Winners and losers in cloud computing

The intent of the Office of Management and Budget’s cloud-first directive — and similar official urgings from the federal government — is clear enough, though how best to follow those orders is somewhat less so.

And the forecast for government IT industry is even murkier.

OMB isn’t the only one sending the cloud scudding across the federal IT landscape. In his Federal Cloud Computing Strategy report in February, federal CIO Vivek Kundra estimated that $20 billion of the federal government’s $80 billion IT spending is a potential target for migration to the cloud.

The General Services Administration’s Federal Cloud Computing Program Management Office, which is behind the Apps.gov cloud computing storefront, reports to the CIO Council. The council is amassing best practices and other cloud computing information, such as the National Institute of Standards and Technology's new definitions of the four types of clouds: public, private, community and hybrid.

The cloud revolution is a beneficent juggernaut, but a juggernaut nonetheless. And it is in the nature of juggernauts to inflict collateral damage. So whom will it hurt?

• Industry in general will have less revenue out of this, said Ray Bjorklund, senior vice president and chief knowledge officer at Federal Sources Inc. “I don’t think we’re going to wave goodbye to any type of company,” he said. “But some companies that have offered one type of service or a handful of products may be affected and see lower revenue over the long run.”
• Small companies that have a lot of business tied to data centers or other conventional IT areas, said Philip Kiviat, partner at Guerra Kiviat Inc. “All the companies that sell products or supplies at the data center level, and that could be anything from [outfitting] big data centers to a single server," might get hurt, he said, because the big cloud infrastructure providers are big enough to skip those companies and buy directly from the manufacturers.
• Big (read: inflexible) companies, said Jay Tansing, managing director of public-sector services at cloud applications provider Acumen Solutions Inc. “We’ve had a number of federal clients come to us because the big traditional integrators told them: ‘This is going to take a few years to study your inventory and infrastructure and make a plan,’ " he said. "They come to us, and we tell them that, depending on the application, we could do it in about six weeks.”
• Anyone who believes the headlines, said Edward Morché, senior vice president of federal markets at communications application and infrastructure provider Level 3 Communications Inc. “Users expect that moving to cloud will be fast and easy and, most important, performance will be better and costs will go down.” If — or more likely, when — that doesn’t happen, he said, “you’ve got some unhappy users.”
• Agencies narrowly focused on a fast payoff. “I think a clear economic payoff for moving to the cloud has not yet been demonstrated,” Bjorklund said. The CIO Council has success stories for cloud migrations, but numbers don’t necessarily tell the whole story, he said. “The question is whether the measures being offered as proof of success are measuring real success.” For example, he said, the number of data centers consolidated is an easy thing to count, “but data centers are not all of what cloud is about.”
• Nobody will get hurt, said Susan Zeleniak, president of Verizon Federal Business, a cloud solution and infrastructure provider. “It’s an opportunity,” she said of the cloud push. “The demand for [cloud equivalents to] the kinds of services that government agencies do on their own now is still growing.”
• Data center staffs — maybe. “I think that those people who manage or control individual agency data centers may be hurt by a move to cloud,” said David Smith, chief technical officer of virtualization provider Citrix Inc.’s public sector. Cloud or no cloud, government has no choice but to cut the number of data centers, Zeleniak said. “And just because the data center is moving to a newer technology doesn’t mean [data center staff] will lose their jobs. It’s more likely they’ll simply be moved to another area that’s underresourced.”
• The federal IT acquisition workforce. Buying cloud solutions is different from buying conventional IT, and that’s a challenge for an IT acquisition workforce that's spread thin, reduced in number, and unfamiliar with writing cloud contracts and service-level agreements, Bjorklund said. “I’m not throwing rocks here. There are some great people in government IT acquisition. I just don’t think there are enough.”

Whom will it help?

• Big cloud companies. “Large cloud companies like Amazon, Google and IBM will do well, because they have huge commercial business as well as customers in the federal space,” Kiviat said. “And in the cloud environment, the larger the number of users you have spread across your environment, the better your economies of scale.”
• Systems integrators. “Individual integrators still have a role,” Citrix’s Smith said. “Government customers are going to look at how to enable their infrastructures to leverage cloud, and I don’t think that’s an overnight process,” he said. Nor are they likely to “just hand it all off to somebody and let them run with it. I also know that most of the integrators are looking at how they will play in cloud.”
  
• Small (read: agile) companies focused on cloud computing, like his own employer, Acumen, Tansing said. “We were doing software as a service before it was called cloud. We grew up doing this.” Using a variety of agile approaches, cloud application companies can “stand up applications in the cloud and generate results in weeks instead of months and years,” he said. Larger companies are more likely to be hobbled by history, he said, and “will need to respond in different ways than they may be used to and handle projects that are smaller than they may have done in the past."
• Creative companies. “There are going to be a lot of problems to solve,” Kiviat said. Small companies that “have good relationships with agency customers need to talk with them and say, ‘Let us help you do this,’ ” he said. “Of course, this will probably mean a change in your workforce, but [if it's] handled right, you should be able to retain a significant portion of your revenue.” In the near term, there is an opportunity to help government agencies find a migration strategy, although that could be tricky, Bjorklund said. Regulations prevent a company from advising an agency on an implementation and then providing the recommended solution, so the advisory company is unlikely to be part of the ultimate solution.
• Data center vendors. Consolidation efforts are cutting the number of data centers, which, Kundra said, commonly run at only 30 percent capacity. However, “because most data centers are already reasonably strapped for power, [and] sometimes space, to get to the point where all the ducks are lined up, there will have to be new physical plant, software and services investments,” Bjorklund said. “They’ll need to upgrade cooling and power systems, get new servers and new software to manage the infrastructure, virtualization and network management systems.”
• Cloud application developers. “Three or four years ago, we’d see a lot of RFPs to build an application with a request to see an option for on-premises installation and, if you wanted, an option for hosted,” Acumen’s Tansing said. “Then it was they wanted to see both. Now what we’re seeing more often is they want to see a proposal for the application to be hosted in the cloud, with no option for an on-premises solution requested."
• Everybody — possibly. Eventually. “But it’s not going to be easy,” Bjorklund said. OMB’s initiative, guidelines from the CIO Council and other resources give agencies a good starting point, “but that should not be confused with a simple road map,” Bjorklund said.