2013-IT11

Developing A Business Case for Cloud

Information Technology Track

IT-11_Presentation_DevelopingABusinessCaseForCloud_OBrien

IT-11 – Presentation – Costs of Migration and Operation in the Cloud

IT-11 – Paper – Costs of Migration and Operation in the Cloud

IT-11 – Handout – Costs of Migration and Operation in the Cloud

Abstract:

Commercial organizations and their customers have embraced cloud-based data management solutions with astonishing speed. Government agencies are not far behind, spurred on by the Office of Management and Budget’s “Cloud First” Federal IT policy urging agencies to look to cloud-based solutions whenever possible. Government decision makers are moving to cloud solutions not only because of pressure from OMB and end users; they are also intrigued by the promise of dramatic cost savings. But can a decision to pursue a cloud transition be based on the promise of cost savings alone? There have been numerous examples where transitions to cloud have not yielded the 40% or more expected cost savings. In response to this gap, we developed a comprehensive cloud business case model that answers key issues for leaders as they prepare for the transition to a cloud environment.

The model was developed by: 1) base-lining and understanding previous and on-going work done for public and private agencies which laid the foundation for the model; 2) extracting insights from across market segments and organizations; 3) validating with IT experts a technical understanding of numerous cloud scenarios; 4) developing content for the model while ensuring flexibility and customization; and 5) validating the results through extensive feedback mechanisms. Promoting a systematic approach to understanding all the costs and benefits of moving to the cloud, the model analyzes not just immediate cost savings but productivity benefits and cost avoidances as well.

We learned that the true business case of transitioning to the cloud requires paying careful attention to cost, productivity benefits and Return on Investment (ROI). In fact, a move based on cost savings alone may not yield a positive ROI. Analysis must cover cost considerations which include transition costs such as how quickly agencies can close out legacy architecture and shift software and applications. Other cost factors are the extent to which data storage facilities and the IT workforce can be repurposed or retrained once the cloud has been introduced. The analysis must also include potential productivity benefits. Productivity gains across disparate activities can be difficult to pin down, and even tougher to ascribe to a single investment. Including the potential for productivity gains in a calculation of ROI begins with a study of current costs, analyzing whether or how those costs can be permanently reduced once in-house data management is replaced by a cloud system. The biggest benefit of moving to the cloud may come from creating efficiencies within the organization once data is more universally and readily accessible.

It is easy to get excited by the possibility of immediate cost savings from outsourcing data management. However, the greatest rewards are further out, as the cloud helps reorganize work processes and produces meaningful productivity gains. A transition to cloud systems may not yield a positive ROI when the move is based on cost savings alone. Only when organizations take a comprehensive and forward-thinking look at the potential for productivity gains will the return begin to yield the magnitude of benefits needed to justify the transition.

Author(s):

Cynthia O’Brien
Booz Allen Hamilton
Ms. O’Brien is a leader in Booz Allen Hamilton’s Defense business. A graduate of Harvard University’s Kennedy School of Government with a Masters in Public Policy, Ms. O’Brien has 17 years of professional experience in a variety of business environments, including management consulting, Fortune 500 organizations, and investment banking environments. She has led the acquisition and program management of large scale custom developed risk and performance management implementations for Defense organizations such as the Defense Information Systems Agency (DISA) and the Defense Finance and Accounting Service (DFAS). On the Global Information Grid Bandwidth Expansion (GIG BE) program for DISA, she oversaw preparation of DoD 5000 series documentation such as Analysis of Alternatives, Acquisition Strategy, Acquisition Program Baseline, Business Cases, and Economic Analyses. Ms. O’Brien also wrote a comprehensive economic analysis of the DoD Teleport program for generation two. The program is a system of communications gateways that enable warfighters to communicate from any location and connect to the secure Defense Information Systems Network. Ms. O’Brien has held account management responsibilities within Booz Allen and is currently aligned to the Air Force market where she manages a team of professionals delivering across several client locations.

John Bell
Booz Allen Hamilton
Mr. Bell leads team of Decision Analytics Professionals in the National Capitol Region and other U.S. locations supporting a variety of U.S. Air Force engagements. Mr. Bell has thirty years’ experience as a Cost and Financial Management professional at all levels in the U.S. Air Force to include assignment in the Office of the Secretary of Defense and on the Joint Staff (J-8). In the private sector, provided extensive economic, cost and cost benefit analysis to numerous government agencies to include: DoD, DoJ, DISA, IRS, FAA, NSA, Army, Navy, U.S. Marine Corps, and other U.S. Government Classified organizations. Senior cost estimator with extensive experience leading multi-billion dollar Cost-Benefit Analysis, Economic Impact Analysis and Econometric and Statistical Analysis. Currently, serves as Program and Technical Manager for extensive financial engagements throughout Headquarters USAF and in direct support of the Secretary of the Air Force for Financial Management and Comptroller. Specifically, Mr. Bell has led several large cost estimating projects to include: SAF/A6 Information Technology Business Cases that identified $800M in efficiencies, OUSD/AT&L GPS III $9B BCA.