Why measuring total cost of ownership for cloud services matters

For many agencies, cloud services are like a smorgasbord, once you start consuming, it’s hard to stop.

With each major cloud provider spending approximately $1 billion a month on adding new services and capabilities, it becomes difficult to stop going back for seconds.

“Once you’re in, and you’ve gotten through all the hurdles of security and finance and CIO consistency and mission assurance, like once you’ve gotten in that environment, the lift to do the next thing that is available to you is so much lighter,” said Tom Greiner, senior managing director and technology lead at Accenture Federal Services, on the Managing cloud services, measuring their value. “It’s not another year-long procurement. All of that goes away, it’s just consuming the next service and the next one and the next one and plugging the three together that make the most sense.”

And like with any smorgasbord, if you eat too much, you eventually will feel sick.

This is why agencies need manage their cloud services, measure the benefits and have a framework to understand the total cost of ownership.

Greiner said agencies are especially taking advantage of software-as-a-service (SaaS) offerings because of the agility and speed to capabilities it offers.

“Agency chief information officers are allowing their mission customers to consume them at will,” he said. “There aren’t as hard a set of gates around security and consistency and the proliferation of cloud sprawl, which does happen and is a consideration in the infrastructure- or platform-as-a-service space.”

Cost savings, more predictable spend

As the momentum to move more and more workloads and applications to the cloud, agencies must do more to manage their costs, guarding against violating the Anti-Deficiency Act or burning through all their funding in six months instead of a year.

Greiner said understanding the cost of the cloud services usually is the first area agencies focus on.

“I think an overriding theme as agencies with seasonal missions are increasingly looking to cloud to help level out and make more predictable that spend, and they no longer need to build for the worst hour on the worst day, and hope they got enough,” he said. “Healthcare.gov is a great example. There’s clearly a massive surge around the first few days of open enrollment in the last few days of open enrollment. Those are well known and predictable. But the Centers for Medicare and Medicaid Services moved from two private cloud providers into the public cloud and that enabled them to handle those surges through elastic compute at a much lower cost point than they would have having to build for the worst hour of the worst day.”

Another example is the Education Department’s Federal Student Aid Office. He said not only is FSA measuring the cost, but also the additional capabilities that come with cloud services.

“First, they saved money on the infrastructure move alone. Second, they realized once they’re there, they can start taking advantage of artificial intelligence and national language processing services that were native to the AWS platform, so they could offer a chatbot,” Greiner said. “They launched a chatbot called Aidan and offloaded call center traffic to the chatbot. To date, FSA has offloaded single digit millions of calls, which has significant financial benefit to them.”

The goal for CIOs and mission owners is to match the service that they need with the cloud configuration that makes the most sense.

Digital transformation comes from cloud

Greiner said the cloud is giving agencies an opportunity to reinvent their processes and how they serve their customers.

“I think they are increasingly looking at old to new, like total cost of operation as opposed to just what did it cost to move this app? Or what is it cost to keep these servers up? I think if they look at the total cost of mission delivery and those agencies, frankly, that are leaning in harder to the cloud, it takes a little leap of faith to maybe not go all in but 70% into the cloud or 50% into the cloud versus dabbling as an experiment,” he said. “But those who are going in pretty heartily, I think are seeing notable returns in total cost of operation and that would be a combination of personnel costs, contractor costs, facility costs, IT costs, software costs, and other costs.”

He said it’s important for agencies to look at the entire picture, not just a segment of the total costs of ownership, which tends to happen when agencies “dabble” in the cloud.

Part of understanding that total cost of ownership is for agency CIOs to work with CFOs and the mission side through a framework like Technology Business Management (TBM) to break down the data.

Greiner said that way agencies can measure the costs and benefits outside just the technology realm.

“What we’re again seeing with a stronger mission bias is the CIO, and the chief information security officer agreeing on the prerequisites of the platform that they are going to build and where they’re going to build it and secure it. They’re going to tightly control it so the mission side will do it their way to consume the services,” he said. “But other than that, beyond the route control, they will say go build your own landing zone and put your hosted application in that environment to drive whatever value makes sense to you. The mission and the CFO are increasingly at the table at the conversation of what are we doing? Why are we doing it? What’s the return on taxpayers spend? How it will impact the budget requests for the next 2-3-4 years? And increasingly, how do we defend that to OMB on the Passback and make sure they understand that this is good use of taxpayer dollars?”

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