Tuesday, October 20, 2009

The Economics of Federal Government Cloud Computing Analyzed

[From Slashdot. I would argue that "green" clouds using follow the
wind/follow the sun architectures would have even more dramatic
savings as documented in recent MIT and Rutgers papers--BSA]


"With the federal government about to spend $20B on IT
infrastructure, this highly analytical article by two Booz Allen
Hamilton associates makes it clear that cloud computing has now
received full executive backing and offers clear opportunities for
agencies to significantly reduce their growing expenditures for data
centers and IT hardware. From the article: 'A few agencies are already
moving quickly to explore cloud computing solutions and are even
redirecting existing funds to begin implementations... Agencies should
identify the aspects of their current IT workload that can be
transitioned to the cloud in the near term to yield "early wins" to
help build momentum and support for the migration to cloud


/"Of the investments that will involve up-front costs to be recouped
in outyear savings, cloud-computing is a prime case in point. The
Federal Government will transform its Information Technology
Infrastructure by virtualizing data centers, consolidating data
centers and operations, and ultimately adopting a cloud-computing
business model. Initial pilots conducted in collaboration with Federal
agencies will serve as test beds to demonstrate capabilities,
including appropriate security and privacy protection at or exceeding
current best practices, developing standards, gathering data, and
benchmarking costs and performance. The pilots will evolve into
migrations of major agency capabilities from agency computing
platforms to base agency IT processes and data in the cloud. Expected
savings in the outyears, as more agencies reduce their costs of
hosting systems in their own data centers, should be many times the
original investment in this area." [2]/

The language in the budget makes three key points: (1) up-front
investment will be made in cloud computing, (2) long-term savings are
expected, and (3) the savings are expected to be significantly greater
than the investment costs.

Booz Allen Hamilton has created a detailed cost model that can create
life-cycle cost (LCC) estimates of public, private, and hybrid clouds.
We used this model, and our extensive experience in economic analysis
of IT programs, to arrive at a first-order estimate of each of the
three key points in the President's budget.