Shawn McCarthy, IDC: Regional Cloud Hubs Will Significantly Change the Way State and Local Governments Procure Online Computing Services

January 23, 2012

IDC Government Insights announced the availability of a new report, Best Practices: Regional Community Cloud Hubs – The New "Trickle Down" Effect That's Boosting State and Local Computing .

According to the new report, IDC Government Insights believes a new type of government cloud services, labeled "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 (often at the state level) offering computing services to other government agencies, have proven successful in the State of Michigan and State of Utah and are further examined within the report. In addition, the new 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 multiagency 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. As solutions merge, less data center space is needed. In fact, by the end of 2012 close to 40% of federal datacenters will be shuttered. Many state governments are following suit, often combing multiple datacenters into one or two large statewide operations. Remaining data centers often serve as a shared computing resource for multiple departments.

Cloud Trickle Down

While any level of government can, in theory, offer services to any other government office, state-level governments are particularly well suited to serve as regional hosts, offering government-to-government services to other state agencies or to local governments. This is true because local governments are looking for trusted cloud providers and for ways to cut 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/security management 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," continued 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."

Regional Cloud Hubs

According to IDC Government Insights, these new 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 datacenters and the largest portfolios of government solutions.