Governments across the globe are being forced to do more with less. As they strive to meet increased expectations from digitally-savvy citizens —and promote economic health for their regions —many government agencies are looking to technology for answers. By moving key IT systems to the cloud, governments can gain benefits that extend far beyond the IT realm. In fact, cloud can assist agencies in driving economic vitality for their regions by helping control IT costs, improving citizen services and sparking operational and business model transformations.
Three global shifts
Central and local governments worldwide are adapting to powerful demographic, environmental and fiscal trends. Today’s nations, regions and cities must compete to attract new residents, businesses and visitors by offering a high quality of life, efficient services and a vibrant economic climate. And they struggle to do this in an environment characterized by change, risk and the need for rapid decision making. In particular, governments are grappling with the effects of three global shifts: urbanization, aging populations and an evolving world economy.
In 2008, the global population reached a milestone with more people living in urban areas than in rural ones.1 Urban areas typically need to offer efficient access to water, healthcare, education, and other social and cultural services. As such, urbanization presents challenges relating to financing the infrastructure (some of which is aging and in need of renewal) for existing and new citizens, adequately planning for land requirements and providing basic services — all in a way that strengthens social capital and preserves the integrity of the earth’s ecosystems.
In addition to increased urbanization, governments also face the effects of increased life expectancy for their citizens. According to World Bank data, life expectancy at the world level has increased from 68.8 years in 2008 to 70.8 years in 2012.2 This puts pressure on governments to increase spending on social programs like pensions, elderly care, etc. For example, the U.K. government spent £86.4 on pensions in 2005. In 2010, that amount grew to £116.4 billion and is expected to reach £149.7 billion in 2015.3 Working-age populations must help support this growing number of older dependents; however, there are concerns that a shrinking proportion of working-age citizens (ages 15 to 64) could contribute to an economic slowdown. This, in turn, could create financial stress for social insurance systems, dimming the economic outlook for the elderly.
Finally, the world’s center of economic gravity has changed over past centuries. Since the mid-1980s, the pace of that shift—from the United States and Europe toward Asia—has been increasing dramatically. According to McKinsey & Company, one billion people will enter the global consuming class by 2025, and around 600 million of them will live in emerging economies.4 In addition, over the last two decades, a series of global recession and recovery cycles have been observed, including the recovery from the last recession in 2008, which is still occurring. However, future growth could be very uneven.
In addition to global shifts, governments are facing fiscal pressures based on decreasing revenues and increasing expectations. Due to a rather gloomy worldwide economic climate, revenue for some governments is expected to stagnate resulting in decreased budgets for citizen services. For example, The U.K.’s Local Government Association expects the total available for local governments to spend on services like social care, environment, etc. to decrease from approximately £50 billion in 2010 to £40 billion in 2020.5
In addition to tightening budgets, governments also face an evolving and more demanding constituency. Advances in social and mobile technology combined with the rise of more transparent—or “open” —government have further empowered citizens. Just as they demand more from products and services, today’s citizens also expect more from their government agencies, including simpler processes and more efficient interactions.
Some governments also find themselves tasked with meeting expectations of non-citizens as well. The world is a smaller place today, with its inhabitants more mobile than ever. Many of these mobile individuals expect services from governments other than their own, such as EU citizens visiting or living in member states that expect social benefits from the host state. This obviously results in more expense for the state exchequer. The U.K. Department of Health estimated that its annual cost of treating foreign residents and visitors is up to £2 billion.6
Finally, in the face of increasing numbers of disasters, governments are realizing the crucial need for infrastructure resiliency—including IT systems.7 Both natural and man-made disasters can result in large numbers of human fatalities and significant financial damage. In fact, the worldwide economic loss due to disasters in 2013 was US$140 billion.8 Prevention of calamities and containment of damages are key challenges facing governments worldwide —and these agencies are incurring large planned and unplanned expenditures to address them.
The net result of all these challenges is that government agencies are tasked with providing more services with fewer resources. As they struggle to do more with less, many are turning to technology solutions, including cloud (see sidebar: Drivers of economic vitality).
Drivers of economic vitality
Long-term sustainable economic development is shaped by the value created by both people and businesses, leveraging technology as an accelerator for growth. The combination of people putting their talents to use within efficient and innovative public sector organizations is what creates value and economic growth.
The aim of economic development is to facilitate the balanced growth of business, talent and technology to enable value creation and innovation, as illustrated in Figure 1. In achieving this growth, cities, regions and countries also seek to realize positive environmental outcomes and grow in a sustainable manner that ensures the long-term well-being of citizens and organizations.
The primary enablers of an agile economy — talent and business —are developed through attraction, creation, use, growth and retention. Such efforts are accelerated by the innovation and adoption of technology.
The cloud advantage
IDC predicts that by 2018, government will decrease traditional IT spending by 15 percent, redirecting that spending to the cloud.9 We view this as a wise move, since cloud can offer benefits that aid not only in IT cost efficiency, but also economic development.
Cloud computing (or cloud) refers to the delivery of on demand computing resources —everything from applications to data centers —over the Internet on a pay-for-use basis (see sidebar: What is cloud?). Cloud can help organizations reduce their IT costs and call on additional computing power, new applications or advanced analytical tools as required. In addition, software tools that are increasingly available for cloud also allow the rapid and cost effective development and deployment of new applications and, thus, new services.
There are essentially three cloud computing deployment models: public, private and hybrid. Public clouds offer rapid access to affordable computing resources to other organizations or individuals. A private cloud, on the other hand, is owned and operated by a single organization to bring cloud benefits to its various lines of business and constituent groups.
Private clouds exist to take advantage of many of cloud’s efficiencies, while providing more control of resources and steering clear of multi-tenancy. Sometimes, a private cloud operator will allow other organizations to use its cloud in a shared services model. An example of this is the State of California, which plans to let any public agency in the state use its new CalCloud. Some public organizations are also considering allowing nongovernmental organizations (NGOs) or private companies from within their geographic areas use of their “private” clouds, as a contribution to the local economy.
Hybrid clouds use a private cloud foundation combined with the strategic use of public cloud services for workloads where control or confidentiality are perceived to be less of an issue or to provide emergency stand-by capabilities. Many organizations with private clouds will come to appreciate the flexibility of managing workloads across data centers, private clouds and public clouds —thereby creating hybrid clouds.
What is cloud?
Cloud computing is a pay-per-use consumption and delivery model that enables real-time delivery of configurable computing resources (for example, networks, servers, storage, applications and services). Typically, these are highly scalable resources delivered over the Internet to multiple organizations, which pay only for what they use. Cloud delivery models can help organizations scale their investments as they grow their business. They can also open the door to new business approaches through rapidly deployed standardized applications, infrastructure, testing environments and business processes that help improve service delivery speed and efficiency.
The three common models of cloud services are software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS):
- SaaS: Cloud-based applications—or software as a service (SaaS)—run on computers “in the cloud” that are owned and operated by others and that connect to users’ computers via the Internet and, usually, a web browser. Agencies using SaaS have no need to purchase, install, update or maintain software, as this is handled by the service providers. In addition, the service is able to dynamically scale to the usage needs of the agency, and cloud-based applications are frequently faster to implement and more flexible to adapt and update.
- PaaS: Platform as a service provides a cloud-based environment with everything required to support the complete lifecycle of building and delivering web-based (cloud) applications—without the cost and complexity of buying and managing the underlying hardware, software, provisioning and hosting. This allows agencies to develop applications and make them available faster, deploy new web applications to the cloud in minutes and reduce complexity with middleware as a service. The growing trend toward modular software with published APIs will enhance the speed and flexibility cloud already offers.
- IaaS: Infrastructure as a service provides organizations with computing resources including servers, networking, storage and data center space on a pay-per-use basis, often to run existing workloads.
For additional details about both the business and technical aspects of cloud computing, please see ibm.com/cloud.
Regardless of the service or delivery model, cloud offers some important key benefits to government agencies (see Figure 2).
Speed, agility and scalability
As touched on, cloud enables faster delivery of services and can help improve the agility and dexterity of government services. In addition, its scalability allows agencies to respond to peaks in demand for services. Governments with a cloud computing environment can rapidly deploy core applications and scale up or down quickly to meet fluctuating or even unpredictable demands.
Obviously, all organizations want their information and systems to be secure. However, governments face particularly stringent security and privacy requirements. They are tasked with protecting sensitive information from unauthorized use while also providing the flexibility to allow critical information sharing between and among authorized users. As such, security is a source of concern for many governments looking to adopt cloud. However, with the right measures in place, information stored in the cloud is often more secure because systems used to manage cloud security are typically more robust than those used in traditional environments. Thus, with the right cloud management platform, authentication procedures and services framework, governments can guard sensitive data while also increasing collaboration within and among agencies.
Many organizations—in both commercial and government sectors—also rely on cloud computing solutions for continuity of operations (CoOp), primarily as an effective disaster recovery strategy. By storing data in the cloud, these organizations can create a continuity-of-operations plan in the event their local systems fail. Typically, cloud computing resources are located far from the specific operator, which makes continuity of operations easier in the course of man-made or natural disasters. In addition, there is growing acceptance of using multiple clouds to ensure recoverability of data in the event of a problem with any given cloud services provider.10
Cloud computing benefits for government
Cloud can help governments more effectively manage IT resources; enable reduced need for human intervention with automation; and integrate fragmented, functionally divided organizations by enabling sharing of applications and data. Cloud computing helps organizations provision new applications or groups of users much more rapidly and efficiently. In addition, by allowing for rapid provisioning of resources without scale limitations, cloud enables a government organization to benefit from economies of scale without necessarily having large volumes on its own.
Cloud can help improve IT efficiency and reduce IT costs, as well as shift costs from fixed to variable. In fact, cost flexibility is a key reason many organizations consider cloud adoption in the first place —and is one of the more direct ways that cloud can help boost economic vitality, as we explore in the next section.