Will Uncontrolled Entitlement Spending Drive Federal Cloud Investments?
Published: January 03, 2013
The fiscal cliff debacle revealed that neither party in Washington is willing to confront the problem of out of control entitlement spending. As this mandatory spending draws in a greater percentage of federal dollars in the coming years, fewer dollars will be available for IT investment. If this scenario plays out agencies will be forced by necessity to turn to enterprise cloud computing. Will your business be ready?
After watching the drama surrounding the so-called “fiscal cliff,” and seeing the sequestration can kicked down the road for a few more weeks, I cannot help but wonder how federal agencies are going find funding in the coming years to take advantage of new and emerging technologies. In theory, information technology is a “spend to save” necessity, but that theory is now being challenged by reality. The reality is that entitlement programs are growing at an exponential rate, taking with them a greater percentage of government dollars every day. If the “debate” (I’m being generous here) over the fiscal cliff revealed anything, it is that there is not a single member of either party willing to address the entitlement black hole. Against this backdrop, agencies are already spending as much as 70% of their limited IT budgets on maintaining legacy systems and pressure is mounting to enact yet deeper budget cuts to feed the entitlement monster. Given the circumstances, it looks to me as if the potential has never been higher for federal agencies to become technological backwaters.
Now, I know what some of you are thinking. Federal agencies are already technological backwaters, so what’s the difference? The difference is that although federal agencies are inefficient and do not adapt quickly to technological change, they at least have some funding today to crawl their way toward modernization. This may not be the case tomorrow given ever-growing mandatory spending demands. The choice Congress and the President will need to make in the near future is between sending grandma’s social security check and funding a new IT investment at the Department of (insert name here). Which expense do you think voters will support?
Because my money is on grandma, I am firmly convinced that agencies will be forced by fiscal necessity and increasingly antiquated systems to outsource most if not all of their IT needs. If this situation comes to pass, it means that industry needs to continue positioning itself for increased agency investment in cloud computing far beyond what we have currently seen. More and more agencies are going to be compelled to move in the direction of enterprise-wide cloud computing. I would also expect to see the rapid evolution of shared services as agencies are forced to pool resources in ways that they previously had not been willing to accept.
Today the biggest obstacles to these changes are cultural, not technological. Most agency IT leaders still do not trust vendors enough with their data to outsource it and agency CIOs continue to defend their IT environments like mother lions defending their cubs. They will continue to act this way until they are either compelled by OMB to stop or until generational change alters the psychological landscape. Do not underestimate the power or speed of generational change. The average shelf-life of an agency CIO is, what, 24-36 months? As younger generations of CIOs more accustomed to cloud computing come on board they will be more likely to accept that moving to a commercial cloud provider is the only viable way to go. Take the example of Vivek Kundra. Before he was named Federal CIO, no one could conceive of federal agencies using cloud computing. Now the term cloud computing is so widely used that people have grown tired of hearing it.
What industry needs to do is not be lulled to sleep. Federal agencies are simply on the uphill portion of the adoption curve. They are taking their time trying to determine the proper way forward and they are wasting a tremendous amount of time and money doing it too. Many are “transforming” their IT infrastructures into clouds so they can check the mandate box and say they have completed the task. This is not solving the challenge. If anything it is exacerbating it, because an internal cloud is still infrastructure that needs to be maintained and upgraded. This too is a form of kicking the can down the road. With each kick, however, the can grows heavier. Before long that can will become a dumpster that cannot be kicked anywhere. This moment will be the long awaited pay day for vendors that have been patient and have been able to weather the long, drawn-out process of agencies coming to terms with doing what they must, not what they want.