Consolidation at the crossroads: 4 paths taken

E-mail systems, prone to proliferation and notoriously expensive to manage, are often near the top of the list of suspects when state and local government IT executives look for places to cut costs. Indeed, consolidating legacy e-mail systems as a cost-reducing, efficiency-boosting measure is even a matter of law in some jurisdictions.

But for IT shops arriving at the crossroads of financial pain and technological aging, the way forward looks a lot different that it did just a couple of years ago. Cloud computing now offers private, public, and hybrid alternatives to the classic in-house consolidation project. Those options could help cash-strapped governments trim equipment, maintenance and administrative costs when compared with in-house installations, a financial lure that hasn’t been lost on vendors who have bid exclusively cloud-based solutions in some recent e-mail procurements.

“I don't think it’s fair to say that on-premises solutions for e-mail are dead, but the cloud-based solutions tend to be cheaper, and they cut out the need to manage a system,” said Shawn McCarthy, research director at IDC Government Insights. “Cloud lets someone else worry about updates, patches. From a pure management and cost standpoint, cloud often wins.”

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That said, McCarthy and other industry analysts said perennial government sensitivities — such as retaining management control and security — will keep in-house deployments on the table for the foreseeable future.

The middle way, tapping both cloud services and on-premise servers, is an increasingly appealing option for government agencies. “We see the future as being very much a hybrid one,” said Michael Osterman, president of Osterman Research Inc., which provides market research in messaging and collaboration.

The states of Florida, Nebraska and Washington and the city of Pittsburgh have all embarked on some variation of cloud-based e-mail. Meanwhile, Washington State is in the midst of an in-house e-mail consolidation that may yet move to the cloud. So all four jurisdictions have at least made an initial decision on how to approach the consolidation vs. cloud fork in the road. Here are four scenarios on how they made the call.

Florida: Toward a private cloud

The Florida legislature in 2010 passed a law targeting e-mail as a cost-savings opportunity, the initial push that eventually brought the state to the cloud. The law called for the creation of a statewide e-mail service to be provided by the Southwood Shared Resource Center (SSRC), a data center run by Florida’s Agency for Enterprise Information Technology.

The legislature left it open to the agency whether to build and operate its own e-mail system or hire a contractor to do so. The agency pursued the latter option, citing cost as the key consideration.

“The unlikelihood of getting an appropriation — in these very difficult budget reduction times — for the general revenue funding needed to buy the start-up infrastructure and licensing was the primary disincentive to building in-house,” said David Taylor, Florida’s CIO.

In 2011, the state awarded a 7-year contract to ACS, a Xerox Corp. company, to establish the resource. ACS provides the e-mail on a private cloud basis. The other bidders participating in the e-mail system procurement also bid private cloud variants, Taylor said.

In consolidating its e-mail requirements to the cloud, Florida will be able to eliminate 30 distinct systems and save a projected $15 million over the contract’s life. The reduction in e-mail systems trims infrastructure costs but also cuts staffing requirements. The intent of the statute-driven consolidation was to eliminate the need for each agency to maintain its own cadre of e-mail-focused personnel.

In general, personnel costs contribute heavily to the total cost of e-mail system ownership, Osterman said. He noted that an e-mail system’s IT labor component can range anywhere from 40 to 70 percent of the overall price tag. He added, however, that the cloud approach doesn’t completely do away with labor costs.

“You can eliminate a lot of the server hand-holding, but you need someone to manage the cloud relationship and manage users,” Osterman said.

In Florida’s case, the SSRC’s executive director is on point for managing the ACS contract, according to the state’s e-mail migration plan. The center monitors vendor performance and bills agencies for e-mail services.

Executive agencies are required by law to use the statewide resource. Migration is under way. As of early March, four agencies have switched to the new system. The state is now “ramping up to velocity migration,” Taylor said, adding the the plan is to have all 115,000 mailboxes cut over by the end of the calendar year.

Washington: In-house consolidation may lead to cloud

Washington’s in-house e-mail consolidation project launched early last year. Gov. Christine Gregoire’s shared-services directive, which covers e-mail among other functions, provided the impetus. Efficiency stands out as an important driver.

“I expect our new shared-services approach...will capture the benefits of economies of scale in a way that ensures good customer service to the client agencies,” Gregoire wrote.

But while economics plays a role in the consolidation, it’s not the only factor. State technologists have used the project as an occasion to bolster its technology while shrinking the number of e-mail servers. The state’s initiative will consolidate e-mail on Microsoft Exchange, but it also includes Symantec Corp.’s Enterprise Vault archiving product, Cisco Systems Inc.’s IronPort Web security gateway, and smart-phone access capabilities.

In addition, M86 Security provides an encrypted e-mail solution in the cloud. “Most agencies didn’t have encryption or DLP [data loss prevention] as a piece of the solution,” said Heidi Brownell, project manager for the state’s Shared Services Email Project.

At press time, the state had migrated 36,000 mailboxes on the way to a total of 63,000. The state’s Consolidated Technology Services (CTS) agency manages the migration.

Culture presents a bigger hurdle than technology as the consolidation unfolds across more than 50 agencies. “It is really not a terribly complex technical project — there is not a lot of customization,” Brownell said. “The tricky part is 53 different existing entities with...different staffs and different viewpoints on consolidation. The human side...is by far the most complex part of the project.”

The political ramifications of moving 50-plus agencies to the cloud have ruled out full-blown cloud as an option, at least for now. Excipio, a consulting firm hired to study the issue, advised the state against outsourcing. But the consultant pointed to the cloud as a possible future direction, once the state has consolidated its e-mail infrastructure, Brownell said.

Accordingly, CTS cited the cloud as “something to be looked at in the future” when it submitted its e-mail consolidation project charter and investment plan to the state’s Information Systems Board for approval, Brownell said. The board oversees large IT investments.

Nebraska: Cloud push follows consolidation

Nebraska is well along the trajectory that may yet come into play in Washington: a system consolidation project flowing into cloud migration.

The state initially pursued in-house consolidation, standardizing on Microsoft Exchange in a project that started in late 2007. As with the Florida and Washington projects, a legislative initiative helped launch the Nebraska consolidation. Gov. Dave Heineman sought to eliminate duplicative IT functions, a push that was eventually enacted in law.

Nebraska consolidated approximately 11 systems to a statewide Microsoft Exchange system, a task completed in late 2009. The state also signed a six-year Microsoft Enterprise Agreement, a software licensing program that offers volume pricing. Then came the cloud enticement: Microsoft, midway through the enterprise agreement, offered to move Nebraska to cloud e-mail, specifically its hosted Office 365 offering, said Brenda Decker, the state’s CIO.

“The savings we believe we would see over the three-year period led us to say this is a good idea,” she said.

The cloud migration, which will involves some 15,000 to 16,000 mailboxes, is expected to generate $1 million in savings over three years. The state has already avoided the cost of a pending hardware refresh. The savings, however, can’t be entirely attributed to cloud e-mail. Nebraska’s reworked enterprise deal with Microsoft also includes Microsoft’s Forefront anti-virus protection software. That move will let the state eliminate multiple contracts for anti-virus products, Decker said.

At press time, several state agencies were involved in a four-week pilot test of Microsoft’s Office 365, and the CIO’s office was planning to migrate to the system as well. Once the CIO agency is settled, a phased rollout process for moving other state agencies will commence.

But the earlier consolidation project doesn’t necessarily make the current cloud journey easier — at least when it comes to managing user expectations. A certain amount of disruption was expected when the state went from numerous e-mail systems to one, Decker said. But users perceive the on-premise-to-cloud shift as fairly easy and believe there shouldn’t be any issues.

“That makes it a bit more difficult for us,” Decker said.

Decker said she anticipates that all state agencies will move to the cloud. But the state will keep some e-mail gear on-site.

“We will continue to keep an on-premise, small environment for anything that we may need that is outside of what Microsoft may offer,” Decker said.

Pittsburgh: Storage limits lead to cloud move 

Storage limitations and the need to upgrade disaster recovery put Pittsburgh on the procurement track for a new e-mail system. All seven respondents to the city’s request for proposals bid some variation of cloud computing.

“We were faced with users wanting more storage capacity for their e-mails,” said Tajuana Stephenson, Pittsburgh’s acting director of City Information Systems. “The current system only provided 50 Mb. The cost to increase each mailbox would have been greater than moving to the cloud.”

In January, the city announced its transition to Google Apps for Government. About 3,000 Pittsburgh employees now use Google’s e-mail and communication system, having previously used Microsoft Exchange. "Google offered 25G of storage per mailbox, which eliminated our need to purchase additional storage," Stephenson said.

The cloud approach also gives disaster recovery a lift.

“Additionally, with a cloud solution we were able to avoid the costly building of a disaster recovery solution that would require manual intervention,” Stephenson said. “A cloud solution requires no manual intervention during a disaster.”

Overall, the city expects cloud e-mail to reduce its annual e-mail support costs by 25 percent. Stephenson said the lower costs stem from savings in resources, personnel, storage and hardware.

Analyst Osterman said he believes agencies facing a “threshold event” such as a pending infrastructure upgrade are more likely to move to the cloud than to stay in-house at this point. “There is a pretty big push for the government to move to the cloud,” he said, noting that vendors’ promises of cloud cost savings have mostly come to pass.