Federal Budget Hastens Cloud Adoption

The Obama Administration’s budget blueprint for 2010, a memo released Monday, looks like a wet dream for cloud computing companies. In keeping with these “stimulating” times, the Office of Management and Budget (OMB) plans to increase spending sharply in 2010, but promises this will result in significant cost savings in the future.

The Administration said it will create a number of pilot projects to prove the idea that using a shared infrastructure to meet shared agency requirements will provide greater efficiency and transparency, both among government agencies and with the electorate. Over time, the OMB expects the new cloud-centric policy will change federal IT investment strategies and eliminate duplicative operations at the agency level. While total federal IT spending will increase from $70.7 billion to $75.8 billion in 2010, OMB director Peter Orszag’s office promises:

Expected savings [after 2010], as more agencies reduce their costs of hosting systems in their own data centers, should be many times the original investment in this area.

The Administration borrows heavily from private-sector experience in describing the benefits of cloud computing, and it’s safe to assume that new CIO Vivek Kundra had a hand in crafting this explanation:

Cloud-computing is a convenient, on-demand model for network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.

Here are some examples of what the OMB has in mind — and there seems to be something here for everyone:

• “End-user communications and computing — secure provisioning, support (help desk), and operation of end-user applications across a spectrum of devices;addressing telework and a mobile workforce.” This is great news for cloud-based application vendors like Salesforce.com, which has already sold into agencies such as Health & Human Services and NASA, as well as Netsuite, cloud call center vendor LiveOps, and IT management vendors like Service-now.com;

• “Secure virtualized data centers, with Government-to-Government, Government-to-Contractor, and Contractor-to-Contractor modes of service delivery.” This is a great opening for large cloud platform vendors like IBM, Microsoft, OpSource and even other large vendors with secure, ISO-certified infrastructure to spare– like Amazon.com, Google, Microsoft and eBay;

• “Portals, collaboration and messaging — secure data dissemination, citizen and other stakeholder engagement,and workforce productivity.” Again, Microsoft, IBM, Cisco and Google are sharpening their pencils and getting ready to respond to requests for proposals when the various agencies put them out;

• “Content, information, and records management — delivery of services to citizens and workforce productivity.” Microsoft and IBM will bid for these projects, but will have to do more customization than vendors more specialized in content management, like EMC and other niche vendors;

• “Data analytics, visualization, and reporting — transparency and management.” SAP, Oracle, HP and IBM would be the front-runners here, but there’s room for niche players like SAS if they can get their SaaS act together.

In fact, while I’ve named some of the big elephants that would have in the past been more likely to win government contracts, the current environment may actually favor smaller insurgents with flexible, customizable Web-based applications.

Dan Burton, vice president of global public policy at Salesforce.com noted how the world has changed in the few short years since Salesforce.com first burst on the scene — and only became a major force since after the previous presidential election. He reminded me that SaaS was considered appropriate only for small and medium-sized companies, and only gradutally got accepted by Fortune 500 and financial services companies, and said the federal government is now poised to make the same kind of leap. “The 2010 budget encourages agencies that have already [adopted SaaS] to extend their use of it, and it signals to those that have yet to make a move that they ought to do so in a hurry,” he said.