Financial Crisis and Cloud Computing: Delivering More for Less

Financial Crisis and Cloud Computing: Delivering More for Less

Demystifying Cloud Computing as Enabler of Government Transformation

A Government Transformation Initiative Workshop

June 16, 2009, 9:00 am - 1:00 pm. ET

Backgrounder

“The rise of the cloud is more than just another platform shift that gets geeks excited. It will undoubtedly transform the IT industry, but it will also profoundly change the way people work and companies operate.”—The Economist, “Let it Rise,” 10/23/08

Governments spend considerable amounts on IT, with the aim to improve efficiency, transparency, and to deliver more interactive services to citizens and businesses. Cloud computing is a fundamentally new approach to IT, which may lead to significant cost savings. At a time of financial crisis and of major fiscal constraints, cloud computing may be key to contain government expenditures. This workshop will discuss the emergence of cloud computing and the advantages that it offers in terms of cost savings in particular. The workshop will also highlight various challenges that need to be addressed with a special focus on connectivity, business models, efficiency, reliability, integration, security, privacy and interoperability issues.

The key objective is to demystify and clarify the rather misty concept of cloud computing for both World Bank staff and our country clients. There is a lot of confusion around this idea with over 20 definitions offered so far by various parties, according to a recent study. The workshop will also clarify the potential role of the World Bank and other development organizations in helping developing countries to realize this opportunity.

This workshop is organized by the Global ICT Department and other partners as part of the Government Transformation Initiative, a collaboration between World Bank and the private sector aimed at supporting government leaders pursuing ICT-enabled public sector transformation.

Grappling with the financial crisis, developing and transition countries governments are being forced to make painful choices about budget cuts all while citizens and businesses are demanding more and better services, transparency, and accountability. But today’s cost reductions cannot be a one-off tactics – they must be driven by transformational improvements that enable sustainable cost efficiencies for the long-term. A crisis of this scale requires a brand new approach to managing public IT investments. This time of financial and economic crisis offers a great opportunity to pause and rethink traditional approaches and start making a transition to the next generation models of IT applications and infrastructure delivery, to get more results for less money. It may potentially offer an opportunity for developing countries to leapfrog to the cutting edge of IT solutions at a fraction of the cost of what it took developed countries to get there. More and more government organizations are starting to explore the Cloud Computing model as one of such transformational approaches. Cloud computing approaches can increase efficiencies and yield dramatic savings in IT costs which can be repurposed to client-facing programs and services.

Cloud computing is a new outsourcing model for deployment of ICT solutions.

It entails use over the Internet of computing hardware and software infrastructure and applications that are remotely hosted and managed by a service provider. Under the “software-as-a-service” (SaaS) model, client organizations pay a fee for use of the ICT solution and need not invest in the infrastructure nor have the skills to manage it. The governing notion is to use only what you need and pay for only what you use. Because the cloud infrastructure is regularly upgraded, users always have access to the latest hardware and software without having to upgrade or patch legacy systems.

Consumer versions of SaaS applications, such as Google Docs, Yahoo Mail and Hotmail have been in use for several years. Business-related cloud software has moved from vertical market applications (e.g., initial version of SalesForce) to more integrated suites enterprise applications (e.g., NetSuite).

The World Bank has lent more than $7.73 billion for ICT solutions in more than 100 countries. Despite successes, however, ICT projects have run into difficulties as the resulting technology solutions are either not successfully installed, are underutilized, are not sustainable or incur high opportunity costs due to delayed implementation. The total cost of ownership of these ICT solutions has been a serious issue for many developing countries. They require major investments in hardware infrastructure as well as sophisticated skills to manage this infrastructure. Licensing costs for the requisite software platforms are very high both initially and throughout the lifecycle of the systems. Cloud computing may offer a radical solution to some of these challenges.

The US government has embraced cloud computing, and government agencies in Canada, Japan, Australia, Sweden, Singapore, France, and the United Kingdom, among others, have begun implementing IT solutions based around the cloud computing model. Examples of applications in developed countries include management of public sector housing, transportation service networks, economic development, the census, health services, contracts, and education services. The number of “packaged” cloud applications for government is still rather limited, but the major IT vendors are revisiting their product suites to identify products which can be offered on a SaaS basis.

By contrast, the uptake of cloud computing by governments in developing countries at present is rather limited. Current examples of cloud computing by developing country governments include use of e-mail services (e.g. Google and Yahoo Mail) and various Web 2.0 tools. Issues of data privacy, data portability, reliability, security and vendor lock-in are still major challenges to deal with.

Several countries (e.g., UK, Malaysia, Spain and Japan) have started establishing "internal or government clouds" to take advantage of the potential benefits of the underlying technologies while avoiding some of these challenges. Also, a number of developing countries (e.g., Kenya, Rwanda) are taking initial steps in this direction by establishing central data centers to host software applications from across government on a secure and reliable technology platform. However, it is important to bring cloud computing to terra firma by dealing with specific steps that governments in developing countries should take to move their core applications to internal or government clouds. This could pave the way for enterprise-wide migration to “higher level clouds” offering integrated, interoperable applications in the future.

Cloud computing is a relatively new approach that is still evolving. In order for governments, particularly in developing and transition countries, to embrace if fully, several serious questions must be addressed, including the following:

Can developing countries leapfrog government transformation goals by using the cloud computing approach? Can they really deliver more and better services for much less? Is it the right time for developing country governments to experiment with this approach?What ate the quick wins/low hanging fruits?evelopment organizations in facilitating this agenda?
Hosting of applications/data across borders: under what circumstances will governments allow their applications to be hosted on an offshore technology platform? Data security: can personal information on citizens/businesses be adequately safeguarded in a cloud environment?
Data portability: how can governments avoid being locked into one service provider’s data architecture? Can interested governments agree on common data architecture for specific applications which could be purchased on a transaction basis (e.g., business, collateral, citizen, leasing, land and other registries)? How to achieve the threshold requirements for broadband infrastructure needed to support cloud-based government applications?
How should governments and development agencies adjust their legal and procurement policies and procedures to enable this approach? How can this be accommodated within World Bank lending operations?
How to plan, design and finance e-Government projects to fully leverage the advantages of cloud computing?
What is the transition strategy for developing countries? Are private “government clouds” an interim solution which should be promoted?
What is the available supply of cloud computing services for key government applications? How can the World Bank Group encourage the development of integrated and interoperable cloud applications for governments, similar to the enterprise systems which have been developed for private sector businesses? Should governments and development agencies be looking at specific institutional models for delivery of services within this environment, for example, grouping registries under one institution?
What is the appropriate role for the World Bank and other development organizations in facilitating this agenda?

This backgrounder has been compiled by Oleg Petrov and has benefitted greatly from valuable inputs by Philippe Dongier, Deepak Bhatia, John Wille, Randeep Sudan, Laurent Besancon, Samia Melhem, Dan Burton, Bill Whyman, Drue Reeves, Rizwan Khaliq andAndres Escobero.