Rise Above the Clouds - What Municipalities Need to Know About the Next 5 Years (Part 1)
Cloud Computing, like any emerging technology, can sometimes be represented as something that is both confusing and difficult to internalize for the non-technical consumer. This is compounded by the fact that there is no absence of hyperbole out there in various media channels (conferences, on-line articles, print media) all talking about it in one way, shape or form. I recently presented on this topic at the Government Finance Officers Association meeting in Alberta, and my thought going into that session was that I wanted to simplify the topic and make it easier for the audience to understand what the cloud represents and how they need to evaluate it from a business value perspective. The concepts that I think are important to understand in this regards are outlined below:
What is cloud computing?
In the simplest of terms, Cloud Computing is software, platforms and infrastructure that are sold ‘as a service’ over the internet. Instead of managing the physical on-site IT infrastructure and programs that you do today and paying for things like servers, hardware and on premise software licenses (along with the related maintenance and support elements), you are now able to consume these things “as needed” by paying a monthly or yearly subscription fee and then accessing what you need through a web browser – 24x7.
The “Cloud” is not really a thing in and of itself, but rather a confluence of a number of technology advances that make it simpler, easier and more cost effective to access infrastructure programs and computing power on line. These technology advances are all related to a theory known as “Moore’s Law”, which states that the power of computing doubles roughly every 2 years. This manifests iteself in terms of processing speed, our ability to codify and store data and our ability to process and consume data over broadband – also improving at an exponential rate in terms of capacity and geographic coverage. Add in the recent proliferation of tablets and smart phones (essentially smart mini-computers) and suddenly we have a perfect storm of technology innovation that we have branded as “the cloud” – which essentially really means that we can do things today that were not physically or economically possible a decade ago, in terms of how we provision and consume technology. Major technology companies recognize that these advances create a reality in which they can quickly and cheaply provision products and services to end users and have spent billions of dollars on creating massive data centers to build out the core of what we now call “the public cloud”.
What is the business associated with the cloud for local government?
Cloud computing is attractive because it offers significant economies of scale, cost savings and efficiencies in terms of what municipalities need to manage (and pay for) for things like business software, IT infrastructure and business productivity programs (Email, Office, Website Management, etc). Traditionally these have been purchased as “on-premise items” which means that not only do you have to pay for them, you also need to have someone install them (hello IT department), train your people and manage on-going upgrades, support and maintenance – all of which add incremental costs over time. In addition, it is common to have to pay for more capacity than you usually need for the few peak periods each year when your utilization might be more than it usually is. This means that you are essentially carrying overhead and paying more than you need to “just in case”. Cloud computing allows you to forgo the large upfront capital expenses related to on-premise licensing and spread out costs on a monthly or yearly basis. More importantly, it allows you to provision products and services in a more granular way so that you only pay for exactly what you need, without carrying excess capacity. It is instantly scalable, so that when you need more, you can get more and when you need less, you can pay for less. The Cloud becomes the ultimate Utility, where consumers can consume products and services quickly with quick time to value and pay for only what they need.
Lastly, because the incremental marginal costs associated with the technologies that support the concept of the cloud are moving towards “zero” each and every day – the products and services that are produced in the cloud should offer considerable cost savings – which will only improve over time. In short, it will be faster, cheaper and easier to consume through the cloud than it will for you to manage IT related products and services on-premise and therein lies the business value for municipalities – the ability to do more with less and allocate scarce funds towards other things that are more important. In the future, there will be many more practical benefits to the cloud, beyond cost savings, which I will delve in to in part 2 of the entry.
Sounds too good to be true - what is the catch?
The catch is twofold. First, we manage all sorts of sensitive data on behalf of our constituents and thus we get a bit edgy thinking about the prospects of trusting that data to the cloud and having it stored “off site” – possibly in another country. There is a general sentiment that if we control it and it resides at City Hall, that we can better protect it and keep it from falling into the wrong hands (in our IT Team we trust). This is compounded by the fact that higher levels of Government have been very quiet on the subject and have provided little in the way of guidelines to help us navigate through this new medium. PIPEDA makes some blanket statements about the best practices that should be followed to safeguard data and some Provinces (B.C. and Nova Scotia) expressly prohibit the storing of municipal data outside of the boundaries of the Province. Beyond that, the message seems to be – figure it out yourself, which makes it challenging to take the first step.
Second, the cloud is still evolving and many of the products and services that we might want to consume through it, might not be available today. This is especially true of more complex applications like ERP, which offers a staggering list of features and is also data sensitive in their own right. There is also the challenge of trying to integrate cloud based products and services to those that still reside on-premise as you begin to move into the cloud (you can’t move everything at once) and thus integration and migration strategies become confusing and difficult to plan for. Finally, as new vendors appear in the marketplace with cloud offerings, they typically lack the credentials that we like to have to justify a purchase decision (things like an established presence in the municipal market, proven client base, profitable business record), which makes it harder to take the leap of faith required to replace an on-premise system with something in the cloud. At the same time, legacy vendors are all talking about how they are going to be ‘cloudifying’ their existing products, making the melting pot of options and choices as confusing as possible. At the end of the day, we see risk which is not yet fully covered by the potential reward that can be realized and so it is easier to stay put and wait out the market.