Demand for Cloud Services Among Government Agencies

While much of the market attention on cloud services adoption tends to be focused on private enterprise applications, government agencies potentially have a lot to gain from its widespread use.

The cost-savings and scalability advantages of the cloud have been clear to those savvy IT leaders that are informed, but government adoption has been hampered by some unique challenges -- and the absence of a compelling mandate. That is, progress was slow until the "Cloud First" initiative was launched.

IDC has released a status update that details the growing demand for cloud services and enterprise architecture resources among U.S. government agencies. Their latest market study focuses on the results of an IDC Government Insights survey, which measured the progress of cloud solutions at government agencies -- while also examining the related architecture needs.

The results of the comprehensive survey revealed that despite the growing demand for cloud services, many IT managers are unsure of their organization's overall cloud strategy and the resources available to purchase and implement cloud services.

The Strategic Imperative for Cloud Services

The IDC report of the market study findings also highlighted that government employees now realize cloud solutions are becoming important for IT strategy. However, apparently many decision makers are still evaluating what cloud solutions will specifically mean to them and their organization.

In addition, in spite of the fact that managed cloud service offerings have been made available to government agencies for some time now, more than a third of the survey respondents lacked knowledge of cloud services budgeting.

IDC Government Insights finds that extensive government employee outreach is necessary to boost the comprehension or understanding of cloud migration strategies and related budgetary requirements.

Other findings from the latest IDC report include:

• Across all levels of government 90 percent anticipate cloud services will have impact on computing infrastructure.
• Local government participants were the least optimistic about cloud, with 14.7 percent saying cloud wasn't at all important.
• Despite the fact that CFOs are often the people who drive their group's transition to cloud (due to potential cost savings) 60 percent of chief financial officers are only somewhat familiar with their organization's cloud strategy.
• Indicating the presence of some progressive thinking, 15.2 percent of respondents said they would dedicate between 1 and 10 percent of their agency's IT budget to cloud services.
• When it comes to cloud providers, there is a clear preference across all levels of government for large IT vendors versus smaller, specialty providers.

"Survey data indicates that significant progress already has been made for cloud services, but overall progress will only accelerate once several important issues have been addressed," said Shawn McCarthy, research director at IDC Government Insights.

IDC believes that these outstanding issues include lack of knowledge by some participants on the level of funding available to spend on cloud solutions -- as well as the needed IT architecture changes that can help agencies move more aggressively into cloud.

Furthermore, by focusing on greater outreach efforts to bring all IT employees in line with enterprise cloud plans, government agencies can begin to benefit from the readily available cloud computing services.

The IDC survey was conducted in the late spring of 2012 and measured the responses of more than 400 government information technology employees at various levels of the U.S. government. About half of the participants work for the federal government, with the remainder working in either state or local government.

How Government Agencies will Adopt Cloud Services

While most commentary about managed cloud services tend to focus on the advances in commercial enterprise applications, government agencies are also making noteworthy progress. In particular, the advent of regional community cloud hubs is a phenomenon that's worthy of further exploration.

According to their latest market study and related report, IDC Government Insights believes regional cloud hubs will significantly change the way state and local governments procure online computing services.

These regional cloud hubs, defined as one government agency offering computing and storage services to other government agencies, have proven successful in the State of Michigan and State of Utah. In addition, the IDC's research provides a framework for building similar regional cloud solutions.

According to Shawn McCarthy, research analyst, IDC Government Insights, "We believe that cloud hubs will see rapid growth, since the first multi-agency efforts have already shown a positive return on investment and solid service levels for cloud solutions subscribers."

Cloud computing is rapidly changing the way government organizations consume computing resources. This comes at a time when virtualized servers and efforts towards application standardization have merged many government solutions.

IDC says that as solutions merge, less data center space is needed. In fact, by the end of 2012 close to 40 percent of federal data centers will be shuttered. Many state governments are following a similar path, often combing multiple data centers into one or two large statewide operations. Remaining data centers often serve as a shared computing and storage resource for multiple departments.

Why State Government is Leading the Way

While any level of government can, in theory, offer services to any other government office, state-level governments are often most qualified to serve as regional hosts -- offering government-to-government services to other state agencies or to local municipal government entities.

Local governments are already looking for trusted cloud providers -- and for ways to significantly reduce their growing IT costs. Through these cooperative arrangements, the government sites are able to leverage private cloud services including software as a service, infrastructure as a service, online storage, and security as a service, among others.

Being able to purchase services through high volume state contracts can give local governments a substantial pricing edge. In addition, moving to a shared service environment also helps local governments conform to broader data standards and gain access to streamlined reporting tools that can be hosted right on the shared system.

"In general, the larger government operations that already manage complex IT systems will evolve as the most likely regional hosts," said McCarthy. "Smaller government agencies may choose to get out of most IT hosting and management operations, as long as they can find reliable, affordable and privately hosted solutions through the cloud."

Business Model for Regional Cloud Hubs

According to IDC, these managed cloud solutions often require zero to moderate capital expenditures and are developed in-house or are commercially developed private clouds -- dedicated to government use and designed to meet specific government standards.

As a result, this evolution has the potential to trigger the following game-changing consequences:

• For the host facility, it can turn a government agency cost center into a revenue center. By selling cloud solutions to other government organizations, host agencies can offset their own IT costs.
• Local governments can buy cheaper cloud solutions than they might find on their own and they may be able to reduce capital expenditures and overhead costs.
• Cloud services will replace internal client/server systems as the main model for government application delivery. The race is on to build shared regional data centers and the largest portfolios of government solutions.

The IDC Government Insights report features two U.S. states, Michigan and Utah, both well on their way to building cloud hubs that can be used by multiple government agencies at various levels of government. In addition, the report highlights several regional multi-state cloud computing efforts.