Hidden costs in the cloud

Published: January 24, 2013

Cloud ComputingContract AwardsGovernment PerformanceIT Services

Deltek is pleased to present a guest blog on cloud computing from Microsoft. Over the next year, the General Government Services team will be looking to partner with leading vendors in the fields of cloud computing, enterprise resource planning software, student and teacher information systems, statewide longitudinal educational data systems and other core technologies tracked in the GovWin IQ Opportunities Database. Special thanks to Joel Cherkis and Michele Bedford Thistle for contributing their valuable insight and opinions regarding cloud computing. Click here to view Joel's blog on cloud computing and shared services.  
If you are interested in guest blogging for Deltek in the topics mentioned above, reach out to for more information! Meanwhile, be sure to follow us on LinkedIn! 
As governments continue to steadily march toward integrating the cloud into their daily IT operations, it is important to try and cut through as much of the hype and hoopla as possible to understand the return on investment IT managers are getting. One of the main alleged benefits of the cloud surrounds the cost savings that governments and businesses can find by shedding IT infrastructure and data center costs through software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS).
At the outset of the cloud phenomenon, this benefit was largely couched in hypothetical terms, such as “moving to the cloud could yield cost savings.” Since then, we have seen thousands of public and private sector organizations execute cloud migration strategies, and their experiences have led to the discovery of some significant caveats and holes in this theory. Cloud computing “allows savings only in the sense that you no longer have to provision servers based on your peak demands,” according to Tech Republic writer Thoran Rodrigues, adding that if your computing resource needs are steady, “there isn’t any real gain.” 
Many veterans of cloud migration compare outsourcing their software or infrastructure to the cloud with leasing a car or hiring a taxi to provide transportation. You can save some real scratch in the short term by shifting the cost burden for commodities such as gas, maintenance and repairs onto a third party. However, since you are paying a higher rate per mile than you would if you owned your own car, these returns tend to diminish over time. After a certain point, hiring a taxi to drive you everywhere will become cost-prohibitive. This is not a perfect analogy, but it helps illustrate why simply assuming you will automatically save money through cloud implementation may get you into trouble.
If you frequent technology conferences where public and private CIOs discuss their experiences with the cloud, you will find that this sort of trepidation around cost savings is beginning to permeate the marketplace. A recent survey commissioned by Symantec on the hidden costs of the cloud yield some fascinating results that should give IT managers pause before they pitch their cloud projects as big-time money savers. 
Depending on how an organization executes its strategy, the overall cost reductions could be diminished or wiped out altogether. Among the biggest mistakes organizations make are rogue cloud deployments where a single department or agency within an organization moves some aspect of its infrastructure to the cloud without coordinating with the rest of IT. Further missteps include costly, decentralized and sluggish disaster recovery operations, and poor cloud storage utilization strategies. Specifically, of the 3,236 organizations that responded to the survey, 68 percent said they experienced a data recovery failure in the cloud, while 79 percent claimed that the frequency of rogue cloud deployments within their organization has either remained steady or is becoming more of a problem.
These are fairly shocking numbers and emphasize the need for a coordinated, enterprise-wide strategic approach to cloud implementation if organizations want to yield any cost savings. Centralizing the procurement and migration process through IT, and bringing in consultants to navigate potential pitfalls and relay best practices is essential to executing a smart cloud strategy. 
To learn more about cloud computing procurement in the state and local marketplace, be sure to check out Deltek’s 2012 report, “Creating the Hybrid Cloud,” by research analyst Derek Johnson (subscription required).