By Teresa Carlson, Vice President, Microsoft Federal
Government agencies are being increasingly challenged shrinking operating budgets, and in this economic climate public sector leaders are looking for technology investments that will save their organization money. CIOs interested in adopting cloud computing are going to have to make a business case for cloud investment, which is the topic that the MITRE Ahead in the Clouds Forum addressed in October. I’ve pasted my full response below, but I encourage everyone to check out the Forum for insight from other respondents!
October’s Question: For Federal IT leaders considering building a business case for a cloud computing investment, please identify the general cost categories/drivers to include in a business case, and if possible, suggestions on approaches for attributing value to new cloud features.
This is a question that every government technology leader must deal with when evaluating cloud computing options. What's the ROI? Is this going to save us money? The short answer is unfortunately – "maybe". In general, cloud computing offers cost benefits through increased efficiencies, pooled IT resources and "pay-as-you-go" models. But when making the business case it's important to distinguish between different types of cloud offerings, because matching the unique needs of an organization to the right type of solution is the best way to maximize ROI.
The first step is identifying the right cloud level to implement at – whether it’s at the infrastructure level, the platform level or the software/application level. For example, GSA recently announced that government agencies would be able to access Infrastructure-as-a-service (IaaS) offerings through Apps.gov. IaaS options are great for agencies that want to get out of the business of buying servers, data center space or network equipment. It’s an entire IT infrastructure in a pay-as-you-go model, but it still requires general administration and maintenance.
For agencies that want to remove IT maintenance completely, SaaS is the way to go. SaaS allows organizations to consume finished applications on-demand, and is typically far less expensive than software that includes a licensed application fee, installation and upgrade costs. Now if an organization has internal developers with the skills to build customized applications, Platform-as-a-Service (PaaS) becomes the best option. Government is seeing an explosion of Gov 2.0 application development for improving citizen services, and PaaS provides developers with the tools they need to test, deploy, host and maintain applications in the same environment.
Organizations have options and each model follows the same basic ROI principle – you only pay for what you use. A pay-as-you-go model combined with very limited upfront costs creates a low risk environment where organizations have the freedom to innovate. If an application or program is successful, cloud offers the scalability and elasticity to incrementally grow as needed. If a program or application doesn’t catch on, the upfront investment was already extremely low. For example, it’s interesting to think about how a program like Cash for Clunkers may have been different in a cloud-based model.
Every organization has to crunch its own numbers to evaluate the cloud solution that makes the most business sense, but the number of cloud options and reduced implementation risk make the current IT environment ripe for innovation. That freedom should be factored into any ROI discussion.