Cloud cost savings obscured by budget process, CIOs say

Agency chief information officers are going to have work closely with their chief financial officers to change the way funds for information technology are allocated in government to achieve real cost savings associated with cloud computing, CIOs representing federal and state agencies told attendees at a Web 2.0 conference.

Cloud computing, an on-demand model for network access that allows users to tap into a shared pool of configurable computing resources, clearly is a great opportunity for government to become more nimble as well as for government to reach out to constituents, the government CIOs said.

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Mike Krieger, Army deputy chief Information officer, and Carolyn Lawson, director of eServices for the Office of the CIO for the state of California, shared their views on May 26 during a panel titled “Finding Value in the Cloud” at the Gov 2.0 Expo co-sponsored by O’Reilly Media and UBMTechWeb in Washington, D.C.

Darrell West, vice president and director of governance studies with the Brookings Institution, joined Krieger and Lawson on the panel. West authored a report, released in April, which found that federal agencies could save as much as 25 to 50 percent of IT costs moving to the cloud.

The cloud offers great opportunities, Krieger said, citing The Army Recruit Command’s use of Salesforce.com’s customer relationship management on-demand software to track and follow up on leads of potential recruits.

The Army is still figuring out how to get the most benefit out of moving to the cloud, Krieger said. Measuring cost savings is a challenge within the Army’s present budget and funding process, he added.

The Army has more than 200 data centers, but it is hard to get an accurate cost accounting of them because different groups pay for the various equipment and services needed to keep them operational.

For instance, a  command might pay for a data center’s facility costs, such as electricity, another group might pay for network bandwidth, a program office might purchase initial hardware and users pay for applications. So there is a struggle to get a clear view of costs.

Another issue within the Army is the massive purchase of new IT hardware and services at the end of the fiscal year. The equipment and services are usually not budgeted. Instead money comes out of operational funds, which makes it more difficult to track cost savings. Additionally, a program manager might make the business case to shut down a certain service or contract at the end of the year, but discover that it is a large part of the IT operations, Krieger said.

"We have to make a huge, cultural change of how we fund things in the Army,” Krieger said

“We have to work hard in the federal government -- and I suspect [the same situation is happening] with states – to work with our CFO counterparts to change the way [government] allocates funding to achieve savings,” Krieger said.

Lawson agreed, noting that the end of the year is when real “goofy stuff” gets bought. However, agencies should also look at the hidden savings by moving to the cloud -- for instance the reduced hardware costs. Lawson said cost avoidance is a powerful concept in the government.

“If you can find ways to avoid costs, that is a win as far as I am concerned,” Lawson said.

West told attendees that much of cost-savings the agency derived from cloud computing are related to server consolidation. For example, the city of Los Angeles was able to reduce the number of servers from 205 to 88 by moving its e-mail system – which ran on Novell’s GroupWise platform -- for 34,000 employees to the Google cloud environment, he noted.

There are nuances in cost savings that agencies should be aware of, West said. Agencies tend to move easier applications to the cloud now, but moving more highly sensitive and complicated applications will require higher levels of security – both physical and virtual -- and the cost infrastructure goes up, West said.

"The opportunity that we have in the cloud to quickly acquire the things that we need changes the way we in government think about IT delivery,” Lawson said.

However, it must be done an application at a time, she said.

“I think we have to be wise in the way we move forward,” she said, noting that California isn’t ready to move everything to the cloud instantly. Agencies should apply the same type of rigorous evaluation to the cloud that they would to any IT initiative.

The atmosphere has changed over the past two years with more cloud providers addressing the needs of government, she said.

“More and more I’ve found that cloud providers are very aware of government data, our regulations and what we have to do with security and really addressing those” issues, Lawson said.

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