Public Sector Enterprises and Cloud Computing: Realizing Efficiencies

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1 Public Sector Enterprises and Cloud Computing: Realizing Efficiencies

2 Summary Catalyst Cloud technology, and its suitability for public services, continues to be a subject that polarizes CIOs. For some, cloud computing is simply a means to achieving savings by reducing storage costs, but others are not only seizing the opportunity to support business units, they are using cloud services to drive transformation across the enterprise. As governments look towards new technologies as a means to deliver this transformation, understanding the pain points and future plans around cloud are of critical importance to the public sector enterprise industry as a whole. Ovum view It is easy to view the coverage of cloud as nothing more than vendor hype, after the way that cloud has been trumpeted as a step change in the way public sector enterprises can consume IT. However, cloud computing is rapidly moving from hyperbole to a strategic approach to service delivery. Demonstrations of the benefits are becoming more frequent. Increasingly these benefits are being felt in terms of improvements to business processes, and not just in hard cash savings from reducing storage costs. The use of cloud is becoming a staple part of many public sector IT managers landscape, and is only set to grow in importance over the coming years. However, there remain challenges to mass adoption. Data security keeps CIOs up at night, and the stakes are rising with the adoption of digital services. The potential for data loss or leakage, unavailability of services, and regulatory constraints bring additional risk to the government enterprises. Managing cloud and the legacy estate are likely to stretch already thin resources, if such skills are not available, governance concerns will prevent more strategic and transformational use of cloud computing. However, adding value and increasing efficiency are imperatives for governments. Cloud computing is maturing to a point where it can be considered a secure, viable, and effective approach. Key messages Adoption of cloud computing is reaching a tipping point, with almost three-quarters of public sector enterprises using cloud computing in some form. Approaches differ, with multiple private cloud models in use. Interest in public clouds remains steady and 20% of public sector enterprises expect to manage a hybrid multi-cloud environment within the next two years. Benefits from adopting cloud computing are moving beyond simple cost savings, improvements to business processes and improved efficiency of processes are being realized. Enterprises fear that the burden of cloud security compliance and management could outweigh any benefits they might gain from further cloud usage in their organization. Networked IT service providers with local secure data-center assets have become a top choice to support European public sector enterprises private clouds, where the most sensitive citizen data is held.

3 Cloud computing: Realizing business efficiencies Cloud is finally moving into mainstream adoption Few governments, if any, have endured the recent economic upheavals and emerged unscathed. Most are still struggling to reinvent processes and services to reduce the cost of service delivery while ensuring the continued effective delivery of public services. To achieve this requires a new mindset, and new technology, to cut costs and increase efficiencies. Given their natural lower cost base and flexible delivery model, cloud services will increasingly have a role to play in governments achieving this. Many have already started on the journey to cloud adoption, 73% of IT decision makers in local and national public sector enterprises surveyed by Ovum for this study reported using some form of cloud technology in supporting business processes. Belief in the ability of cloud computing to help solve the major challenges facing public sector enterprises is high amongst CIOs, 45% of CIOs believe cloud computing is of high importance in terms of solving the major challenges facing the enterprise and 14% thought it was of critical importance. The importance of cloud computing to public sector enterprises is reflected in investment plans, 40% of surveyed public sector enterprises expect to see an increase in data center infrastructure expenditure over the next 12 months. It is clear that cloud computing has become an accepted part of the government enterprise computing environment. Enterprises are adopting a variety of routes to implementation. Private clouds, hosted internally have been the preferred routes for early adopters, but as the market matures enterprises are increasingly looking towards externally hosted and managed solutions (see Figure 1). Figure 1: What IaaS has your company implemented and which do you expect to have implemented within two years? Source: Ovum

4 Cloud computing solutions are starting to deliver improvements to work processes The maturity of cloud services could not have come at better time, as public sector CIOs, looking to cut costs and increase the agility of the enterprise, adopt business intelligence tools and digital services. Improvements to business processes top the list of benefits realized from the adoption of cloud computing: 39% of the survey respondents identified this as the primary benefit achieved; followed by cost savings (32%); improved efficiency of business processes (28%); and performance improvements for internal users (27%). While cost savings are being delivered through the shifting of backup and storage requirements into cloud environments, improvements to business processes are being achieved through the shifting of business intelligence and desktop virtualization workloads into cloud environments, with more than 40% of respondents indicating they were using cloud computing for these services (see Figure 2). Figure 2: What types of workload do you currently deliver from IaaS clouds? Source: Ovum The combination of cloud and business intelligence and analytics is proving a popular cocktail for public sector CIOs. Using business intelligence and analytics is critical for governments looking to improve the collection of revenues and better target the redistribution of monies through social support packages. The combination of a cloud environment and business intelligence tools can transform government by providing real-time information to decision makers in whatever setting, allowing for the most efficient delivery of services. While the current trend is to disaggregate the provision of IT services as much as possible, public sector CIOs still want the efficiencies that can be realized from a centralized architecture delivered to

5 the employees desktops through a virtual client. By delivering desktop environments as secure, the on-demand services, system updates, and migrations become less arduous. Early successes are leading enterprises to consider allocating more mission-critical data and services to the cloud over the next 24 months. Solutions such as e-commerce, ERP, and CRM are increasingly expected to shift to private cloud environments (see Figure 3). The workloads under consideration for migration to the cloud indicate that business unit managers are increasingly acting as key stakeholders. As they rise in importance, business unit managers are likely to wield more influence in the cloud adoption decisions. Figure 3: What types of workload do you expect to deliver from IaaS clouds in the next 24 months? Source: Ovum Private cloud environments are still the preferred option, but increasingly CIOs are softening their attitudes to public and hybrid cloud environments, and are considering shifting workloads into these environments. The survey respondents indicated that they would increase the use of hybrid cloud environments by 10% for business intelligence and analytics and ERP. ERP is still seen as key lever to deliver savings through the simplification of processes and supporting business decision-making with better information, but implementation has traditionally been costly. Bridging barriers to adoption requires quantification of risk Increasing budget allocation and complexity of workloads being allocated to cloud computing over the next 24 months will provide opportunities for the vendors, telecoms operators, and other providers

6 that can deliver these services. However, there are still some fairly complex obstacles that will need addressing. The need for increased compliance and the data security requirements remain the most important challenge for cloud computing in public sector enterprises: 41% of respondents highlighted this as the biggest challenge (see Figure 4). Ensuring the continuation of access and services levels when migrating legacy applications to a cloud environment is also considered a challenge by more than a third of respondents. Figure 4: Which of the following do you regard as important future challenges for cloud computing in your company? Source: Ovum Meeting internal business unit use demands is also a challenge. However, public sector CIOs have struggled to balance the individual demands of business units for application-specific performance commitments before the cloud, it is difficult whether the application is delivered via the cloud or on premise. Public sector CIOs face many security challenges, which are exacerbated by a lack of guidance and clarity around compliance and accreditation on key areas such as interoperability and data portability, identity and access management, auditing, adaptability, and availability, as well as risk management and detailed security SLA formalization. Governments are rushing to catch up and publish relevant guidance. The issue is complicated further as the distinction between legacy IT and cloud becomes less clear. At the same time, public sector CIOs face an increasing skills gap, 38% of the survey respondents cited a lack of internal skills in cloud computing as one of the biggest problems that their organization has faced when using or evaluating cloud computing. The complexity of public sector procurement and regulation means that managed cloud computing services can provide better value for public sector enterprise users that are looking to make the move

7 from private cloud services managed in-house to private cloud services hosted and managed by a third party, as they are more likely to be able to meet the increasing compliance requirements being pushed out from central government. What public sector enterprises must do While designed with the best intentions, European Union efforts to codify cloud SLAs, establish standards for supplier accountability, and bring greater professionalism into the cloud computing market will not address all the challenges set out in this paper. Cloud security has improved considerably and governments are publishing service standards and best practice guidance. However, enterprises should assess their current infrastructure to determine what data and applications should, or should not, be moved to a cloud environment. Public sector CIOs must determine whether personal data will be involved, and whether data protection, security, and privacy laws are raised. This is resulting in a notable shift in the capabilities valued among cloud suppliers. Half of all public sector respondents felt there was considerable benefit from selecting a cloud computing provider that could provide end-to-end management and SLAs for both the cloud data center and wide area networking connecting the enterprise. Government functions tasked with providing guidance are rushing to catch up with the sector. However, in terms of choosing cloud suppliers, public sector enterprises are still largely being left to get on with it. When shortlisting suppliers, enterprises should consider whether they: Bridge the IT and network divide. There can be no cloud without a network and data centers and suppliers competencies can often appear to be centered on the data center. However, IT consumption is linked to the way in which public services are constructed and delivered. As a result, enterprises should demand deeper expertise and services in connectivity from their suppliers. Certify competence. Demand third-party proof of expertise and compliance with evolving government accreditation schemes because investment in certification demonstrates market commitment in addition to reducing the risk of supplier failure. Among the competences that should be demonstrated and certified, security is top of the list. Offer cloud choice. Enterprises want hybrid cloud environments, but also want to minimize complexity. That can be achieved with suppliers that can broker between private and public cloud environments without prejudice, and have the consulting skills to determine which configurations are best for the project in question.

8 Appendix Methodology Ovum conducted an online survey of 143 European public sector enterprises between July and August This survey was sponsored by BT and Cisco Systems, and conducted independently by Ovum. The sample included enterprises based in the UK, France, Germany, Italy, Spain, the Netherlands, and Belgium. Demographically, 76% of the public sector enterprises surveyed had 1,000 or more employees, public sector enterprises with employees accounted for the remainder of the sample. Author Chris Pennell, Practice Leader, Public Sector Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum s consulting team may be able to help you. For more information about Ovum s consulting capabilities, please contact us directly at consulting@ovum.com. Copyright notice and disclaimer The contents of this product are protected by international copyright laws, database rights and other intellectual property rights. The owner of these rights is Informa Telecoms and Media Limited, our affiliates or other third party licensors. All product and company names and logos contained within or appearing on this product are the trademarks, service marks or trading names of their respective owners, including Informa Telecoms and Media Limited. This product may not be copied, reproduced, distributed or transmitted in any form or by any means without the prior permission of Informa Telecoms and Media Limited. Whilst reasonable efforts have been made to ensure that the information and content of this product was correct as at the date of first publication, neither Informa Telecoms and Media Limited nor any person engaged or employed by Informa Telecoms and Media Limited accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as no liability can be accepted in this regard readers assume full responsibility and risk accordingly for their use of such information and content. Any views and/or opinions expressed in this product by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Informa Telecoms and Media Limited.

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