According to their latest market study and related report, IDC Government Insights believes regional cloud hubs will significantly change the way state and local governments procure online computing services.
These regional cloud hubs, defined as one government agency offering computing and storage services to other government agencies, have proven successful in the State of Michigan and State of Utah. In addition, the IDC's research provides a framework for building similar regional cloud solutions.
According to Shawn McCarthy, research analyst, IDC Government Insights, "We believe that cloud hubs will see rapid growth, since the first multi-agency efforts have already shown a positive return on investment and solid service levels for cloud solutions subscribers."
Cloud computing is rapidly changing the way government organizations consume computing resources. This comes at a time when virtualized servers and efforts towards application standardization have merged many government solutions.
IDC says that as solutions merge, less data center space is needed. In fact, by the end of 2012 close to 40 percent of federal data centers will be shuttered. Many state governments are following a similar path, often combing multiple data centers into one or two large statewide operations. Remaining data centers often serve as a shared computing and storage resource for multiple departments.
Why State Government is Leading the Way
While any level of government can, in theory, offer services to any other government office, state-level governments are often most qualified to serve as regional hosts -- offering government-to-government services to other state agencies or to local municipal government entities.
Local governments are already looking for trusted cloud providers -- and for ways to significantly reduce their growing IT costs. Through these cooperative arrangements, the government sites are able to leverage private cloud services including software as a service, infrastructure as a service, online storage, and security as a service, among others.
Being able to purchase services through high volume state contracts can give local governments a substantial pricing edge. In addition, moving to a shared service environment also helps local governments conform to broader data standards and gain access to streamlined reporting tools that can be hosted right on the shared system.
"In general, the larger government operations that already manage complex IT systems will evolve as the most likely regional hosts," said McCarthy. "Smaller government agencies may choose to get out of most IT hosting and management operations, as long as they can find reliable, affordable and privately hosted solutions through the cloud."
Business Model for Regional Cloud Hubs
According to IDC, these managed cloud solutions often require zero to moderate capital expenditures and are developed in-house or are commercially developed private clouds -- dedicated to government use and designed to meet specific government standards.
As a result, this evolution has the potential to trigger the following game-changing consequences:
- For the host facility, it can turn a government agency cost center into a revenue center. By selling cloud solutions to other government organizations, host agencies can offset their own IT costs.
- Local governments can buy cheaper cloud solutions than they might find on their own and they may be able to reduce capital expenditures and overhead costs.
- Cloud services will replace internal client/server systems as the main model for government application delivery. The race is on to build shared regional data centers and the largest portfolios of government solutions.
The IDC Government Insights report features two U.S. states, Michigan and Utah, both well on their way to building cloud hubs that can be used by multiple government agencies at various levels of government. In addition, the report highlights several regional multi-state cloud computing efforts.