in public sector transformation and job creation.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

Before I ask Ms Cathriona Hallahan to make her presentation, I wish to apologise for the delay and thank all the delegates for coming before the joint committee.

Ms Cathriona Hallahan:

I thank the Chairman and members for their invitation to appear before the joint committee to discuss the impact that cloud computing can make in driving efficiencies in government as well as job creation. I am joined by my colleagues, Mr. Karl O'Leary, public sector director for Microsoft Ireland, and Mr. Niall McDonagh our cloud technology leader for western Europe. We welcome the opportunity to discuss the important issue of cloud and its roll-out in Ireland during our national cloud week.

Under the banner of national cloud week, we are running a series of events designed to raise awareness about the opportunities and benefits that cloud computing can bring to the public and private sectors. The opportunity to address this joint committee on this important topic is central to part of the week's activities.

Microsoft as an organisation has been transformed from a product company into a devices and services company, providing solutions to our customers. As part of that transformation, cloud is key. Microsoft Ireland has a 1,200 strong employee base, but we have an extended partner ecosystem of small companies that represents about 40,000 jobs in our ecosystem. We have been in Ireland 28 years and have been evolving from being a manufacturing facility to being an operations core development centre, a sales, marketing and service group but also a data centre, which is the key cloud element of our ecosystem. We are driving and facilitating the move to a solutions and services company in Ireland.

Many will have heard Microsoft staff speak of the potential that cloud has to offer. There has been a small level of deployment on cloud in the public sector, but we believe there is so much more we can do. That is the reason that we are hosting a national cloud week. Cloud has the opportunity to play a significant role in Ireland's economic recovery efforts. It can help deliver the public sector transformation agenda, be a catalyst for growth in the indigenous economy and help to retain our competitiveness and attractiveness as a home for multinational companies in the future. Importantly, we believe cloud can play a significant role in helping Ireland achieve its job creation and growth agenda. We welcome the fact the Government is committed to encouraging deployment of cloud in both the public and private sectors and that it has been identified as a strategic priority in the programme for Government and in the Action Plan for Jobs.

To ensure that cloud has the maximum impact, organisations need to know of its potential benefits and how it can be harnessed to drive growth and achieve efficiencies. Today, in partnership with the Irish Internet Association and Enterprise Ireland, we are announcing an initiative to raise the awareness of cloud to hundreds of small businesses around the country. This was in direct response to a recommendation in the Government's Action Plan for Jobs strategy, which was published earlier in the year. By working in partnership with a range of organisations we can help encourage broader adoption of cloud. We have seen some initial data from a cloud index survey that we commissioned from Amarach Consulting. This will be ready for publication later this week. We will be delighted to send the full set of findings to members.

The early data show that awareness has improved significantly year on year. It also shows that deployment of cloud services is up year on year, particularly among small businesses. It shows the movement towards its adoption in the public sector is slow. If we want to be a leading cloud environment and have a centre of excellence for cloud in Ireland, we need to move faster. As industry leaders in the area, there are a number of pointers, of which we need to take note. When asked to determine the primary barrier to cloud deployment, security and privacy were raised as issues of primary concerns. We have a responsibility to address these continuing concerns and to look for ways to reassure organisations that the cloud is a safe environment for their personal and commercial data. We plan to work with our industry colleagues to develop solutions in this area.

Let me use today's meeting as an opportunity to assure members that the cloud is a trusted environment. It can play a major part in helping to drive efficiencies in the public sector and in facilitating job creation in the wider economy. There are a number of successful examples in which cloud has been deployed effectively on a variety of interesting projects in countries across Europe. Cloud has opened up new possibilities for governments and for the people they serve. With the advent of cloud computing and IT as a shared service, new levels of flexibility, manageability and agility are possible, enabling organisations to deliver services more effectively.

Furthermore, by maximising the use of existing technology infrastructure, governments are able to reduce costs, drive productivity and deliver services across multiple departments and to a broad set of citizens and stakeholders.

We want to share some of the examples with the joint committee, as we believe many of them are relevant in the Irish context. The first one is from Mexico City where citizens now spend just one quarter of the time to have a property deed prepared and registered compared with the past. If we relate this to the Irish environment, we think we could apply the same technology and mechanisms to drive efficiency in areas such as passport and television licence applications.

Government agencies can implement robust solutions that connect valuable data across disparate systems enabling greater insights and new levels of accountability. These solutions help agencies to monitor performance and enable greater levels of transparency on where tax dollars are being spent. For example, the German Government drove a productivity increase of 66% using cloud technology by streamlining access to 400 lines of business applications into a single user interface. Here in Ireland, we know there is a vast disparity of systems across the public sector. This is a real area of opportunity to drive efficiency. The Irish Government can play a role in the growth of cloud computing in Ireland by adopting cloud services within the public sector, taking a lead in the areas of regulation, classifying data and creating open data sets.

In order to drive momentum on cloud and realise necessary cost savings, governments in many countries are putting programmes in place to accelerate cloud adoption in their public service. A number of different approaches are being followed. In the UK, we are seeing a procurement-led approach. The UK government is driving a process to classify public databases on confidentiality levels and certifying a range of cloud services for different levels of data confidentiality, providing a portal that makes it easy for public sector entities to procure these services for prices that have been negotiated centrally.

There are currently 500 supplies offering approximately 3,000 cloud services in the UK. To date, £80 million worth of transactions have been recorded. Several other countries have followed the procurement-led approach in putting framework agreements in place for a range of IT services, including cloud services. This approach is common in the Nordic countries. In Finland, the government has a shared service provider framework contract to one local partner who, within two years, has moved 200 municipalities onto cloud services.

There are other mechanisms as well, like policy-led approaches. In order to accelerate adoption of cloud services in the Federal Government in the US, the CIO introduced a cloud-first policy in 2010. They mandated all federal agencies to identify three services they would move to the cloud. One of these services had to be moved within 12 months and another within 18 months. They then mandated a 40% reduction in their data centre over the following five years. There are multiple methods the government can use to enable cloud computing.

For Ireland to be a leader in the cloud computing area, it is important that we can demonstrate that the Government, its Departments and agencies have seized the opportunity to lead innovation through cloud technology. In June 2012, the Department of Public Expenditure and Reform published details of its cloud computing strategy. We welcome that strategy and look forward to its implementation. We believe that the approach outlined within the strategy provides a strong foundation upon which a series of cloud-enabled efficiencies can be introduced in the Irish public sector. We welcome the opportunity to partner with the Government on this task.

Before concluding, I wish to touch briefly on the issue of skills. We are all only too aware of the unemployment challenge the country faces. As has already been stated, we believe that the cloud can be a catalyst for economic growth and job creation. In the short term, we at Microsoft are finding opportunities for our unemployed youth through our youth-to-work initiative. We are working with FIT - that is, Fast-track to IT - to help support the development and training of 10,000 young people over the next three years. Many of these young people will participate in training for the cloud. They will have the skills to enable them to help with the objective of making Ireland a cloud centre of excellence. As we know, there are vacancies in the IT sector and it is imperative that we do what we can to ensure that our unemployed young people are equipped with the skills to fill these vacancies.

I wanted to use the opportunity of our visit today to thank the joint committee for its continued commitment to addressing unemployment issues and for its focus on job creation. My colleagues and I would welcome the opportunity to respond to any questions that members of the committee may have at this time.

John Lyons (Dublin North West, Labour)
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Just before I go over to questions, I am quite familiar with cloud computing. As time goes on, I cannot imagine how we will do without it - whether it is a drop-box on an iPhone or anything else. I am particularly aware of Microsoft's youth-to-work initiative globally. I am delighted that Microsoft has linked with FIT, whose representatives have been before this committee in the past. Microsoft and FIT together are a great team. I commend Ms Hallahan on that work. As a multinational, Microsoft has taken a lead role in examining the issue of unemployment, particularly concerning young people. That is a credit to her company.

I now call Deputy Áine Collins who wanted to ask some questions.

Áine Collins (Cork North West, Fine Gael)
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I welcome the delegation. We are all very much in favour of cloud. As Ms Hallahan knows, Cork Institute of Technology, CIT, is the only college in the country that has a degree course in cloud technology. As a result, it is retraining quite a lot of people who are going into VMware and EMC, with which I am sure Ms Hallahan is familiar.

When I came into this job two years ago, I was completely frustrated with the cumbersome security and data elements. A few of us wanted to put cloud into the Oireachtas committees, which I thought would be a really good example of how we could let the world know that we had moved on. I believe we will have it within 16 to 18 months. None of us will have laptops or desktop computers then; we will all have iPads.

However, the attitude to change is slow and people seem to be quite afraid of it. It is moving in the right direction but it will take us some time. Ms Hallahan is far more expert in this area than I am, but there are so many areas that would benefit from all of this, including the HSE. It would sort out a lot of efficiencies that we badly need, but which do not seem to be happening. The biggest problem we have is people and their attitudes, including the fear of change and the idea that this will end up losing jobs instead of creating them with better efficiency. I am sure Ms Hallahan has thought about this matter and has researched it, so I wonder if we could publish something on that and discuss it a bit more. People still do not understand much about cloud and they tend to fear it.

Seán Kyne (Galway West, Fine Gael)
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Ms Hallahan mentioned a few things, including security and privacy which are primary concerns. I remember that we received something from the Oireachtas IT unit stating that, as cloud computing services are located outside the State, security cannot be guaranteed. Therefore, it is obviously an issue in here as well.

Ms Hallahan said she was doing her best to reassure organisations, so how is that progressing? What sort of reassurances can she give? Presumably, broadband is an absolute requirement but it is more easily found in urban areas than in rural ones which have intermittent, low-speed broadband. Ms Hallahan also said that Microsoft's deployment of cloud services, particularly among small businesses, is progressing, although movement towards its adoption in the public sector is slow. What type of small businesses are progressing in this way? As regards the public sector, a lot of data is stored by local authorities so what moves are there within those organisations to examine that issue? What cost savings are involved in moving towards the cloud system?

John Lyons (Dublin North West, Labour)
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I would like to ask a few questions also. Ms Hallahan mentioned passports in the context of cloud computing. I am familiar and comfortable enough with cloud computing. The passport is a sacred document we all have, so can Ms Hallahan explain how we could involve cloud in applying for passports? In general, if we were moving more to cloud computing within the public service, what would the knock-on effect be for job displacement?

Rather than displacement, would workers be able to perform other tasks instead? Will Ms Hallahan provide examples of how cloud computing could be used effectively, particularly in the public service, over which we have ownership?

Ms Cathriona Hallahan:

I will start and ask my colleagues to continue. Regarding change management and cultural changes, Deputy Collins hit the nail on the head. I have been with Microsoft for 28 years. In Ireland, it has transformed from a manufacturing facility into an operations, development and data centre. An element of transformation is change management, given people's fear factor. This is particularly the case in manufacturing facilities, where people are concerned about whether they have the ability to upskill and move into value added services. One must put in place a change management strategy, help in educating people on their opportunities and the skills they will need, and have a communications strategy. The public sector is undergoing significant changes. In general, an overarching change management or transformation strategy must be built, including a communications pillar. Such a strategy is the only way to alleviate some of the fear factor. Small steps should be taken. For example, identify areas in which success is demonstrable.

Deputy Kyne asked about the types of small business that could use cloud computing. E-mail is a good example. Many small businesses do not buy their own exchange servers. Instead, they use e-mail in the cloud. They log onto a service and pay a subscription. This helps them in two ways. First, it moves from making the capital investment of buying servers and licences to paying a subscription cost. Second, it helps small businesses to be more cost efficient and gives them some of the predictability they need to be able to scale and grow, as it is an operating expense as opposed to a capital one.

Deputy Collins asked for public sector examples. The HSE could benefit greatly. Mr. O'Leary has been working closely with it in that regard. He has also been working with the health services in Northern Ireland. We can share a number of good examples.

Mr. Karl O'Leary:

I will address the transformation in the public sector. On average, €480 million is spent on ICT in the public sector per year. A minimum of €80 million in savings is being sought. This will primarily be delivered by adopting new work practices. Cloud is an enabler in that regard. We have three pillars, one of which is public service delivery engagement. Mobile telephone applications being used to access documents was mentioned, but they could also be used to enable citizens to engage with public services. For example, people could use them to find out where health centres are, what time they are open, to book appointments, etc. All of this can be done through the cloud. A school project running out of St. James's Hospital to map health providers' locations is being delivered on the cloud.

A second pillar is workplace modernisation, that is, changing how people work. In Northern Ireland, the Belfast Health and Social Care Trust modernised by adopting a more unified communications approach. A member mentioned the greater use of mobile devices, but the ability to use video conference calls and examine patient data has saved the trust approximately 30% of its facility costs, those being, heat and power. It did this by consolidating data and making them more available remotely without needing to get into a car and visit someone.

Deputy Kyne mentioned the amount of data that is stored by local authorities but not shared or leveraged when delivering a service. For example, some UK councils work with their areas' health trusts in determining where to make preventative health investments.

I had the chance to listen to an earlier session on the fodder crisis. In terms of predictive analytics, "big data" is always mentioned. I will try to make the concept real for the committee. If we had the capacity for each farmer to notify his or her stock of fodder decreasing at an accelerated rate, those data could be mapped and people could figure out how to put in place local initiatives to solve the crisis. This is cloud. It is not just a matter of working differently. Rather, it is concerned with service delivery and engagement, modernising the workplace and providing better insights and accountability.

We would be more than happy to go into the detail of multiple examples. We are working with the public sector to deliver in this regard. The recent ECOFIN meeting was an example, in that it was delivered through cloud technology. We are working closely with the HSE to understand what services we can deliver. We are working hospital by hospital as well as centrally. This type of work takes time, but people need to be confident in the cloud. They will only be confident after they have seen the public sector embracing it. Hence, the classification of data. People must be confident that they will receive e-mails and documents from the cloud. We look to politicians as leaders, who must demonstrate their confidence in the cloud.

Mr. Niall McDonagh:

I will address a number of points. The fear of change is probably one of the reasons for the slower movement in the public sector. There is a risk for the private sector, but there is also an incentive, particularly for chief information officers, CIOs. There is a risk for the public sector in adopting cloud computing but there is not necessarily an incentive to take that risk. People will not necessarily see improvements in their budgets or increases in their pay packets.

The policy mandated approach in the US is interesting. In a way, it provides a cover or support for CIOs to take action. It is possible to dip one's toes in the cloud waters. One could buy a subscription for one of our services, for example, Windows Azure, for €10,000 or €20,000, and start building pilot applications. A large, overnight and risky transformation is not necessary.

Regarding fear of change and questions of security and privacy, "cloud" does not necessarily mean "public cloud". It need not involve giving one's data to an external provider. For example, an Irish Government service could have all of the characteristics of cloud. Indeed, this is exactly the Government's strategy. While it is primarily intended for central government, it also envisages a private cloud strategy and, therefore, removes many of the risks.

Another key security and privacy point is that of data classification. Of the Departments' data, one needs to know what is and is not sensitive. Therefore, one can tailor a cloud service. Typically, the public cloud service is large scale and, for this reason, allows one to make greater cost savings. However, there are also greater privacy concerns. If one classifies data, the less sensitive data can be moved onto the public cloud and the more sensitive data can be kept in a private cloud. This is in line with what the Government has envisaged.

Anthony Lawlor (Kildare North, Fine Gael)
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I apologise for interrupting, but I saw a fascinating film last night, called "Hackers", about a group of people who were able to access information. Excuse me, but I am a technological git.

John Lyons (Dublin North West, Labour)
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The Deputy is doing fine.

Anthony Lawlor (Kildare North, Fine Gael)
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Putting information on the cloud as opposed to spreading it about makes accessing it much easier for hackers.

Mr. Niall McDonagh:

This is a major debate. On the other side, if a large cloud service provider like Microsoft has many contractual obligations to protect customers' data, its security practices will be at the highest end. Most organisations whose business is not to provide or manage cloud services will not be able to invest in those practices.

Although they may have the advantage of more fragmented data, individually they have less protection. There is a trade-off between the two.

Seán Kyne (Galway West, Fine Gael)
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The US Department of Defense deals with sensitive material. What system would it use?

Mr. Niall McDonagh:

Given the question of scale, companies like Microsoft have built bespoke clouds purely for the United States Government. There are specific dedicated clouds for defence in particular. We are not the only company doing this, some of our competitors are engaged with the FBI and Department of Defense. Providers build dedicated clouds for those agencies.

Anthony Lawlor (Kildare North, Fine Gael)
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I look at how technology is moving on and I am sure NASA has already moved to the next level beyond cloud. Where are things going in future? We are in the cloud at the moment but where is the next movement? I have an iPhone 3 and there is an iPhone 5 out and an iPhone 10 is probably being developed by Apple at the moment. The technology is moving on quickly because this is business. Where are we going? Do we keep reinventing these products until eventually we go back to the pen and paper?

Ms Cathriona Hallahan:

Hopefully not, but it is a good point. One of the key things consumers are looking for is access to their data anywhere, on any device. It is irrelevant what device is being used, those people want to be able to get their data any time, anywhere. That is what the cloud service provides. It does not matter if it is an iPhone, a Windows phone, an iPad or a tablet, or an X-Box at home, people should be able to access the same data on any device. That is where the cloud comes to life because it offers that opportunity regardless of the device. We will see lots of technological evolution but there will always be a need to be able to access data and it is how that is done is what the cloud services will provide.

John Lyons (Dublin North West, Labour)
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To give a very quick example, my two staff are upstairs at present reading e-mails as they come in. We have software the three of us use and if there is something in an e-mail that only I can look after, it is directed to a little app on this phone that will tell me what I need to do based on the workload coming in. Within that app I can send one of the guys up in the office a message to say I have done that. There are so many things that make our life much easier and more productive, leaving more time for creativity to do even more creative things.

Mr. Karl O'Leary:

It is secure access anywhere at any time. As a technology company, we have become the custodians of data. The innovation will be delivered through lots of SMEs. In Ireland we have 40,000 partners who are involved in delivering jobs and creating skills. They must have the confidence in us that our data centres host their solutions securely. As for the Government, it must lead the way in cloud, it must show we have the highest level of cybersecurity policy that is not a barrier to a person adopting the cloud, but makes that person feel secure. People will be able to change to the latest iPhone when they are ready and they will not lose any data; it will be secure and they will be able to interact with those people they were interacting with before they changed device.

In 20 years, everyone will be accessing on multiple mobile devices what they do at work and at home but in that one secure environment. As Deputy Collins mentioned, she wants to come into this physical environment to see what she has to do there but when she goes home she can use the same device to do something else. People just want to know that is secure. Constituents want to know that when Members are looking at something for them, the device it is being done on is secure. That is the cloud challenge: to address the security concern because that is the barrier to us all adopting the cloud at a greater rate.

Ms Cathriona Hallahan:

There was a question about applying for passports on-line. We are not getting rid of physical passports, which are key to access, but we want to make it more efficient and easier for the consumer to apply and be issued with a passport and to be able to interact in real time if they have any queries, so the usual to-ing and fro-ing in the post can be avoided.

In response to the question of whether moving to the cloud will lead to job displacement, our view is that it drives efficiency and gives an opportunity to redeploy resources into the areas where investment is needed. That is our focus - driving efficiency and productivity to give the chance to reinvest in future activities.

Mr. Niall McDonagh:

Generally in IT departments, public or private, about 80% of time is spent maintaining current infrastructure and 20% developing services. The whole opportunity for Government and businesses is to turn that on its head, so they spend 20% of their time maintaining their infrastructure because they will have a lot less to maintain, and 80% of the time developing services for their businesses and, ultimately, for their customers. That is the idea, not to take people out but to turn to their work towards more added value activities.

Áine Collins (Cork North West, Fine Gael)
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Which is much needed in the public service.

John Lyons (Dublin North West, Labour)
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I thank the witnesses for attending today. I apologise for incorrectly reading Ms Hallahan's name earlier. I hope everyone has a happy cloud week and hopefully some day we will come in here in a very different position technologically. The witnesses are right that the Government has a role to play in transforming how we operate services. If we do not do that, who will?

Ms Cathriona Hallahan:

We thank the committee for its time and anyone who would like to come out to see some of those services is most welcome.