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Cloud $ Confusion

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Andy Blumenthal

It seems like never before has a technology platform brought so much confusion as the Cloud.

No, I am not talking about the definition of cloud (which dogged many for quite some time), but the cost-savings or the elusiveness of them related to cloud computing.

On one hand, we have the Federal Cloud Computing Strategy, which estimated that 25% of the Federal IT Budget of $80 billion could move to the cloud and NextGov (Sept 2012) reported that the Federal CIO told a senate panel in May 2011 that with Cloud, the government would save a minimum of $5 billion annually.

Next we have bombastic estimates of cost savings from the likes of the MeriTalk Cloud Computing Exchange that estimates about $5.5 billion in savings so far annually (7% of the Federal IT budget) and that this could grow to $12 billion (or 15% of the IT budget) within 3 years, as quoted in an article in Forbes (April 2012) or as much as $16.6 billion annually as quoted in the NextGov article–more than triple the estimated savings that even OMB put out.

On the other hand, we have a raft of recent articles questioning the ability to get to these savings, federal managers and the private sector’s belief in them, and even the ability to accurately calculate and report on them.

Federal Computer Week (1 Feb 2012)–“Federal managers doubt cloud computing’s cost-savings claims” and that “most respondents were also not sold on the promises of cloud computing as a long-term money saver.”

Federal Times (8 October 2012)–“Is the cloud overhyped? predicted savings hard to verify” and a table included show projected cloud-saving goals of only about $16 million per year across 9 Federal agencies.

CIO Magazine (15 March 2012)–“Despite Predictions to the Contrary, Exchange Holds Off Gmail in D.C.” cites how with a pilot of 300 users, they found Gmail didn’t even pass the “as good or better” test.

ComputerWorld (7 September 2012)–“GM to hire 10,000 IT pros as it ‘insources’ work” so majority of work is done by GM employees and enables the business.

Aside from the cost-savings and mission satisfaction with cloud services, there is still the issue of security, where according to the article in Forbes from this year, still “A majority of IT managers, 85%, say they are worried about the security implications of moving to their operations to the cloud,” with most applications being moved being things like collaboration and conferencing tools, email, and administrative applications–this is not primarily the high value mission-driven systems of the organization.

Evidently, there continues to be a huge disconnect being the hype and the reality of cloud computing.

One thing is for sure–it’s time to stop making up cost-saving numbers to score points inside one’s agency or outside.

One way to promote more accurate reporting is to require documentation substantiating the cost-savings by showing the before and after costs, and oh yeah including the migration costs too and all the planning that goes into it.

Another more drastic way is to take the claimed savings back to the Treasury and the taxpayer.

Only with accurate reporting and transparency can we make good business decisions about what the real cost-benefits are of moving to the cloud and therefore, what actually should be moved there.

While there is an intuitiveness that we will reduce costs and achieve efficiencies by using shared services, leveraging service providers with core IT expertise, and by paying for only what we use, we still need to know the accurate numbers and risks to gauge the true net benefits of cloud.

It’s either know what you are actually getting or just go with what sounds good and try to pull out a cookie–how would you proceed?

(From Andy Blumenthal’s Blog The Total CIO)

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Mark Forman

Shouldn’t we discuss how we take advantage of the IT and mission opportunities provided by the cloud and how to manage change in order to recieve the benefits? It seems to me that cost savings goals are good, but resistance to change is very evident in the data. If there are no cost savings, is the problem that agencies are probably looking at the cloud policy as a compliance activity? At the heart of the cloud opportunity is an organization’s ability to replace customized apps and connectors with commoditized services. Isn’t the amount of savings a function of willingness replace customized apps, and the issue that it is not in the interest of the legacy IT community to replace the people infrastructure surrounding those apps with an IT “as-a-service” approach absent a major external forcing function (like big budget cuts)?

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Andy Blumenthal

Mark — Thank you for your comment. It’s an honor to hear from you. I agree with you on efficiency through commoditization and that change resistance is a challenge. At the same time, cloud may be beneficial for some things, but not for everything and that’s why sound cost-benefit analysis is important. Also, the costs-benefits should factor in security risks, which is not trivial particularly when many acknowledge the existence or future possibiity of cyberwar and all that it implies. So while savings are important, particularly with the mounting national debt, perhaps it’s not a one-size fits all solution, and we need good data to make good decisions about the cloud. All best, – Andy

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