This analytical article is by Steve Hodgkinson, the director of Ovum’s Government practice in Australia and New Zealand. Prior to joining Ovum, Hodgkinson was the Deputy CIO and Director of eGovernment Strategy & Policy for the Victoria state government in Melbourne for five years. This post originally appeared on Ovum’s site and is replicated here with permission.
analysis We believe it is time for governments to elevate their policy thinking about cloud services to confront their ICT strategy conundrum. They must address increasing fiscal constraints and disappointment with existing approaches to boosting ICT productivity with an approach that enables cross-agency sharing.
Mature enterprise cloud services are “capitalist economy” shared services that work. Cloud services break the cycle of agency investment in dedicated ICT solutions that are difficult or impossible to share. In contrast, each procurement of cloud services incrementally develops the capacity of the vendor to offer the same service to other agencies. A policy position of “cloud services first” is a strategic commitment by government to the development of the next generation of shared services.
Let’s get realistic about government’s ICT strategy conundrum
Ovum believes it is time for government policy executives to start considering a more visionary stance on cloud services, which explicitly acknowledges the stark realities of their ICT strategy conundrum:
- First, fiscal constraints mean that few agencies and few jurisdictions can now afford to sustain dedicated agency-by-agency, on-premise, or outsourced ICT environments and application portfolios. These constraints have led to unsustainable underinvestment, which will only worsen in the future.
- Second, “kicking the unruly ICT teenager out of the house” by entering into long-term outsourcing arrangements has, in many cases, proven to be a high-cost, high-risk, and inflexible strategy, with disappointing results.
- Third, government-owned in-house shared services have also, too often, proved to be high-cost, high-risk, and inflexible, with disappointing results. Their closed “socialist economy” markets, complex governance, underinvestment, and customer dynamics inevitably lead to real or perceived underperformance, compared to more open-market-based service offerings.
- Fourth, mandated ICT strategies that attempt to consolidate, standardize, and rationalise ICT infrastructure and applications across agencies have also proved to be high-cost, high-risk, and inflexible, with disappointing results. The organizational and cultural forces of devolution and differentiation tend to be stronger than the forces of central control and coordination.
How can governments tackle this conundrum?
From a strategic perspective, governments need infrastructure and application services that can be used by many agencies on an “arms-length,” shared services basis. A service must be designed to support diverse needs by enabling configuration of standardized functionality, rather than the creation of one-off customized solutions for each agency. It should deliver productivity benefits from economies of scale across agencies, enabling both reduced costs and the pooling of investment in service modernization and innovation.
It should evolve iteratively, on a continuous basis, to meet the changing needs of the user base. It must be transparent in its operations and have clearly defined interfaces for integration with other services. Finally, it must be trustworthy, secure, and reliable, and should not unnecessarily commit the agency to inflexible costs.
Agencies should use such a service because they believe it to be better, faster, and less expensive. They should behave as intelligent consumers of a shared service would – with a willingness to make pragmatic and agile cost/benefit decisions about desired functionality in order to work within the “as is” constraints of the service offering.
This represents the hopes and dreams of any government for its shared ICT services strategy, but in most cases these hopes and dreams remain substantially unrealized. It is also, however, an accurate statement of the value proposition actually delivered today by a mature, enterprise-grade cloud service that is deployed by a forward-thinking agency.
What comes first, the demand or the supply?
The issue for many jurisdictions is that, outside North America, the cloud services market at a local level is still at an early stage of development. Most governments prefer onshore data hosting, so the supply of cloud services is still rather thin across the spread of local applications that agencies require. In this regard, from a policy perspective, governments get the local cloud industries that they deserve. If a government has failed to demand cloud services in the past, it has failed to stimulate local investment in cloud services that can be supplied to agencies today.
A policy position of “cloud services first” is a commitment to shared services for government
The way out of this conundrum is for each agency to ensure that as much of their ICT spending as possible is directed toward the development and operation of shared services that benefit the country’s public sector as a whole. They can do this by buying cloud services from vendors that are either based in their country or committed to the deployment of global cloud services in their country.
Cloud services break the cycle of agency investment in dedicated ICT solutions that are difficult or impossible to share. In contrast, each procurement by an agency incrementally develops the capacity of the vendor to offer the same service to other agencies. Each procurement of cloud services boosts the breadth and depth of the local cloud services market for the benefit of all agencies in all jurisdictions in the country.
A policy position of “cloud services first” is a strategic commitment by government to the development of the next generation of shared services. It signals a buying preference that will stimulate the development of appropriate cloud services offerings in that country. It also requires agencies to change the logic of the way they source ICT capabilities and develop the mindset and skills needed to become more intelligent and agile consumers of shared, cloud services.