The broader question of value to be derived from the cloud, of course, includes cost efficiency but does not stop there. In addition, the cloud service offering should be carefully considered and specifically selected to provide the most value to end users. One of the challenges is that the services of most value to an organization will vary depending upon the mission and capabilities of that organization. The best-practice is to identify those widely utilized and common services that would be good candidates for migration to a cloud model and would therefore draw high usage throughout the organization. This widespread potential for adoption will accelerate the efficiencies as usage increases. The final "piece" of the broader value proposition from the cloud can be associated with service levels - perhaps the most important of these is speed. One of the key features behind the end user interest in the cloud is customer self service. This capability, in itself, is not the appealing factor. Rather it is the underlying use of standards and technology to automate the processes for service provisioning that is appealing. The considerable potential to radically reduce cycle times for the provisioning of services is a major component of the overall cloud value proposition.

Since cost efficiency is the easiest to measure and budgets are tight and getting tighter, there is considerable attention given to this key driver. Don't lose sight of the fact that there is also considerable value to be derived from the selection of cloud services as well as the speed in which cloud services are delivered. This latter component – speed – is the one that will "wow" your end users the most and perhaps have the biggest impact on changing the perception of the IT organization on the journey to becoming a service provider.

You can read more at http://www.vmware.com/cloud.

Posted: October 14, 2010

Cloud computing will drive the adoption of open source software, reducing costs for operating systems, software development stacks, and applications like Appistry and CA 3Tera AppLogic. IT leaders should also carefully track capital expenditures for systems integration costs related to installation, configuration, and training.

The best way to track operating expenses is to use project portfolio management software (PPM) and track all expenses as services. Projects should be clearly defined so that cost codes can be assigned and broken out by specific tasks in the work break-down structure (WBS). Labor costs must be tracked for both employees and contractors and broken out for each FTE (full time equivalent). Operating expense categories should be tracked by service and should include-time-to-deliver, support costs, infrastructure, and electricity. While some operating expenses like electricity can be tracked against specific servers, many expenses like HVAC and floor space will have to be calculated.

When building a business case for cloud computing, it is especially important to quantify success from the customer's perspective. A short survey taking no more than two minutes can accomplish this. For example, a customer might be asked to rate a statement such as "I find it much easier to order IT services through the new self-service cloud computing portal" using a five-point Likert scale consisting of strongly agree, agree, neutral, disagree, and strongly disagree. Response rates of 50% or more can be interpreted with confidence. Follow-up reminders and incentives, such as a random drawing for a gift certificate, are good ways to increase response rates. Sample categories to include in any survey on cloud computing should include: reduction in time-to-deliver services; ease of use of ordering; improved confidence in IT; and reliability of delivered services.

There are many drivers for implementing cloud computing, and while initiatives or mandates do not require a ROI, a business case does. By clearly defining costs categories for both capital and operating expenses, and by using well-defined customer surveys, federal IT leaders can estimate the success of cloud computing projects from both an ROI perspective and from a customer's vantage point.

For more information, please see www.ca.com/cloud.

Posted: October 25, 2010

Other IT costs are less readily measured, but perhaps even more vital to contain. Workers in many organizations report continual distraction and loss of time due to every individual user of a thick-client PC needing to serve, in varying degrees, as his or own system administrator. Tasks of accepting and activating software updates, managing mailbox quotas, and protecting thick-client systems from increasingly aggressive security threats demand effort from individual users but do not serve organizational missions.

Further: the acquisition and deployment costs of conventional IT will almost always precede, often by months or years, the realization of value from those investments. Hardware purchase, facility construction, software licensing, and labor-intensive custom application development divert present resources to deliver future value – that is, in the best-case scenario that a project achieves its goals on specification, on schedule, and on budget. Many projects are placed at grave risk by the growing complexity of the technology and the dynamic nature of the problems being solved: a recent federal analysis found 72% of major projects to be considered at serious risk.

Cloud systems align the cost incurred with the value received, sometimes on the scale of yearly or monthly subscriptions; sometimes at the scale of hours (or fractions of hours) of service received, or bytes of data transferred or stored. Services that are evaluated on a discount or free trial basis are the services that will be used in production, not approximations of a future on-premise configuration. Cloud-delivered applications, including custom applications as well as configured versions of packaged applications, are frequently developed and deployed in days or weeks.

But even this is an argument based on costs, when often the far more powerful justification is in the value to be gained by pursuing projects that today are deferred due to excessive cost or delay of any realistic availability date. The Bureau of the Census, for example, did not use a cloud database to save money, but to meet a deadline that's in the Constitution and was not looking likely to be met by on-premise technology.

Justification of cloud projects should therefore begin with expected improvements in cost, reductions of risk, and accelerations of service availability, but should not stop there: they should also make reasonable projections, based on growing collections of relevant examples, of the value of improved mission performance.

For further information, please contact Peter Coffee at pcoffee@salesforce.com or see his blog at http://cloudblog.salesforce.com/

Posted: October 29, 2010

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, the 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.

For more information, please see Teresa Carlson's FutureFed blog at: http://blogs.msdn.com/USPUBLICSector/

Posted: November 1, 2010

By taking advantage of the scale at which cloud providers operate, organizations using cloud-based applications drive down their own costs substantially. In fact, a recent Brookings Institution study found that agencies moving to the cloud can cut costs as much as 50%. The three main areas in which the cloud offers cost savings are labor, hardware and software. The primary driver of cost savings is the reduced amount of employee time spent patching and maintaining servers and software applications. This labor can instead be applied to the government's more mission-critical systems. By using systems operated by cloud providers, agencies can decrease hardware costs and the associated costs of real estate, electricity, and more required to operate servers in an organization's own data centers. Additionally, instead of the traditional model of an upfront software licensing cost plus a recurring annual maintenance fee, cloud computing applications are paid for via an annual subscription fee. In addition to providing cost savings, this model offers both predictability and flexibility, as organizations evolve or change in size.

Harder to measure are the soft cost savings associated with cloud computing. Ubiquitous access, increased productivity and better security are all worth something to cloud users, but are not always easy to value. With cloud computing, employees can access their information anywhere they have access to an Internet connection, whether at work, home, in the field, or on travel. The cloud also makes people more productive by making it easier to collaborate with fellow employees and locate an organization's historical information, lessons learned, and improve organizational knowledge management. And if users ever lose a laptop or mobile device, with their data stored in the cloud they can be back up and running in no time; not to mention the benefit of limiting the organization's risk of such a lost device. On the security front, in many cases cloud providers offer security capabilities -- such as redundant data centers for failover -- that would be prohibitively expensive for organizations to build on their own. All of this must be considered when building a business case for moving to the cloud.

Government agencies are already benefiting from moving to the cloud. Take for example Lawrence Berkeley National Laboratory. By moving to Google's cloud-based email and collaboration tools, Berkeley Lab expects to save in hardware, software and labor costs, while increasing email storage and improving collaboration tools. (See Government Computer News article for details.) With these results, agencies should take a serious look and independently assess the business case including mission, operational, and financial, plus workforce trends for user expectations in the workplace, for moving some of their applications to the cloud.

For more business case ROI information, see http://googleenterprise.blogspot.com/2010/11/how-much-is-faster-collaboration-worth.html.

Posted: November 7, 2010

Government is both providing cloud environments and using them. In order to establish a business case for being a cloud provider, whether private or community, cloud-specific benefits and costs need to be estimated and analyzed. The owning organization invests their resources into their own hardware and software and operates and controls their own infrastructure. Through more efficient use of physical servers, reductions in cost categories such as capital investment and ongoing operating expense can be realized. The value of new capabilities for users and costs for delivering the capabilities should be included along with the costs for meeting rigorous requirements for COOP, location independent access for users, security, "up time" and help desk support. Nathanial Rushfinn notes, "By clearly defining cost categories for both capital and operating expenses, and by using well-defined customer surveys, federal IT leaders can estimate the success of cloud computing projects from both an ROI perspective and from a customer's vantage point."

When using a public or community cloud service, the acquiring government organization no longer needs to invest significant capital for building their own data center capability, which can include cost drivers such as buildings, storage hardware, servers, and HVAC systems. Associated cost drivers such as electricity, maintenance contracts, software license costs and support personnel for data center infrastructure are reduced. In addition to the cost reductions, there can be value from increased agility. Douglas Bourgeois states: "Don't lose sight of the fact that there is also considerable value to be derived from the selection of cloud services as well as the speed in which cloud services are delivered." These cost reductions driven by using public and community clouds need to be compared against the cost areas that will increase. In addition to monthly usage costs, there are on-going costs to manage the relationship with the provider. These cost categories can include porting, integration, data migration, testing, security analysis and certification and accreditation (C&A) costs that impact the business case.

In addition to the above factors, there are many considerations relevant to organization-specific business cases that can drive costs, such as schedule demands, network dependency, security requirements, and risk analysis. The value can be more than cost savings, notes Peter Coffee. "Justification of cloud projects should therefore begin with expected improvements in cost, reductions of risk, and accelerations of service availability, but should not stop there: they should also make reasonable projections, based on growing collections of relevant examples, of the value of improved mission performance."

Posted: November 12, 2010