State of the Union: Public Sector and the Cloud


Analyst, Software Advice

Within the private sector, Cloud-based, software-as-a-service (SaaS) applications are now being adopted aggressively, even by some formerly nay-saying late majority buyers. The public sector, however, has been slow to follow. And it hasn’t helped the Cloud’s case when high-profile municipalities fail in a Cloud deployment. One recent example: the highly publicized plan to roll-out Google Apps throughout Los Angeles, which was scrapped by the LAPD in December.

Is the relationship between the Cloud and public-sector organizations truly oil-and-water? In this post, I explore the issues stifling Cloud adoption in the public sector and highlight strategies for promoting it in one area in particular–procurement–that has a high probability of success.

All About the Benjamins

The Cloud offers a number of benefits over traditional enterprise software alternatives: a smaller upfront investment, subscription pricing, increased accessibility for users and a flexible architecture that easily scales to accommodate fluctuations in organizational size, among other benefits.

Which factor has the greatest potential to impact the public sector? Cost. That is, according to Alan Webber, Partner and Principal Analyst at Altimeter Group.

“It’s just a hard thing to take [cost] off the table,” says Webber. “Considering the current economic situations that public-sector groups are in, it’s the number one decision criterion these days.”

That’s not surprising, given the federal budget deficit of $1.3 trillion and the debt approaching $56.5 trillion. Cuts in key government programs are unavoidable, and IT spending will surely take a sizable hit. If cost is the defining factor in government technology decisions, the low implementation costs and flexible subscription model of Cloud solutions are ideal. So what’s holding back the public sector from moving to the Cloud?

Security, Ownership and Control are Cloud Deterrents

There are many concerns within the public sector about migrating to the Cloud, particularly in the interrelated areas of security, data ownership and control. There is a widespread perception, if not reality, that data stored in the Cloud is more vulnerable to theft. This could be especially problematic with classified or otherwise sensitive information, which is common in the public sector.

There is also a perception that applications and data stored off-premise are not under the control of the users’ organization, coupled with confusion over whether a Cloud application vendor–not the public-sector entity–“owns” the data stored in its systems.

Stratfor, a security think tank and government intelligence partner, was hacked on December 23, fueling arguments that it’s premature for the public sector to embrace the Cloud. However, Webber asserts that data storage concerns will lessen as government groups move forward.

“One of the biggest questions in government IT is, ‘Where is the data going to be stored?’” says Webber. “I think that’s a fascinating question. At the same time, I think it’s an irrelevant question.”

Webber points out that any method of data storage is subject to security breaches without proper deployment and security protocols, regardless of whether the software is on-premise or Cloud-based. And misplaced concerns about data ownership and control will largely resolve themselves.

“As an organization, if the differences are inconsequential, then why not go to the Cloud?,” argues Webber. “I’m not saying it’s a simple cost-benefit analysis…but that’s what it really comes down to.”

Moving Public-Sector Procurement to the Cloud

The specific ways in which the public sector can adopt Cloud-based solutions will vary by the function of that group, its size and the type of applications it requires to operate. One of the more exciting areas is in procurement. With government purchasing and sourcing, the potential cost savings through adoption of Cloud-based e-procurement solutions are substantial.

Private-sector procurement has embraced the Cloud. In a recent conversation with a software company executive, I was told that private sector customers are adopting Cloud-based versus on-premise procurement solutions at a rate of 3:1–an about-face from only a couple of years prior.

I feel that software vendors should utilize two strategies to improve their product and increase their ability to serve the public-sector procurement user. These strategies would help alleviate the perception of Cloud security issues and focus on increasing workflow efficiencies.

  • Private Cloud deployment — So-called “private Clouds” are worth considering for many government groups. By shifting ownership of application infrastructure to the customer, government groups can reap the benefits of the Cloud while maintaining tighter control over the application and its associated data. Webber believes that the private Cloud will be a popular option for many public-sector groups, and adoption may in fact move faster than in the private sector.
  • Public-sector specialization — Vendors that offer Cloud-based solutions which manage and streamline the highly regulated manner in which public-sector procurement is conducted possess a distinct advantage over vendors that merely re-package their private sector offerings for the public sector. Functionality that focuses on the eccentricities of purchasing and sourcing at the federal, state and local level are essential to public-sector procurement groups.

In addition, two trends within the public sector will create an opportunity for the Cloud in public-sector procurement.

  • Increasing prevalence of P3sMary Scott Nabers, a government procurement consultant, sees the increasing prevalence of public-private partnerships (P3s) as having a big impact on the solutions that public organizations will choose. These partnerships, commonly used to bring-on private firms for large projects such as road infrastructure improvements, have long been commonplace throughout Europe. Nabers believes P3s will now become more popular in the United States as groups look for private funding. And like Webber, Nabers affirms it comes down to cost for these groups selecting new technology solutions–opening the door for subscription-based procurement software.
  • Software buying groups — Even groups at the municipal government level can benefit from adoption of Cloud-based solutions by banding with similar organizations and forming software buying groups. For example, instead of multiple school districts purchasing an on-premise solution, they can jointly adopt the Cloud-based alternative. Webber notes that buying groups have become popular and successful within local public-sector groups in Texas.

Cloud Coexistence

Despite the benefits of Cloud-based software, traditional enterprise software won’t completely disappear in either the public or private sector. Webber likened it how consumers have found it common to store music on their personal computers as well as stream their own collections (and others’) online.

“I don’t think on-premise will ever go away,” says Webber. “There will always be a place for both.”

Do you feel that the public sector is ready for the Cloud, or are the aforementioned deterrents too great for government groups to move beyond? What benefits do you see Cloud-based solutions having within the public sector? Please leave a note with your thoughts below.

Thumbnail image created by Karin Dalziel.

  • Dominic Myers

    Interesting post I’ve discussed it here:

    I have to admit to not being a huge fan of private clouds though I can appreciate that they can be seen as being something of a middle ground for those clients with major distrust of the wider cloud.

  • Ken Cole

    Interesting parallels here in the UK too. Even though there is plenty of support from the UK Government (politiicans), a lot of public servants and big IT providers don’t like it, albeit for different reasons. I have posted a short entry on my blog  

  • Ken Cole

    Interesting parallels here in the UK too. Even though there is plenty of support from the UK Government (politiicans), a lot of public servants and big IT providers don’t like it, albeit for different reasons. I have posted a short entry on my blog  

  • Lorin Bristow

    Thanks for the article, Michael.  Cloud adoption will continue in the U.S.   Government buyers don’t like risk and will lag behind commerce, but eventually see the “light”.  I’ve posted on the topic here:

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