For Federal IT, cloud savings not a slam dunk

It's a fact of life that federal agencies are always under pressure to cut costs. But will migrating to cloud computing really result in markedly lower information technology costs?

Everybody is trying to figure out whether [cloud computing] will really help reduce their costs.The question is still up in the air.


Washington IT consultant to governement agencies,

It's a fact of life that federal IT departments are always under pressure to cut costs. But will migrating to cloud computing really result in markedly lower information technology costs?

"Everybody is trying to figure out whether [cloud computing] will really help reduce their costs," said a Washington IT consultant to government agencies. "The question is still up in the air."

In a research report issued last year, Gartner Inc. analysts concluded that cloud computing "does not always save money. In fact, it can drive cost up if it is used simply to replace on-premises work with an exact duplicate of that work in the cloud. Knowing when to redesign or when to use cost savings as a justification for cloud computing is critical."

"Moving IT from a capital expenditure to an operational expenditure has clear [cost] benefits," said Andrea Di Maio, vice president and distinguished analyst at Gartner. "Cloud computing is not going to annihilate the cost of IT but it is going to lead to good savings."

Shawn McCarthy, director of government programs for IDC Government Insights, agreed that cloud computing has the potential to yield substantial cost savings. "But will everybody actually see cost savings? It depends on how much it's going to cost to get there. Most people aren't in the situation where they can simply turn on a cloud service and use it immediately."

Susie Adams, chief technology officer for Microsoft's federal business, concurred. "Before agencies move to the cloud [they may find that] the upfront cost is a little higher than they thought," she said. "But there is a reward over time because [agencies] won't have to update their own servers and they won't have to purchase the equipment to run it on. Each case is different, but agencies absolutely will realize savings in the long term."

McCarthy suggested that transitioning to a services-oriented architecture puts agencies in a better position to migrate to the cloud and see cost savings in the long run. "Being able to plug into shared service centers helps you cut costs, get rid of redundancies and eliminate some employee costs," he said. "Once you're in that position, it just becomes a series of cloud services you're plugging into."

But he cautioned, "You're not going to see [cost reduction] overnight…you will see it if you make your investments wisely. Set your long-term [cloud] migration goal and take iterative steps so you can eventually get there."

At the National Institute of Standards and Technology, Tim Grance, program manager of cyber and network security, advised government officials not to focus exclusively on cost. "First develop the business case [for moving to the cloud], consider your architectural goals and the state of your current infrastructure and where you want it to be, and [plan for] an orderly migration," he said.

He also counseled agencies to assiduously negotiate service level agreements with cloud vendors. "But keep in mind that a public vendor may not be as flexible because they can't separately negotiate all agreements with thousands of customers," he added.

When properly done, migrating to a cloud computing platform offers not just cost savings, but it gives agencies the flexibility to stand up innovative programs and deliver better service to citizens, he said.

A case in point is the General Services Administration's When the informational portal was moved to the cloud last year, officials quickly realized cost savings from reduced management expenses, enabling them to invest in some new technologies, according to Martha Dorris, deputy associate administrator of GSA's Office of Citizen Services and Communications.

About the author:
Richard Walker is a freelance writer based in the Washington, D.C., area who has been covering issues and trends in government technology for more than 10 years.

This was last published in March 2010

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