Infrastructure as a Service in the Government
Government IaaS Contracting
Cloud Computing challenges the service delivery capability of many IT service providers, especially the financial issue of infrastructure costs and revenue models.

The Government IT community has been moving toward IaaS for many years, but the pace has recently quickened as cloud computing has gone mainstream. Key drivers behind this shift from novelty to mainstream include ever-shortening product lifecycles (obsolescence), severe capital funding shortfalls, and the need to focus limited government resources (people) on the task of providing service to its citizens. This “smart sourcing” mindset and the acceptance of COTS infrastructure as a commodity have driven government IT executives to shift ownership and operation of large IT infrastructures to the private sector.

For government contractors large and small, this trend represents a tremendous opportunity. First, IaaS raises the entire discussion level from commodity piece-parts to solutions. To the government, if you are just offering commodity items, and you are not the manufacturer, you’re just in the way. So, it’s solve or dissolve.

Second, IaaS does not just drag services; it is a service. The higher the service content, the better the potential value to the user, and of course the higher the margins. Leading with IaaS automatically kicks the discussion “upstairs” to the CIO level.

Third, a managed infrastructure, owned by the contractor, offers upgrade and refresh opportunities that simply do not exist in a reseller or pure services model. The government actually insists on these clauses, to enable price/performance improvements, new technology adoption, and to respond to inevitable change.

Finally, the omnipresent  end-user applications available today have driven the discussion of infrastructure ownership toward almost a complete disregard for where the applications and data are managed.  Security and chain-of-custody aside, users today are focused on access and results, not the "how" or "where".  Examples are mapping applications (google, Microsoft), and contact systems (Salesforce).  

Cloud Computing (intranet and extranet) offers the next logical progression of infrastructure outsourcing.  The model has evolved from managed services (customer-owned infrastructure on site, contractor managed) to hosting, application service providers and now shared services.  The Cloud Computing model challenges traditional service level agreements (SLAs) and typical "control" paradigms.

Central to the delivery of next generation Cloud Computing offerings is the cost and revenue model.  The financial approach requires capital investment and fast scalability.  The revenue model requires service-based cost recovery using a value metric that is easily understood by the customer.  High up-front capital investment and revenue based on usage or SLA require a sound financing plan.  

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