Exploring The Cloud

GOVERNMENT
Exploring the Cloud

A Global Study of Governments Adoption of Cloud kpmg.com
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b | Exploring the Cloud: A Global Study of Governments Adoption of Cloud
Cloud is here. And as the accompanying research reveals, its promise is becoming real.
2012 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
Exploring the Cloud: A Global Study of Governments Adoption of Cloud | 1
Foreword
Cloud environments are already at work today reducing operating costs in some cases substantially. Such models are enabling optimization of asset utilization and flexibility in both the scale and scope of IT services and hardware. Less of a revolution, as the hype might suggest, and more of a long-anticipated next phase in the evolution of information technology (IT), nonetheless clouds arrival carries profound implications for IT provision for governments. The era of cloud will likely offer an array of ancillary benefits. For example, cloud is proving to be an engine of innovation. Many government agencies around the world are exploring a host of new services for, and interactions with, other groups within government as well as citizens. Further, as cloud reduces the footprint of IT operations, agencies are free to focus more on the effectiveness of their programs, and less on the management of IT. Of course, there are challenges such as data security and governance. But, according to this research, the experience of those moving forward with cloud has shown that such risks can be adequately addressed. In fact, it seems more likely that cloud will actually enhance data security. Other challenges range from a lack of government-specific applications to a dearth of investment capital. But again, those who participated in this research say such issues can easily be addressed and given the payoffs, must be overcome. The opportunity awaits, and for many the exploration has begun. This report is the third in a series on cloud from KPMG International, and seeks to offer guidance and insight to help those in the public sector get ready to move forward. To view the other KPMG cloud reports, please visit KPMG.com. Thank you to the many government officials around the world who gave generously of their time and insight as part of the research that provided the foundation for thispaper.
John Herhalt Global Chair KPMG Government & Infrastructure KPMG International
Ken Cochrane Partner KPMG in Canada
Table of contents
Executive summary Introduction: the evolution of cloud-enabled government Governing from cloud How the public sector is taking advantage of cloud technology Drivers of change Ensuring security and building trust Unique challenges for the public sector A clear mandate: adopt cloud! A world of progress Cases in point Adoption will come The transformation agenda Creating a cloud-infused government Driving innovation Getting there: six tips for creating traction Conclusion Insights and implications About the survey Additional reading 4 5 8 8 9 16 18 21 21 27 29 31 31 31 33 37 38 42 43
4 | Exploring the Cloud: A Global Study of Governments Adoption of Cloud
Executive summary
How are governments planning for and adopting cloud? What are the challenges of cloud-enablement? How will the integration of cloud technologies disrupt the status quo of governance? More importantly, what are governments doing to ensure they get the most from their cloud investments? These are just some of the questions that KPMG International hopes to answerwith this report. Working in conjunction with Forbes Insights, close to 430public-sector government executives from 10 countries were surveyed to learn more about their cloud strategies and expectations. Key findings are as follows: Government adoption of cloud is happening slowly, but is poised to accelerate: When it comes to exploring the opportunities of cloud, not surprisingly the public sector is well behind the private sector. Survey results find that the progress of government entities significantly lags that of their for-profit counterparts by 9 to 13 percent. Only 12 percent of government executives say that over 10 percent of their agencies overall annual IT resources are allocated to cloud in 2011. By the end of 2012, this figure is anticipated to more than double to 28 percent. Countries leading the way in cloud adoption are Australia, Italy and Denmark. The public sector has modest expectations of cloud: Only 50 percent of government respondents expect to gain some cost advantages with cloud; only 28 percent expect it to fundamentally change their model for operations; and just 39 percent expect it to change interaction with constituents. Security remains the biggest concern, but certification would help: Concern with security was cited by almost half of all government respondents (47 percent) as their most significant concern, only exceeding the private sector slightly at 44 percent. Among the largest government entity respondents of the survey, the figure rises to 56 percent, the highest level of concern cited by any group. However, almost 80 percent said they would be more confident if cloud services were certified by a government body. This report examines the implications of these findings on governments, citizens, cloud service providers and IT leaders. Responses from the global business survey of 808 business executives are referenced to provide further context. Throughout, we combine the deep experience of KPMG member firms professionals with the results of a series of in-depth interviews that were conducted with government leaders from around the world. The results provide insight into the current state of government cloud and offer an important benchmark for public sector organizations globally.
Introduction: the evolution of cloud-enabled government

Cloud
Hosted IT services delivered on a shared, internet-based platform. Government entities are starting to embrace cloud, but what does that mean for the public sector? Cloud technology constitutes a change in computing and knowledge management, with hosted IT services delivered on a shared, internet-based platform. The real value of this type of environment is the ability to use that platform to combine data access and exchange with access to low-cost computing and applications to provide efficiency and flexibility (see Figure 1).
Research methodology
The information in this report is based on the results of surveying 429 government executives and managers in 10 countries, as well as 808executives in the private sector. The research was done in May 2011 by Forbes Insights in collaboration with KPMG International. Additionally, a series of one-on-one interviews, were conducted with government leaders from around the world. Respondents break-down as follows: Size of organization: All agencies and companies have annual budgets or revenues of at least US$200 million. Forty-six percent of government agencies surveyed have budgets of US$1 billion or more; 23 percent have budgets of US$10 billion or more. Forty-two percent of private-sector companies have revenues of US$1 billion or more; 20 percent have revenues of US$10 billion or more. Level of government and title: Fifty-three percent of respondents to the government survey work at the national level, 25 percent at the regional level, and 22 percent at the local level. Thirty-one percent of respondents to the government survey have C-level titles; 46 percent have C-level titles in the private-sector survey. Countries: Countries in the government research include Australia, Canada, Denmark, Italy, Netherlands, Singapore, South Africa, Spain, United Kingdom, and United States. Twenty-nine percent of government respondents are located in the Americas, 22 percent in Asia/Pacific, and 50 percent in Europe/Middle East/Africa. For the private-sector survey, the geographic distribution was 43 percent Americas, 32 percent Asia/Pacific, and 25 percent Europe/Middle East/Africa.
Definitions
IaaS Infrastructure as a Service: Infrastructure traditionally provided by servers, desktops and network equipment is instead delivered over the internet and can be scaled up or down as needed. PaaS Platform as a Service: Software development, storage and hosting are accessed as a service over the internet. SaaS Software as a Service: On-demand applications provided through an internet browser, eliminating the need to install, run and maintain programs on internal systems. BPaaS Business Process as a Service: Business process outsourcing (BPO) is provisioned using a cloud computing model; bundled with SaaS/ PaaS/IaaS and delivered over the internet.
Like other potentially transformative innovations, cloud will take some time for users to fully understand its full potential and get past its initial mystique, build and make it work, prove and develop its credibility, and operationalize and move it to broad adoption. There is still much work to be done. However, as results of this research suggest, momentum is building, but governments remain cautious. Figure 1: Cloud environment
Cloud Environment = Internet-based data + access and exchange Internet-based access to low-cost computing and applications
Virtualized Technology Virtualized Processes Opportunities to Leverage Commoditized Enterprise Applications and Economies of Scale
Virtualized Organization
Virtualized Business Models Speed to Market Improve Reduce Invested Working Capital Capital Reduce General Reduce Cost of and Administrative Goods Sold Costs (SG&A)
Source: KPMG in the US 2011, Cloud environment
The promise of cloud is that it can bring together practices, tools, and technologies that will better position a government department to operate in a significantly more efficient, predictable, flexible, and accountable manner.
The benefits of the cloud for the CIO
The advantages of adopting cloud can be profound for government IT departments, starting with the reduction or redirection of on-site IT staff as well as the ability to access IT resources and infrastructure as needed. For the CIO and the senior IT team, cloud can also deliver the added benefit of reducing the time needed to manage IT infrastructure, and therefore increase the IT functions ability to focus on developing stronger programs and services for citizens, businesses, and other stakeholders.
CASE 1: Ontario, Canada examines the benefits

Canadas Ron McKerlie Deputy Minister of Government Services, Associate Secretary of the Cabinet, and Secretary of the Management Board of the Cabinet is taking a hard look at cloud-enabled processes. And what hes keen to learn is whether or not theres a prize here, financial or otherwise. In practical terms, McKerlie is involved in a pilot project, testing the cloud-based wares of a major technology provider. We were actually very anxious to get some experience with private cloud technologies, McKerlie explains. So we were delighted when we were approached and so far its been a great opportunity. The work-to-date centers on accessing and managing common shared services like email and collaboration tools. And in McKerlies opinion, so far, the project has been a success. Now, says McKerlie, were better informed, and are now in a position where we can harvest some of the learning to see what potential exists for the cloud in the Ontario Public Service. Still, the approach remains cautious just one step at a time. Wewant to make certain not only of what we think we know, but of whatwe might not know. And there are other, more conscious concerns. If our private data is in the hands of a US supplier or provider, US legislation allows their government to obtain private data without notification. This,says McKerlie, is a big deal for us, particularly given the amount of personal information, such as health data, that we hold for the citizens of Ontario. Such concerns aside, McKerlie says the pilot project is likely just a first baby step. A possible next step could be a private cloud offering services such as email to related government entities. Weve built a Tier 4 data center, and now we have several agencies interested in getting service. A government cloud, says McKerlie, could be set up to provide municipalities or broader publicsector entities or agencies with the services they need.
Governing from cloud

Public vs. Private: Exploring cloud
When it comes to exploring the opportunities of cloud, the public sector seems well behind the privatesector. Survey results find that the progress of government entities significantly lags that of theirfor-profit counterparts by 9 to 13 percentage points.
How the public sector is taking advantage of cloud technology

The results of this survey find that a large number of government entities are already taking steps to better understand and potentially capitalize on the many advantages that cloud offers. For this research, three core elements were used to provide evidence of this shift: the development of a cloud strategy, the testing of a proof of concept, and the partial implementation of a cloud environment. Survey results show that approximately a quarter of governments around the world are moving forward with exploring the benefits of cloud (see Figure 2).
Figure 2: Evidence of a shift to cloud Which of the following activities has your organization undertaken as part of its move toward adopting/implementing a cloud environment?
Developing a strategy Testing of a proof of concept Partial Implementation 0% 5% 10% 15% 19% 20% 25% 30% 24% 29% 38% 35% 32% 35% 40%
Government/Public sector
Source: KPMG International 2012, Government Cloud Survey KPMG International 2011, Clarity in the Cloud
Private Sector
Public, private or hybrid cloud?

Cloud services are often developed in one of two ways: (1) private clouds, where the services are dedicated to a single party that retains direct management oversight; and (2) public clouds, where non-related parties may reside on the same servers and are primarily managed by a third party. Hybrid clouds, as the name suggests, are combinations of these two methods. A number of governments are also exploring the concept of Community Clouds envisioned as a rules-based environment shared by organizations with similar needs, perspectives or requirements, such as geography, industry, or supply chains. Figure 3: Types of cloud environments What type of cloud environment does your organization use/intend to use?
Private cloud Public cloud Hybrid cloud Community cloud No plans to adopt cloud Dont know 0% 5% 10% 15% 20% 8% 23% 25% 30% 35% 13% 22% 26% 32%
Source: KPMG International 2012, Government Cloud Survey
Drivers of change
The transition to a more cloud-centric model is under way. For government respondents, some of the most influential drivers appear to be potential cost savings, and the pursuit of increased efficiency and effectiveness -- if not wholesale process transformation. But expectations are modest. Only 50 percent expect potential cost savings from cloud (Figure 4).
Economic drivers Governments are seeing the potential for achieving cost reduction by migrating to a more virtual operating model through the adoption of cloud as critical. Some are already identifying potential cost savings, such as reduced invested capital by using less IT infrastructure and lower administrative costs by requiring fewer internal staff to perform processes.
Figure 4: Expected impact of cloud Which of the following best describe the potential impact of cloud on your business model/operations?
It will fundamentally change our business model It will change our interaction with customers (i.e., constituents/citizens) and suppliers It will provide management with greater transparency on transactions It will reduce costs It will accelerate time to market No signicant impact Other (Please specify) 3% 1% 0% 10% 20% 30% 40% Private sector 50% 18% 12% 24% 35% 32% 50% 50% 28% 32% 39% 39% 37%
Seventy-six percent of government respondents describe cost and related economic factors as either extremely important (41 percent) or important (35 percent) to their organizations decisions surrounding cloud adoption (see Figure 5).
Budget deficits and austerity programs in so many nations provide a compelling reason for governments to take a closer look at the potential for savings.
John Hermans KPMG in the Netherlands
Figure 5: Importance of economic factors (e.g., cost savings, shift capital expenditures to operational expenditures) How important are the following factors in driving your organizations adoption of a cloud environment?
Extremely important Important Neither important nor unimportant Unimportant Extremely unimportant 0%
2% 3% 2% 2% 19% 19% 41% 37% 35% 40%
20%
40%
60%
80% Private sector
100%
Public vs. Private: Impact of cloud

The public sector and private sector are on par when it comes to the impact of cloud on business models and consumer/citizen interaction. But government is slightly more optimistic on the influence of cloud on transparency: 37 percent of publicsector respondents say cloud will make operations and performance more transparent to management, versus 32 percent in the private sector.
Government respondents indicate that funding for cloud initiatives will only be forthcoming if significant cost savings can be achieved. Almost three quarters (73 percent) of government respondents say that cost reductions are necessary for their organizations to move to a cloud environment (Figure 6). Figure 6: Need for cost reductions Are cost reductions/savings necessary for your organization to move to a cloud environment?
Yes No 0% 20% 27% 25% 40% Government/Public sector
73% 75%
60%
80% Private sector
100%
To move to cloud, just how significant will those cost savings need to be? According to survey results, more than a quarter of respondents need to achieve savings of up to 10 percent, slightly less (21 percent) require savings of up to a quarter of their costs, and one in ten respondents say they would need cloud to deliver at least a 25 percent savings on current costs (see Figure 7). Figure 7: Required cost savings What percentage reduction in IT or non-IT costs do you believe would be needed?
More than 25% 11% 9% 21% 27% 32%
1125%
110%
43%
Dont know 0%
10% 10% 20%
29%
30%
40% Private sector
50%
Who will lead?

In the planning and implementation phase, government respondents are most likely to view leadership as the responsibility of the CIO (29%), with a government equivalent of the CEO a close second (21%). Once under full implementation, the CIO remains the most frequently cited executive followed by the CTO and the COO.
Figure 8: Leader of a cloud environment Who should be responsible for managing service level performance of external cloud providers after a cloud environment has been adopted?
Chief Information Ofcer CIO Chief Technology Ofcer CTO Chief Operations Ofcer COO Chief Executive Ofcer CEO/Minister/Secretary Chief Financial Ofcer CFO EVP/SVP/Deputy Minister/ Under Secretary/DG Other C-level executives Misc. Others (Senior Directors, Managers, Managing Directors, etc.)
27% 15% 14% 10% 6% 6% 5% 16% 5% 10% 15% 20% 25% 30%
0%
If achievable, this would represent a critical benefit for government, where it is important to be flexible. There are often policy changes, amendments to regulations or laws that can result in a needto ramp up fast.
Ann Steward Australian Government Chief Information Officer and Deputy Secretary, Department of Finance and Deregulation
However, many are not yet convinced the cost savings of cloud are real, accessible, or even sustainable. As Ron McKerlie1 of the Ontario Ministry of Public Services explains, Weve heard the claims that there are some cost savings to be had. Certainly, we are interested in those if they can be realized, but it remains to be seen whether they really are or arent there. While Dave McClure, Associate Administrator of the Office of Citizen Services and Innovative Technologies at the US General Services Administration (GSA), says that his groups early experiences are showing real benefits so far, including greater agility, solution support simplification, and lower costs. Still, he wonders, what will happen in the long run are the gains sustainable? Technical change drivers Government also seems eager to gain a clearer picture of the potential enterprisewide benefits of cloud environments, especially flexibility, scalability, simplicity, security, and advanced technology. Seventy-nine percent of government respondents cite technical change drivers as either extremely important (39 percent) or important (40 percent) to cloud adoption (Figure 9). Figure 9: Importance of technical change drivers How important are the following factors in driving your organizations adoption of a cloud environment? Technical factors (e.g., exibility, scalability, simplicity, security, advanced technology)
Extremely important
39% 37% 40% 42% 18% 16% 1% 3% 2% 1% 0% 10% 20% 30% Private sector 40% 50%
Important
Neither important nor unimportant
Unimportant
Extremely unimportant
1 Mr. McKerlies full title: Deputy Minister of Government Services, Associate Secretary, of the Cabinet and Secretary of Management Board of the Cabinet.
Strategic factors As Pat Howard, an IBM partner and VP for global services, maintains, This opens up strategic avenues that werent there before. Among agencies and public sector initiatives, there will be a level of optimization, market responsiveness, and agility that governments just couldnt achieve in the past. Interestingly, larger government entities (those with 1,000 or more employees) are significantly more likely to find strategic drivers to be extremely important than are smaller entities (those with under 1,000 employees). Forty-two percent of larger government entities describe strategic benefits as extremely important versus only 27 percent of smaller entities (Figure 11). Figure 10: Importance of strategic factors How important are the following factors in driving your organizations adoption of a cloud environment? Strategic factors (e.g., process transformation, linkage to business/ organization partners, speed to market/implementation, focus on core competencies)
Extremely important Important Neither important nor unimportant Unimportant Extremely unimportant 0% 3% 2% 2% 10% 20% 30% Private Sector 40% 50% 5% 19% 23% 30% 33% 40% 44%
Figure 11: Importance of strategic factors by size of government organization How important are the following factors in driving your organizations adoption of a cloud environment? Strategic factors (e.g., business process transformation, linkage to business partners, speed to market, focus on core competencies)
27% 28% 35% 33% Important 30% 37%
Extremely important
42%
47% 44%
Neither important nor unimportant 16% Unimportant 0% Extremely unimportant 3% 2% 3% 2% 2% 2% 10% 20% 5%
21% 21%
0%
30%
40%
50%
Public sector with less than 1,000 employees Public sector with 1,000 or more employees
Private sector with less than 1,000 employees Private sector with 1,000 or more employees
Tracking ROI
What metrics will governments be tracking as they adopt cloud technologies? According to our survey, key performance indicators will include those relating to cost, productivity, and revenue. Figure 12: Key performance indicators Which of the following key performance indicators (KPIs) or metrics are/will be used by your organization to measure the return on investment (ROI) of a cloud environment?
Productivity Cost Revenue Access to markets Other (please specify) Cloud ROI not measured Dont know 0% 10% 20% 2% 6% 20% 30% 40% 50% 60% 22% 28% 49% 57%
Ensuring security and building trust

Public vs. Private: Security
Government concerns over security only slightly exceed those of the private sector (47% vs. 44% respectively). But among the largest government entity respondents of the survey, the figure rises to 56%, the highest level of concern cited by any group. Security and privacy concerns are the most significant barriers to public sector cloud adoption (see Figure 13). As Geoffrey Weber, partner with KPMG in the US, explains, Data security is probably the number one concern for most government agencies contemplating cloud. Already relatively more risk averse than private sector companies, government agencies are meanwhile often privy to some of the most sensitive data available. This includes not only citizens personal information, but also data relating to national security interests in agencies like the Department of Homeland Security or the Department of Defense. Thus, these government executives heightened concerns, says Weber, arent unreasonable. Figure 13: Top challenges of adopting a cloud environment What do you believe are the top challenges or concerns your organization faces in adopting a cloud environment?
Security Regulatory compliance IT governance 0% 10% 24% 24% 47% 44% 14% 18% 20% Government/Public sector
30% Private sector
40%
50%
Not only is personal data held by government often quite sensitive, but governments are also a favorite target for hackers. We are regularly under attack, says McKerlie of the Ontario Ministry of Government Services. Its just amazing the number of threats that come at us in the course of a day. Consequently, he says, we have to make certain that whatever we implement in security terms is incredibly robust. Data security is also a primary concern for the United State General Services Administration (GSA). In December 2010, the GSA became the first federal government agency in the US to move its entire email function to a cloud model. McClure maintains that at least in the case of his agencys cloud provider, security is a strong competency. Most government CIOs know their own security programs strengths and weaknesses, he explains. But if they evaluate a cloud services provider and go through a solid baseline check for certification and accreditation and examine continuous monitoring capabilities they may walk away very impressed. In general, says McClure, the commitment to security and the level of controls tend to be stronger for cloud services because these providers are being continually challenged. Overall, says McClure, if security is set up and managed correctly, there can be security advantages to working in a cloud environment.
Figure 14: Security concern by size of organization

Less than 1,000 employees 1,000 or more employees 0% 10% 20% 24% 33% 24%
43% 45% 40% 50% 56%
30%
60%
Private sector
The value of certifications

Survey participants indicate that they would feel more comfortable moving forward with cloud if there is a means of certification: a stamp of approval on issues such as appropriateness, effectiveness, and security. This certification appears to be of greater perceived benefit to smaller government entities.
Figure 15: Easing of concern with certication by different entities If there were a certication of cloud services by the following entities, would it ease any of the concerns you have about adopting a cloud environment for your organization?
Certication by government body
10% No 40% No 90% Yes 60% Yes
21% No
79% Yes
Under 1,000 Employees
Over 1,000 Employees
All Public Sector Respondents
Certication by independent, non-prot body
37% No 63% Yes 72% No
28% Yes
53% No
47% Yes
Certication by independent, for-prot body
30% Yes 70% No 72% No
28% Yes 62% No
38% Yes
Many government decision-makers are still somewhat skeptical of outsourcing their data security to cloud. Executives want assurances that systems will be up-andrunning when needed, explains Geoffrey Weber. And they also want to be certain that data will be secure and privacy is protected. But given the nature of cloud, theres not a long track record and this causes some concern amongst government IT leaders and executives. Dr. Bernd Welz, Senior Vice President at enterprise software-focused SAP says , that as time passes, executives will come to recognize that cloud-based processes represent an advancement in both up-time and security. Any data center at any company can go down from time to time. So theres already risk in running your own servers, says Welz. But by comparison, the risk of a cloud provider failing materially for any extended period is substantially lower. The difference in the overallrisk-profile is significant.
Unique challenges for the public sector

While there are strong lessons to be shared between the two sectors, government decision-makers face a number of challenges that are unique to the public sector. Embracing risk Governments face a very different risk/reward environment in comparison to the private sector. Government enterprises have less incentive to take on the risks of new and arguably untested technologies. Businesses get rewarded for taking on and successfully managing risk; do that well and earn a profit, notes Iain Gravestock, partner with KPMG in the UK. In the public sector, if you take a risk and succeed, you might get a pat on the back but not much more; but if you fail if your pensioners dont get their checks, or if you botch privacy protection you will be in a world of trouble. Managing complexity When it comes to size and scope of operations, government enterprises can vary substantially from the typical private sector corporation. As KPMG in Canada partner Ken Cochrane explains, Governments are generally very large, very complex, and run literally hundreds of different programs, each equivalent to business lines in the private sector. By comparison, most corporations are smaller and less widely dispersed. For example, in Ontario, Canada, there are some 1.2 million people working in the broader public sector, says McKerlie. Meanwhile, this massive workforce is distributed across more than 2,000 locations, focusing on a wide array of often unrelated tasks. Overall, says Cochrane, the sheer size and scope of governments can make it a greater challenge to develop a broad ranging, government-wide cloud strategy, which is likely why governments, on balance, are moving a bit slower than corporations.
Centralized vs. regional strategies While government agencies often strive to maintain a wide geographic presence and employment across their jurisdiction, cloud environments tend to pull resources out of dispersed operations and into a more concentrated model. Of course, cloud also enables disperse locations and mobile employees to achieve greater connectivity to the organizational IT infrastructure, which may further enable a geographically-distributed workforce.
CASE 2: The bleeding edge the UKs Essex County Council

David Wilde is the CIO for the Essex County Council in the UK. This organization is responsible for many aspects of public sector service delivery, including schools, adult social care, environment and waste management, as well as the payment of certain types of benefits and the collection of various revenues. According to Wilde, Cloud is no longer a promise its a reality and those in government can no longer afford to wait on the sidelines. Wildes ideal IT environment consists of the following elements: It begins with a model for service delivery thats based on cost per user, per annum, and scales as needed. From there, Wilde wants an infrastructure that is available whenever and wherever office, home, or out and about; interoperates across all of its subsystems rather than being restricted within any silos; completely converges voice, data, and video on a single stack; and finally, enables integration with the full range of social media. It sounds like a tall order. But according to Wilde, its achievement is not as hard as people believe. One of the biggest challenges is changing out legacy systems, both of the end-user and among providers. The migration can be expensive. But according to Wilde, the lower ongoing costs and superior flexibility of cloud-based models make for an irresistible investment case. Operating in a cloud environment, says Wilde, is reducing his groups operating spending by 26 percent. In certain areas, the savings are even more compelling. For example, You can save 40 percent or more by integrating voice, data, and video. Another challenge, says Wilde, is sorting out the data security issues. Here, many government groups say cloud isnt yet secure enough for their needs. According to Wilde, however, with a little hard work and common sense, the security issues can be reconciled. In particular, says Wilde, people should stop thinking of this as a technology issue the technologies can deliver all the security you have now and more. The real challenge, says Wilde, is legal: Which nations will protect your data and which will not? To Wilde, fears about legislation like the US PATRIOT Act are misplaced. Any government could step in and demand access to information on its shores, says Wilde. But whats refreshing about the PATRIOT Act is that heres a government finally admitting what the rest of us already know. What government agencies should do, says Wilde, is make certain their data resides in nations with sufficient legal frameworks to ensure fair treatment, due process and damages when and if applicable. Such attributes will tend to rule out any capricious data breaches. Of course, this rules out most of the developing world. Iwill allow data to reside in Poland; I will not put it out to some developing countries not until they have suitable legal frameworks, which is likely a long way off. But thats okay, says Wilde, because owing to energy costs, you would want your data in more temperate climates anyway. Wilde says that the Essex County Council is on track to achieve his vision of the ideal IT platform by 2015. Nonetheless, he insists, most of his groups activities are by no means on the cutting edge. Rather, says Wilde, all were really doing is following the private sector. Most of what we want to achieve, theyre already doing by routine. Where Wildes group is breaking new ground is in its pursuit of government sector-specific solutions. As Wilde explains, you cant buy a package to meet our needs in social care, for example. So, we have to be the guinea pigs, driving the development. But there can be advantages to leading. Because were the first to do something, were in close collaboration with providers and that means we have a big say in how it will be designed and what it can deliver. Are there dangers in moving so far and so fast? Wilde says he acknowledges the risks, but finds them to be well understood and eminently manageable. If we were to get it wrong that could be a problem. The answer, according to Wilde: Well just have to make absolutely sure we dont get it wrong.
UK Government G-Cloud Strategy

In March 2011, the UK Government published a Government Cloud (G-Cloud) Strategy, a sub-strategy of the UK governments ICT strategy. The vision is to have the government use multi-tenanted services, shared and managed by multiple organizations across the UK public sector. Shared resources, infrastructure, software and information will be provided to a range of end user devices, on a pay by use basis, via a network connection in many cases the internet. It will be dynamically scalable, agile, and easy to move in and out of the service. G-Cloud is not a single entity, but an ongoing and iterative program of work to enable the use of a range of cloud services throughout the public sector. By adopting cloud computing, the government will be able to more easily exploit and share commodity ICT products and services. This enables the move from high-cost customized ICT applications and solutions to low cost, standard, interchangeable services where quality and cost is driven by the market. The objective is for government to adopt a public cloud solution first policy where possible. It has been recognized that simply buying cloud technology will not, in itself, save money. The greatest value will be gained by the government changing the way that it buys and operates ICT. One of the key elements of the Cloud Strategy will be the Government Application Store. This will take the form of an online portal, and will provide an open marketplace displaying services that can be procured, used, reviewed and reused across the public sector.
A clear mandate: adopt cloud!

A world of progress
While the public sector may face a number of realities that complicate cloud adoption, the factor that is becoming a powerful force for accelerating adoption is the growing number of national governments that have already implemented or are in the process of implementing policies that drive a shift toward cloud-based processes. The survey results from this research highlight that countries are moving ahead with cloud exploration and adoption at different rates. Leading the way are Australia, Italy, and Denmark, with almost one third of respondents in each nation saying their organizations are moving to full implementation. Singapore looks to be readying itself to follow them closely, with slightly more than one in three of respondents citing moves toward partial implementation, 46 percent citing testing of a proof of concept, and 40 percent developing a strategy (Figure 16). Governments expect to experience a range of challenges in adopting cloud environments. Respondents in Canada (64 percent), the United States (57 percent), and the United Kingdom (56 percent) are the most concerned about security. Canadians (23 percent) are the most skeptical about whether the promise of cloud can be realized, while approximately a third of respondents from South Africa, Denmark, Australia, and Canada cited concern about IT governance (Figure 17). When it comes to governments supporting the use of cloud for their constituents, data security and privacy issues tend to be a priority concern, but some countries seem to show heightened concern in this area. Almost two-thirds of respondents in Singapore, Canada, the United Kingdom, South Africa, and the United States cited security and privacy as a challenge, versus just 31 percent in the Netherlands (Figure 18). South Africa appears to be the most concerned about challenges across the board: security and privacy tied with lack of resources/skills toassess or implement a cloud environment (59 percent), closely followed by lack of funding, and potential fraud and corruption (both 56 percent).
Figure 16: Country adoption comparison Which of the following activities has your organization undertaken as part of its move towards adopting/implementing a cloud environment?
22% 24%
44% 41% 47%
Assessing and exploring the value proposition of the cloud

15%
56%
26% 24% 46%
17%
26%
36% 35%
Developing a strategy
13% 21%
40% 40%
35% 39%
14% 23%
26% 46% 29% 26% 16% 39%
Testing of a proof of concept
7% 10%
8% 15% 31% 35% 33% 18% 19% 12%
Partial implementation
6%
12%
0%
10%
20%
30%
40%
50%
60%
5% 10% 12% 18% 31% 29% 30%
Full implementation
2%
14% 7% 13%
None of the above
2%
9% 10% 6% 8% 10% 11%
17%
0% 42% 6% 21% 12% 16% 10% 21% 42% 31%
Don't know
0%
0% Canada Italy
10% US
20%
30% Australia Spain
40% Singapore UK
50% Denmark
60%
Netherlands
South Africa
Note: Country-specific responses are not statistically significant and should be used for directional purposes only.
Figure 17: Country challenges with adoption What do you believe are the top challenges or concerns your organization faces in adopting a cloud environment?
5% 10% 13% 19%
Response time
18% 19% 4%
24% 27%
29% 64% 39% 57% 48% 47% 40% 33% 32% 56% 37% 25% 22% 23% 23% 35% 17% 8% 35% 23% 22% 16% 14%
Security
Difculty integrating cloud with existing systems
Loss of control over data with respect to customers
21% 19% 18% 10% 8% 16% 15% 32% 6% 5% 21% 12% 12% 7% 15% 16% 0% 15% 16% 19% 18% 27%
Availability
Performance
12% 27% 33% 32% 17% 27% 31% 19% 33% 15%
IT governance
15%
35% 20% 19% 23% 37% 22% 33% 21% 21% 18% 27% 18% 22% 40% 12%
Regulatory compliance (i.e. privacy, data retention, software licensing, etc.)
0%
10%
20%
30%
40%
50%
60%
70%
80%

Canada Italy US Netherlands Australia Spain Singapore UK Denmark South Africa
5% 12% 13%
Lack of condence in ability of cloud vendors to perform
10% 0% 0% 13% 5% 10% 17% 6% 3% 8%
Dissatisfaction with offerings/ pricing by vendors
10% 0% 3% 10% 5% 6% 7% 6% 7% 0%
Lack of customization opportunities

2%
12% 6% 7% 8% 8% 12% 9% 7% 13% 8%
Measuring ROI
5%
18% 10% 16% 13% 7% 23% 10% 10%
Not sure the promise of a cloud environment can be realized

5%
19% 18% 10% 8% 10% 7% 9% 5% 10% 10% 6% 3% 5% 5% 17% 7% 0% 2% 10%
Difculty making a business case for adopting a cloud environment
Lack of clarity/detail related to billing
8% 12% 3% 10% 5% 4% 7% 3% 7% 3% 2%
Other (please specify)
0% 0% 0% 3% 4% 0%
0%
5%
10%
15%
20%
25%
Figure 18: Country challenges with supporting citizen use What would be the main challenges to your government supporting the use of the cloud environment for everyone in your country?
13% 22%
Lack of necessary technical infrastructure
26%
24% 13% 14% 25%
40% 40% 44% 57% 61% 62%
44%
Data security and privacy issues

31%
40% 41%
47%
60% 59%
Dening appropriate policies and regulations for the service
23% 18% 27%
31% 33% 29% 30% 44% 33% 28% 33% 29% 35% 37% 33% 41% 40% 40%
21%
Assurance on meeting regulatory compliance
23% 15%
20% 19%
Lack of resources/skills to assess or implement a cloud environment

5%
8%
12% 13% 21%
25%
59% 31% 41% 47% 44% 56%
Lack of funding
19% 18%
33% 29% 32% 25% 25% 29%
19% 21%
Fraud and corruption
20% 21%
30% 27%
56%
16% 17%
Lack of leadership support
0%
12% 8% 8% 10% 13%
23%
34% 26% 41% 33% 35% 33%
Lack of government-wide agreement on specic direction
25% 10% 23% 22%
46%
16% 8% 0% 14% 2% 13%
21%
Dont know
18% 26% 31%
Note: Country-specific responses are not statistically significant and should be used for directional purposes only.
0%
10% Canada Italy
20% US Netherlands
30%
40% Australia Spain
50%
60% Singapore UK
70% Denmark
80%
South Africa
Cases in point
Singapore: The government of Singapore began its journey to cloud as early as 2005. At that time, a program was announced to consolidate the whole of its government IT infrastructure. James Kang, the Chief Executive at the entity behind this drive, the Infocomm Development Authority (IDA), says that today, computing resources are centralized and provided to government agencies on an as a service subscription model basis. From here, the executive explains, it is the role of the IDA to conceptualize, define, and implement a central government cloud to facilitate government agencies adoption of cloud computing. This central, private government cloud, the so-called G-Cloud, says Kang, will become the core of the next `whole-of-government infrastructure. United Kingdom: In the UK, the country published its Digital Britain report in 2009, a document outlining that nations roadmap for assuming and maintaining a leadership role in an increasingly digital global environment.
Where the investment is going

Thirty-eight percent of government respondents say their investments will skew toward Software as a Service (SaaS). While less frequent, investments in Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) were cited by more than a quarter of government respondents. Figure 19: Preferred type of cloud environment Which of the following cloud environments will your organization most likely invest in?
Software as a Service (SaaS) 38%
Platform as a Service (PaaS) Infrastructure as a Service (IaaS) No plans to invest 9%
28%
26%
Dont know 0% 5% 10% 15% 20% 25%
28% 30% 35% 40%
Canada: Shared Services Canada is a government agency focusing on identifying and realizing savings and efficiencies across the Canadian Federal Government. Announced in August 2011, the initiative aims to cut the total number of government data centers from over 300 to 20, while paring down the number of email services from 100 to only one. Cloud-based processes and technologies, says KPMGs Cochrane, will necessarily play a prime role. United States: In July 2011, the US Office of Management and Budget added considerable substance, accountability, and transparency to its November 2010 Cloud First policy announcement, which requires agencies to give priority to web-based applications and services. In a speech given by OMBs Chief Performance Officer, it was officially announced that as of budget year 2012, allnewfederal government IT deployments must adopt cloud technologies wherever a secure, reliable, cost-effective cloud option exists. 2 South Africa: While the country faces a huge challenge in that the state of readiness of its computing infrastructure, of its citizens, and its government, isnt quite cloud-ready, says Isaac Mophatlane, Chief Executive at systems integrator Business Connexion Group LTD, the executive does believe that state agencies are now moving on developing standards that will help catalyze change. Consumer adoption and telecoms infrastructure will also play a part. South Africa is one of the fastest-growing markets for BlackBerry and for Apple, notes Mophatlane. As citizen demand for mobile technologies increases, infrastructure will tend to grow in lockstep. So conditions for cloud in government are improving.
The rise of the Digital Economy Governments around the world are seeking to digitize their economies to connect all members of society through access to and the sharing of digital content via the internet from anyplace at anytime to work, play, consume and learn. Cloud is a platform that, when combined with the internet and a growing access to powerful personal devices, will make the Digital Economy truly possible. And while government executives will need to pay close attention to the security of information and services as well as the privacy of personal data, the increasing demand for cloud services will also drive rapid evolution of security and privacy capabilities. Ultimately, we expect to see the development of powerful identity management solutions that will prove more effective than any single organization could achieve on its own.
Ken Cochrane KPMG in Canada
2 Speech by Jeff Zients, chief performance officer and deputy director for management, the US Office of Management and Budget, at the Northern Technology Council, Vienna, Va., July 2011.
Public vs. Private: Cloud adoption

According to respondents, publicsector adoption rates are expected to continue to lag those of the private sector through 2012. But what about over the longer term? Governments sheer size, says KPMGs Cochrane, means in the early stages of adoption, they will tend to plan carefully and move a little slower than the private sector.
Adoption will come

Cloud adoption rates are poised to accelerate within government in some casesdramatically. For example, only 12 percent of government executives say that over 10 percent of their agencies overall IT expenditures will be on cloud in of 2011. However, by the end of 2012, this figure is anticipated to more than double to 28 percent (Figure 20). Interestingly, many of the same forces that are hindering cloud adoption rates in government today could lead to exponential growth in both scale and scope in the years ahead. Some of the preliminary tasks currently slowing government adoption rates (such as developing standards, modules, and even approved vendor lists) will arguably accelerate deployment of future cloud-based infrastructures, applications and services. At the US GSA, for example, weve set up an Infrastructure as a Service (IaaS) procurement vehicle, says McClure. It states how other groups can order what they need very fast and very simply. For needs like storage, hosting or virtualization, the offering is well developed, the vendors pre-vetted with a security accreditation, and the pricing is volume-based, and transparent. Greater adoption of standardization and vendor interoperability will help to accelerate cloud evolution. As SAPs Welz explains, the value of a solution is much greater if its an integral part of the whole. Point solutions may be the most frequent path towards cloud today, but what customers soon learn is that further integration is vital.
By some measures, government adoption couldsoon overtake the private sector.

John Hermans, KPMG in the Netherlands
Figure 20: Cloud budgets 2011 versus 2012 What do you estimate your organization will budget for cloud as a percentage of your annual IT expenditures in each of the next 2 years?
0% 1-2% 3-5% 8% 5% 14% 7% 18% 14% 16% 14% 8% 17% 4% 11% 31% 32% 0 0% 5 5% 10 10% 15 15% 2011
6-10% 11-20% > 20% Dont know
20 20% 2012
25 25%
30 30%
35 35%
CASE 3: Australias pursuit of open government

According to Ann Steward, Australian Government Chief Information Officer and Deputy Secretary, Department of Finance and Deregulation, for the past few years, weve been working on IT reform, looking for ways to ensure efficient management and procurement. This includes taking a look at everything from software licensing and data centers to telecommunications. Thus far, over A$1 billion in savings has been realized. But another large part of Stewards role is to coordinate and develop policies and strategies to use and exploit emerging technologies. And in this instance, Steward explains, Cloud is a very important piece of work. We have released the Australian Government Cloud Computing Strategic Direction paper which outlines that Australian Government agencies may use cloud services if they represent value-for-money and are adequately secure. The Strategic Direction paper outlines a range of deliverables including good practice guides to assist agencies considering cloud options, and investigation of sourcing models for cloud services. In general, says Steward, her team is working with other agencies to explore a range of approaches, including open source programing and cloud environments, in order to facilitate a more open government. In particular, says Steward, The government has stated its intention to be more open and collaborative and engaging with citizens. Getting it done, however, requires attention to a range of details. One of the most important areas of focus, she maintains, is guiding various government agencies toward better staging of cutting-edge IT skills. The various government groups need to position themselves align skills as best as they can in these evolving IT professional competencies. Another vital focus is closer collaboration among government, corporations and providers of information and telecommunications technologies. We have an information and communication technologies (ICT) community made up of very large MNCs (multinational corporations) and SMEs (small and medium-sized enterprises) says Steward. We engage very directly with industry so we can take account of their strategic product or service directions so we can better tailor our own approach. Were sitting around the table with those who are building or using these technologies, working through what should be the standards, the practices, the common understandings, and that helps to shape the direction. One key area relates to evolving service level agreements. Steward says that cloud providers need to be very clear about what theyre providing, what is expected and how it will be paid for. The industry, Steward insists, needs to clearly demonstrate that their contracts and pricing are truly flexible and enable true scalability. This is not outsourcing this is a new model. Overall, says Steward, the Australian Government is going to be taking on some very big reform agendas. Staying on top of the risks and opportunities in cloud environments, says Steward, is one of the ways we can enable that.
The transformation agenda

The benefits of cloud may be truly transformational for the public sector, but the jury still seems to be out. Governments could expend fewer resources managing infrastructure services, enabling more focus on accomplishing their true mission and goals. And, as the adoption of cloud shifts from concept to implementation, innovation is very likely to emerge as a by-product of the process.
Creating a cloud-infused government

For some governments, process transformation is expected as a result of moving to cloud. Twenty-eight percent indicate that cloud will fundamentally change their business model. Thirty-nine percent say it will change the character of interaction with constituents/citizens, stakeholders and suppliers (Figure 4). But, as Australias Steward points out, all of the potential benefits of cloud are predicated on government agencies and technology providers working together to enable transformation. Everything the cost savings, the capital expenditure reductions, the efficiency, quality, and security improvements is contingent on everyones ability to move to a more service-based model. Its getting to a buy-on-demand for additional capacity as-needed model that will lead to the benefits and the innovations of cloud. Canadas McKerlie believes that cloud environments have the potential to thoroughly transform both processes and services. Internally, for example, cloud could revolutionize the way various agencies manage software. While the current tendency is to hold more licenses than are needed, McKerlie believes that by harnessing cloud his organization will be able to bring people in and out of a service quickly and efficiently and pay only for the number of licenses that were actually using. Moreover, says McKerlie, such a process model might be leveraged by other, smaller government groups or even quasi-government entities. We have over 300 agencies in the Ontario Provincial Government. And then theres the broader public sector, the school boards, hospitals, universities, colleges, and childrens aid societies. Deploying cloud capabilities across an array of organizations, he says, could present an enormous opportunity.
Driving innovation
The move towards cloud-enabled government may generate significant opportunities for government to innovate. For example, Canadas McKerlie sees potential for innovation in the way that government shares and harnesses data. There are literally terabytes and terabytes of information: mapping, overlays, everything from mining and mineral rights to land-based features for building, Ministry of Natural Resources information on waterways, where there are good fish stocks or where there are problems. Making such data accessible beyond government firewalls, says McKerlie, could lead to new applications, solutions, or other innovations.
Along these same lines, Australian Government CIO, Ann Steward offers up the example of the nations Bureau of Statistics. According to Steward, the Australian Bureau of Statistics has transitioned its traditional IT infrastructure to a private cloud platform and is currently developing a Platform as a Service (PaaS) environment. In general, says David Wilde, CIO of the Essex County Council in the UK, government IT platforms of the future will have to embrace innovation. One of the most overlooked sets of opportunities, says Wilde, is the benefit achievable if government agencies could do more to blend with social media. Thats where the citizens are so we have to find ways to help make their interaction with government more seamless and integrated. We have to enter the exchange of ideas and services.
CASE 4: Security is everything United States (GSA)

For Dave McClure, Associate Administrator of the Office of Citizen Services and Innovative Technologies at the US General Services Administration (GSA), the biggest issue in cloud today is security. And overall, the executive believes that security can actually be enhanced with cloud, owing to the fact that cloud provider business models rely on security strengths. Nonetheless, says McClure, security is a moving target, and thus requires constant attention. McClure says that any time GSA awards a contract, cloud service providers face a long and tough accreditation and authorization process. This means an extensive battery of tests, including an assessment of access controls, to show the provider is paying attention to the sorts of risks that matter to us. The GSA is hoping the industry is shifting toward continuous monitoring with real-time alerts rather than after-the-fact audits. We want systems and applications and infiltration security so were on top of any breach as fast as we can be, he explains. But while the executive is clear in his expectations, he remains realistic. The fact is, says McClure, just because someone can meet a security requirement as defined, that doesnt make you invulnerable. Youre never invulnerable. So in the security space, says McClure, you need multiple levels, including technical controls, operational controls, and policy controls. Moreover, these must be used in concert with robust, continuous monitoring of an organizations real-time security posture. Beyond security, McClure says he is looking for providers with clear ideas on how to manage cloud within a wider, legacy environment. We have infrastructure and data centers that will not go away overnight and, in fact, some legacy systems may never be ripe for cloud, says McClure. So an area where were looking for insight is: how can we most effectively manage these hybrid cloud/non-cloud situations?
Getting there: six tips for creating traction

Based on survey results and experience, six steps have been identified that government agencies should take to gain a better understanding of how cloud will impact their organization. 1. Adopt a comprehensive approach As public-sector executives first approach cloud, there is a natural tendency to perceive the work as primarily IT-centric. But in reality, cloud is being driven by an ecosystem of participants that stretch well beyond IT. In order to gain a stronger grasp of the challenges and potential of cloud, it becomes vital to think of the evolution of cloud from the perspectives of three essential stakeholders: service providers, core process owners, and IT. While this will often require cooperation, agreement and compromise along with intensive focus and hard work, the main challenge going forward will be to balance the various stakeholders objectives, needs and wants against real capabilities and risks for the organization. 2. Apply leadership Government agencies tend to be risk-averse. Moreover, they like to maintain control and protect local resources. Consequently, says KPMGs Cochrane, the highest levels of government will need to launch strong initiatives such as Cloud First, Digital Britain and Shared Services Canada to get things moving. But governments should not underestimate the degree of motivation that will likely be required. The need for cultural change cannot be understated. Some groups will be resistant to the changes in roles and responsibilities that cloud will bring. Initiatives to drive cloud, says Cochrane, need clear and visible top-level direction behind them to reinforce and support the changes. 3. Balance risk and reward As with any adoption of new processes and technologies, there are risks. However, cloud providers and end-users are increasingly working together to use cloud in ways that actually enhance the ability to manage key risks in areas such as data privacy and security. In short, says Iain Gravestock, Government agencies should be aware of risks, but they should not be using the mere existence of risk as an excuse for doing nothing.
4. Create centers of excellence Many government respondents say that their organizations are moving to develop standards and certifications that will make it easier for additional agencies or programs to proceed more confidently with their own cloud deployments. The more that governments can create such centralized capabilities, the more rapidly cloud concepts can be harnessed by a wider array of agencies.
Open access to the cloud

About a third of public-sector respondents say they hope to extend participation in their governments cloud environment to all citizens (32%). Meanwhile, 27% say that cloud will not be available to all, with 41% not yet certain which approach they will take.
Figure 21: Extending cloud to citizens Is your government entity (agency, ministry, etc.) planning to make a cloud environment available to all citizens?
Yes No Don't know 0% 10% 20% 30% 40% 27% 41% 50% 32%
5. Collaborate with providers An important consideration is determining whether or not a specific provider has the experience and capability to offer genuinely usage-based pricing based on flexible volumes. As Iain Gravestock explains, Not all of the technology companies are set up to deliver on-demand. Many still have some work to get their offering right and figure out their pricing. Pilot programs are one means of gaining this insight and building internal capability. Key government agencies should engage with providers in comprehensive forums to improve understanding and guide the fundamental strategic and technical evolution of cloud. 6. Collaborate with the private sector As cloud takes shape, private industry will begin functioning in new, more efficient and decidedly innovative ways. Government agencies should actively collaborate with business as a means of understanding, responding to or in certain cases influencing technological developments. Such collaboration cannot only help make the provision of government duties and services more relevant, but also more efficient and effective.
CASE 5: A leader in technology presses forward Singapore

Singapore is a nation that prides itself on leadership in all things technological. James Kang, is the Chief Executive at the Infocomm Development Authority (IDA), the agency that is driving the government of Singapores forays into cloud environs. According to Kang, the key factors driving the pursuit of a cloud environment involve leveraging the benefits cloud computing provides, such as increased business agility, higher levels of system resilience, and an optimized utilization of computing resources. He expects that the quality of services will improve and cost savings will accrue as a result of these benefits. The overall cloud strategy for Singapores government is to deploy the appropriate cloud for the appropriate need by adopting a multi-prong approach to cloud computing. Specifically, the nation intends to: Leverage commercially available public cloud offerings where appropriate so as to benefit from the lower cost of computing resources Implement a private government cloud (Central G-Cloud) for whole-of-government use where security and governance requirements cannot be met by public clouds Enable interoperability within the whole-of-government. (In practice, agencies may set up their own clouds to address specific needs that cannot be met by public clouds or the central private government cloud). The key challenges, says Kang, lie in defining the extent of security and governance requirements. While private clouds better address security and privacy concerns, the challenge is to meet this and yet still reap the benefits of public cloud infrastructure, such as economies of scale. The other challenge, says Kang, is the usual resistance to change. But in todays world of rapid changes and increasing competitiveness, maintains Kang, the risk of doing nothing is too high a price to pay. As for the various subcategories of cloud-based offerings, the priority for Singapore is to implement Infrastructure as a Service (IaaS) to provide efficient, scalable, and resilient cloud-computing resources designed for government requirements of performance, governance, and security. Then, to further aggregate whole-of-government demand to maximize cost savings, says Kang, the government will identify and provide common services, such as customer relationship management and web content management, as Software as a Service (SaaS) offerings on G-Cloud. The nation will then look at implementing development and deployment platforms (PaaS) in a later phase. Moving forward with Singapores ascent into cloud, Kang explains, entails a focus on performance metrics. For individual agencies, the metrics will include cost savings, shorter system development times, and higher levels of resilience, says Kang. Meanwhile, for the government private cloud, the metrics will include adoption rates as well as agency satisfaction, says Kang.
Conclusion
The time to explore cloud is now. The era of cloud has arrived and with it a host of opportunities for forwardlooking government executives. Cloud environments may represent a paradigm shift in the management of IT. Through cloud, government agencies could streamline their IT footprint while reducing ongoing costs and achieving greater scalability and responsiveness. Clearly, the full promise of the cloud is not yet being fully realized. Providers are still working out the challenges in service provision and public sector leaders are still kicking the tires and approaching the move with caution, requiring significant benefits in order risk the change. Regardless, the question isnt whether governments will adopt cloud or not, but how far and how fast will they go? A KPMG member firm can help your organization assess its specific situation and cloud readiness. Please contact your local KPMG representative for more information.
Insights and implications

KPMG initiated this research in an effort to better understand the underlying challenges and opportunities presented by cloud technology. Based on that knowledge, we have developed a Whats Next? guide to help governments to ensure that the opportunities presented by cloud are leveraged, challenges are monitored and mitigated, and results are measured and evaluated. For government leaders Identify gaps in your processes and determine if and how cloud can help fill those gaps. Evaluate collaboration and information exchange needs with providers, constituents and stakeholders, and other agencies. Are there areas where information exchanges could be migrated to a cloud environment? Could they be converted to new opportunities to improve the efficiency and quality of services? Assess the economics and risk profile of a private versus public cloud. The differences can be significant, based on an organizations requirements; the risks, such as security, need to be actively managed. Estimate risks versus potential rewards using tools like cost-benefit and ROI analysis. Understand where the cloud provider internal or external will force organizational process changes, assess the change management implications, and plan. Are there any organizational redesign factors to consider? Does your current operating model support the cloud migration plan? If not, have you properly designed your target operating model? Validate cloud-computing cost-savings claims for your organization. Test these claims against total cost of ownership, including the cost of compliance and related change management implications (vendor estimates can vary widely). Test the customization needs of your agency. A general rule of thumb: the more customization required, the less likelihood of cloud success. Is the desired customization critical? What are the trade-offs? Identify business integration issues in your entity, with specific emphasis on data that is now scattered across the enterprise. Understand how the data architecture must evolve to address cloud, inter-cloud and inter-enterprise operability. Assess internal staff, current roles and responsibilities, change management needed, and how well current skills map to the cloud model being designed or implemented. Consider where a cloud program fits within the existing capital budgeting and approval process. Will it exist outside existing governance models? What mechanisms are in place to ensure adequate or mandated governance?
Determine how operating continuity and disaster recovery will factor into your cloud migration strategy. Understand the contracting process, the degree of flexibility both your organization and the provider require, including contract length, scope, and coverage, liabilities, indemnifications, contingencies, changes in external or internal circumstances, etc. Remember to consider service level agreements and how they will be managed. Are the right mechanisms in place with your current vendor management strategy to effectively manage cloud projects? Assess your vendor management risk strategy in the context of current and future cloud technology. Vendors will evolve to leverage new technology and to enable new cloud delivery models; this may result in significant financial and operational impact on their costs and their ability to provide services. Evaluate the vendors financial ability to restructure its business model and the impact that would have on your organization. Determine assurance reporting needs you will require from your cloud vendor. What worked for outsourcing may not provide the assurance you need in a cloud environment. Assess whether it is sufficient to test an entire process versus a single transaction. Dont forget the new reality of a commingled world of cloud: internal audit, global security, regulatory implications of data-privacy, storage, co-location, etc. How do you effectively and accurately audit all these areas under cloud? How do you ensure all regulatory requirements are met? What internal controls over data security need to be implemented, for example, sharing of data encryption keys internally and with a vendor, how to report data breach disclosures, etc.? For government IT professionals Work closely with agency and process leaders to develop a comprehensive cloud strategy and plan of action. Early in the process, create the enterprise vision and roadmap for cloud. Identify proof-of-concept opportunities to leverage. Assess whether your technology platforms are an accelerator or inhibitor to your corporate strategy. Educate relevant executives on clouds realistic capabilities and potential from an IT perspective. Deploy competent specialists to study the cloud market, its capabilities, offerings, and providers. Evaluate the interoperability of cloud solutions against current applications, platforms, and infrastructure. Assess their readiness for cloud migration. Ensure the assessment is objective.
Redefine the role of the CIO as it evolves from IT provider to chief integration officer, who has the opportunity to drive process models and innovation. Develop plans to align with various scenarios for cloud adoption and deployment across each cloud layer and across different IT and business operating areas. Interpret cloud services and capabilities planning in the context of your third-party provider contracts. For example ramping capacity up and down while technically feasible may not be covered in the contract. Design, develop and deploy operating governance and risk management programs from the IT perspective of cloud-computing services. For agency professionals and process owners Work closely with IT leadership to develop a comprehensive cloud strategy and plan of action to ensure critical integration points are managed and to help ensure all opportunities for efficiencies and effectiveness are leveraged. Focus on the process value and potential of cloud over its technical capabilities or merits. At the same time, work with the IT organization to avoid pockets of capabilities that will create disparate data sets to manage. Develop policies and checks to ensure that all groups implement cloud-based processes in close collaboration with the IT group. Assess the implications of deploying applications that are more standardized and less customizable: do the benefits of a standardized process outweigh the costs of customization? Develop various scenarios for cloud adoption and deployment across relevant and affected processes. Evaluate cloud capabilities benchmark cloud usage among other agencies and even private enterprise to assess opportunities for improvement in core activities, provisioning or other processes. For cloud service and technology providers Avoid overpromising; in this fast-moving market, failures will prove costly. Where possible, over-deliver. Positive word-of-mouth, an early adopter market and a high level of risk avoidance and tight budgets will channel opportunities to established, documented providers. Be realistic on cost-savings claims; provide examples with applicable documentation, and ensure appropriate performance measures. Monitor results to increase likelihood of achieving anticipated savings. Develop contracts and pricing that deliver true flexibility and scalability. Educate customers and prospects on the benefits of cloud. Relatively intangible benefits such as optimization, agility, and innovation may require real world examples. Moreover, such benefits are not always equally shared between an IT department and its corresponding front-line government functions.
Assess and be proactive about communicating with clients the challenges they may face from rapid and multiple cloud investments and deployments. Assist in developing an integration roadmap with existing infrastructure and other cloud offers. Plan to continually address ongoingintegration cloud-to-cloud/cloud-to-enterprise requirements. Address security and data ownership concerns. Assist clients in developing new KPIs to measure their investment. Measurements may include increased efficiency, reduced cost, improved productivity and higher adoption rates. Optimize your business model in key areas such as customer management, risk and compliance, revenue recognition and tax structures. Recognize that although a wider international footprint increases complexity, it also tends to expand the potential benefits of a more optimized approach. For risk professionals, and internal advisory committees Ensure adequately skilled professionals are in place to assess and monitor the risk and controls management aspects of cloud. Embed risk and controls consideration in cloud selection processes. Understand that traditional IT controls protocols may be nonexistent in a cloud service provider and that funding, development and the implementation lifecycle may require a new governance model. Understand that users have access to public cloud services. Policies and safeguards will be necessary to prevent commingling of data and applications. Involve risk and internal advisory groups in cloud services planning and vendor selection processes. Require regular reporting on risk and controls management monitoring in deployed cloud services. Evaluate how information will be secured and how privacy and confidentiality will be maintained. Determine how cloud-computing adoption will affect regulatory and compliance requirements. Establish a formalized assurance program, whether through internal audit or independent assurance reporting (SOC reports). Understand the global, regional and local implications of the cloud environment. For government groups that regulate or otherwise work with the private sector, this will include an appreciation for evolving tax treatments of cloud environments.
About the survey

The KPMG survey was conducted in 10 countries from February to May 2011 and canvassed 429 government executives as well as 808 private sector executives. A series of one-on-one interviews were also conducted with a number of government leaders around the world. Countries included in this survey were: Australia, Canada, Denmark, Italy, the Netherlands, Singapore, South Africa, Spain, the UK and the US. More than half (53 percent) of government respondents worked at the national level, and 31 percent of respondents had C-level titles within government. Almost half of the government respondents (46 percent) had budgets of US$1 billion or more and 23 percent had budgets of US$10 billion or more.
Additional reading
KPMG member firms have written of the transformative impact of the cloud in several prior publications including: The Cloud Changing the Current Business Ecosystem http://www.kpmg.com/IN/en/IssuesAndInsights/ThoughtLeadership/The_Cloud_ Changing_the_Business_Ecosystem.pdf The Cloud Transforms Business http://www.kpmginstitutes.com/financial-reporting-network/insights/2010/ business-implications-of-cloud-mark-goodburn-dec10.aspx From Hype to Future: KPMGs 2010 Cloud Computing Survey http://www.kpmg.com/ES/es/ActualidadyNovedades/ArticulosyPublicaciones/ Documents/2010-Cloud-Computing-Survey.pdf
Contacts KPMGs Government & Public Sector Practice is made up of a network of experienced professionals based in member firms around the world.
Global Chair Government and Infrastructure John Herhalt T: +1 416 777 8778 E: jherhalt@kpmg.ca Africa Tshidi Mokgabudi T: +27 11 647 7075 E: tshidi.mokgabudi@kpmg.co.za Argentina Claudio Boueke T: +54 1 14 316 5713 E: cboueke@kpmg.com.ar Australia Michael Hiller T: +61 7 3233 3299 E: mhiller1@kpmg.com.au Brazil/Latin America Mauricio Endo T: +55 11 3245 8322 E: mendo@kpmg.com.br Canada Archie Johnston T: +1 604 527 3757 E: agjohnston@kpmg.ca Ken Cochrane T: +1 613 212 5764 E: kcochrane@kpmg.ca Central and Eastern Europe Miroslaw Proppe T: +48 604 496 390 E: mproppe@kpmg.pl
France Pierre-Mathieu Duhamel T: +33 1 55 68 86 50 E: pmduhamel@kpmg.fr Franois Caubriere T: +33 1 5568 9006 E: fcaubriere@kpmg.fr Germany Ulrich Maas T: +49 30 2068 4888 E: umaas@kpmg.com India Navin Agrawal T: +91 22 3090 1720 E: navinagrawal@kpmg.com Ireland Paul Toner T: +353 1 410 1277 E: paul.toner@kpmg.ie Italy Roberto Jannelli T: +39 06 8097 1419 E: rjannelli@kpmg.it Franco Perone T: +39 06 8097 1439 E: fperone@kpmg.it Malaysia Woon Tai Hai T: +603 7721 3388 E: thwoon@kpmg.com.my
Mexico Alejandro Villarreal T: +52 55 5246 8371 E: avillarreal@kpmg.com.mx Netherlands Wouter Bos T: +31 20 656 7428 E: bos.wouter@kpmg.nl Wim Touw T: +31 70 338 2176 E: touw.wim@kpmg.nl Panama/Central America Hctor Castillo T: +50 7 208 0700 E: hcastillo@kpmg.com Spain Candido Prez Serrano T: +349 1451 3091 E: candidoperez@kpmg.es Singapore/Asia Pacific Satyanarayan Ramamurthy T: +65 6213 2060 E: sramamurthy@kpmg.com.sg United Kingdom Alan Downey T: +44 20 7311 6541 E: alan.downey@kpmg.co.uk United States Nancy Valley T: +1 518 427 4610 E: navalley@kpmg.com
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. 2012 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. Designed by Evalueserve. Publication name: Exploring the Cloud: A Global Study of Governments Adoption of Cloud Publication number: 120108 Publication date: February 2012

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GOVERNMENT

Exploring the Cloud

Access Cost savings

Digital economy e-government Public Sector

b | Exploring the Cloud: A Global Study of Governments Adoption of Cloud

Exploring the Cloud: A Global Study of Governments Adoption of Cloud | 1

Ken Cochrane Partner KPMG in Canada

4 | Exploring the Cloud: A Global Study of Governments Adoption of Cloud

Exploring the Cloud: A Global Study of Governments Adoption of Cloud | 5

Introduction: the evolution of cloud-enabled government

6 | Exploring the Cloud: A Global Study of Governments Adoption of Cloud

Source: KPMG in the US 2011, Cloud environment

Exploring the Cloud: A Global Study of Governments Adoption of Cloud | 7

CASE 1: Ontario, Canada examines the benefits

8 | Exploring the Cloud: A Global Study of Governments Adoption of Cloud

Governing from cloud

How the public sector is taking advantage of cloud technology

Exploring the Cloud: A Global Study of Governments Adoption of Cloud | 9

Public, private or hybrid cloud?

Source: KPMG International 2012, Government Cloud Survey

10 | Exploring the Cloud: A Global Study of Governments Adoption of Cloud

80% Private sector

Exploring the Cloud: A Global Study of Governments Adoption of Cloud | 11

Public vs. Private: Impact of cloud

80% Private sector

10% 10% 20%

40% Private sector

12 | Exploring the Cloud: A Global Study of Governments Adoption of Cloud

Who will lead?

Source: KPMG International 2012, Government Cloud Survey

Exploring the Cloud: A Global Study of Governments Adoption of Cloud | 13

Neither important nor unimportant

14 | Exploring the Cloud: A Global Study of Governments Adoption of Cloud

Exploring the Cloud: A Global Study of Governments Adoption of Cloud | 15

Source: KPMG International 2012, Government Cloud Survey

16 | Exploring the Cloud: A Global Study of Governments Adoption of Cloud

Ensuring security and building trust

30% Private sector

Figure 14: Security concern by size of organization

43% 45% 40% 50% 56%

Exploring the Cloud: A Global Study of Governments Adoption of Cloud | 17

The value of certifications

Certication by government body

10% No 40% No 90% Yes 60% Yes

Under 1,000 Employees

Over 1,000 Employees

All Public Sector Respondents

Certication by independent, non-prot body

37% No 63% Yes 72% No

Under 1,000 Employees

Over 1,000 Employees

All Public Sector Respondents

Certication by independent, for-prot body

30% Yes 70% No 72% No

28% Yes 62% No

Under 1,000 Employees

Over 1,000 Employees

All Public Sector Respondents

Source: KPMG International 2012, Government Cloud Survey

18 | Exploring the Cloud: A Global Study of Governments Adoption of Cloud

Unique challenges for the public sector

Exploring the Cloud: A Global Study of Governments Adoption of Cloud | 19