Saving Money Through Cloud Computing

Darrell M. West

Executive Summary

The U.S. federal government spends nearly $76 billion each year on information technology, and $20 billion of that is devoted to hardware, software, and file servers (Alford and Morton, 2009). Traditionally, computing services have been delivered through desktops or laptops operated by proprietary software. But new advances in cloud computing have made it possible for public and private sector agencies alike to access software, services, and data storage through remote file servers. With the number of federal data centers having skyrocketed from 493 to 1,200 over the past decade (Federal Communications Commission, 2010), it is time to more seriously consider whether money can be saved through greater reliance on cloud computing.

Cloud computing refers to services, applications, and data storage delivered online through powerful file servers. As pointed out by Jeffrey Rayport and Andrew Heyward (2009), cloud computing has the potential to produce “an explosion in creativity, diversity, and democratization predicated on creating ubiquitous access to high-powered computing resources.” By freeing users from being tied to desktop computers and specific geographic locations, clouds revolutionize the manner in which people, businesses, and governments may undertake basic computational and communication tasks (Benioff, 2009). In addition, clouds enable organizations to scale up or down to the level of needed service so that people can optimize their needed capacity. Fifty-eight percent of private sector information technology executives anticipate that “cloud computing will cause a radical shift in IT and 47 percent say they’re already using it or actively researching it” (Forrest, 2009, p. 5).

To evaluate the possible cost savings a federal agency might expect from migrating to the cloud, in this study I review past studies, undertake case studies of government agencies that have made the move, and discuss the future of cloud computing. I found that the agencies generally saw between 25 and 50 percent savings in moving to the cloud. For the federal government as a whole, this translates into billions in cost savings, depending on the scope of the transition. Many factors go into such assessments, such as the nature of the migration, a reliance on public versus private clouds, the need for privacy and security, the number of file servers before and after migration, the extent of labor savings, and file server storage utilization rates. Based on this analysis, I recommend five steps be undertaken in order to improve efficiency and operations in the public sector:

  1. the government needs to redirect greater resources to cloud computing in order to reap efficiencies represented by that approach,
  2. the General Services Administration should compile data on cloud computing applications, information storage, and cost savings in order to determine possible economies of scale generated by cloud computing,
  3. officials should clarify procurement rules to facilitate purchasing through measured or subscription cloud services and cloud solutions appropriate for low, medium, and high-risk applications,
  4. countries need to harmonize their laws on cloud computing to avoid a “Tower of Babel” and reduce current inconsistencies in regard to privacy, data storage, security processes, and personnel training, and
  5. lawmakers need to examine rules relating to privacy and security to make sure agencies have safeguards appropriate to their mission.