exploring the cloud – a global study of government’s adoption of cloud[1]

Government

CloudAccessInformation

Servers

Security

Data

Web-based

Storage

Collaboration

Digital economy

EfficiencyUsersApplications

Cost savings

Citizens

e-government

Risk mitigation

On-demand

Network Services

Transformation

Public Sector

Innovation

GOVERNMENT

Exploring the Cloud

A Global Study of Governments’ Adoption of Cloud

kpmg.com

http://www.kpmg.com

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 cloud’s 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 this paper.

John HerhaltGlobal ChairKPMG Government & InfrastructureKPMG International

Ken CochranePartnerKPMG in Canada


Table of contents

Executive summary 4

Introduction: the evolution of cloud-enabled government 5

Governing from cloud 8How the public sector is taking advantage of cloud technology 8Drivers of change 9Ensuring security and building trust 16Unique challenges for the public sector 18

A clear mandate: adopt cloud! 21A world of progress 21Cases in point 27Adoption will come 29

The transformation agenda 31Creating a cloud-infused government 31Driving innovation 31

Getting there: six tips for creating traction 33

Conclusion 37

Insights and implications 38

About the survey 42

Additional reading 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 answer with this report. Working in conjunction with Forbes Insights, close to 430 public-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

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 methodologyThe information in this report is based on the results of surveying 429 government executives and managers in 10 countries, as well as 808 executives 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:

• Sizeoforganization: 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.

• Levelofgovernmentandtitle: 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.

Cloud Hosted IT services delivered on a shared, internet-based platform.



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.

Opportunities to LeverageCommoditized Enterprise

Applications andEconomies of Scale

Virtualized Business Models

Speed to Market ImproveWorking Capital

Reduce InvestedCapital

Reduce Cost ofGoods Sold

Reduce General and Administrative

Costs (SG&A)

CloudEnvironment

Internet-based dataaccess and exchange

+= Internet-based access to low-costcomputing and applications

Figure 1: Cloud environment

Virtualized Technology

VirtualizedProcesses

VirtualizedOrganization

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.

CASE 1: Ontario, Canada examines the benefitsCanada’s 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 he’s keen to learn is “whether or not there’s 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 it’s been a great opportunity.”

The work-to-date centers on accessing and managing common shared services like email and collaboration tools. And in McKerlie’s opinion, so far, the project has been a success. Now, says McKerlie, “we’re 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. “We want to make certain not only of what we think we know, but of what we 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. “We’ve 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 public-sector entities or agencies with the services they need.”

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 function’s ability to focus on developing stronger programs and services for citizens, businesses, and other stakeholders.



Figure 2: Evidence of a shift to cloud

29%

24%

19%32%

35%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Government/Public sector Private Sector

Partial Implementation

Testing of a proof of concept

Developing a strategy 38%

Which of the following activities has your organization undertaken as part of its move toward adopting/implementing a cloud environment?

Public vs. Private: Exploring cloud

When it comes to exploring the opportunities of cloud, the public sector seems 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 percentage points.

Governing from cloud

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).

Source: KPMG International 2012, Government Cloud Survey KPMG International 2011, Clarity in the Cloud



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?

0% 5% 10% 15% 20% 25% 30% 35%

Private cloud

Public cloud

Hybrid cloud

Community cloud

No plans to adopt cloud

Don’t know

32%

22%

26%

13%

8%

23%

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).



0% 10% 20% 30% 40% 50%

It will fundamentally changeour business model

It will accelerate time to market

It will change our interaction withcustomers (i.e., constituents/citizens)

and suppliers

It will provide management withgreater transparency on transactions

It will reduce costs

Other (Please specify)

No significant impact

Economic driversGovernments 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 yourbusiness model/operations?

28%32%

39%39%

37%32%

50%50%

24%35%

18%12%

3%1%

Government/Public sector Private sector


Seventy-six percent of government respondents describe cost and related economic factors as either extremely important (41 percent) or important (35 percent) to their organization’s 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 organization’s adoption of a cloud environment?


0% 20% 40% 60% 80% 100%

41%37%

35%40%

19%19%

2%3%

2%2%

Extremely important

Important

Neither importantnor unimportant

Unimportant

Extremelyunimportant




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?


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?


0% 10% 20% 30% 40% 50%

11%

21%32%

27%

29%10%

43%

9%

Don’t know

1–10%

11–25%

More than 25%

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 public-sector respondents say cloud will make operations and performance more transparent to management, versus 32 percent in the private sector.


0% 20% 40% 60% 80% 100%

Yes

No

73%75%

27%25%




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 Officer – CIO

Chief Technology Officer – CTO

Chief Operations Officer – COO

Chief Executive Officer – CEO/Minister/Secretary

Chief Financial Officer – CFO

EVP/SVP/Deputy Minister/Under Secretary/DG

Other C-level executives

Misc. Others (Senior Directors,Managers, Managing Directors, etc.)

0% 5% 10% 15% 20% 25% 30%

27%

15%

14%

10%

6%

6%

5%

16%




1 Mr. McKerlie’s full title: Deputy Minister of Government Services, Associate Secretary, of the Cabinet and Secretary of Management Board of the Cabinet.

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, “We’ve 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 aren’t 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 group’s 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 enterprise-wide 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


Technical factors (e.g., flexibility, scalability, simplicity, security, advanced technology)


39%37%

40%

18%16%

1%3%

2%1%

42%

0% 10% 20% 30% 40% 50%

Extremely unimportant

Unimportant

Neither important nor unimportant

Important

Extremely important


“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 need to ramp up fast.” Ann Steward Australian Government Chief Information Officer and Deputy Secretary, Department of Finance and Deregulation



Government/Public sector Private Sector

30%33%

40%44%

23%19%

5%3%

2%2%

0% 10% 20% 30% 40% 50%


Unimportant


Important

Extremely important

Strategic factorsAs Pat Howard, an IBM partner and VP for global services, maintains, “This opens up strategic avenues that weren’t there before. Among agencies and public sector initiatives, there will be a level of optimization, market responsiveness, and agility that governments just couldn’t 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


Strategic factors (e.g., process transformation, linkage to business/organization partners, speed to market/implementation, focus on core competencies)




Figure 11: Importance of strategic factors by size of government organization

How important are the following factors in driving your organization’sadoption of a cloud environment?

Strategic factors (e.g., business process transformation, linkage to business partners, speed to market, focus on core competencies)


Tracking ROIWhat 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?

49%

57%

28%

22%

2%

6%

20%

0% 10% 20% 30% 40% 50% 60%

Productivity

Cost

Revenue

Access to markets

Other (please specify)

Cloud ROI not measured

Don’t know


27%28%

42%35%

33%

30%44%

37%21%21%

16%3%

3%

2%0%

2%2%

2%5%

47%

Public sector with less than 1,000 employees Private sector with less than 1,000 employeesPublic sector with 1,000 or more employees Private sector with 1,000 or more employees

0% 10% 20% 30% 40% 50%


Unimportant


Important

Extremely important



Ensuring security and building trust

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, “aren’t 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?


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. “It’s 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 agency’s cloud provider, security is a strong competency. “Most government CIOs know their own security program’s 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.”

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.

47%

24%

24%

0% 10% 20% 30% 40% 50%

IT governance

Regulatory compliance

Security44%

14%

18%


Figure 14: Security concern by size of organization


24%

24%

0% 10% 20% 30% 40% 50% 60%

1,000 ormore employees

Less than1,000 employees 43%

45%


33%

56%



The value of certificationsSurvey 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 certification by different entities

If there were a certification of cloud services by the following entities, would it ease any of the concernsyou have about adopting a cloud environment for your organization?

Certification by independent, for-profit body

Under 1,000 Employees Over 1,000 Employees All Public Sector Respondents

All Public Sector Respondents

All Public Sector Respondents

Under 1,000 Employees Over 1,000 Employees

Under 1,000 Employees Over 1,000 Employees

Certification by independent, non-profit body

Certification by government body

No

90%Yes

60%Yes

10%

40%No

63%Yes

28%Yes

30%Yes

28%Yes

37%No

72%No

70%No

72%No

79%Yes

21%No

47%Yes

38%Yes

53%No

62%No




Many government decision-makers are still somewhat skeptical of outsourcing their data security to cloud. “Executives want assurances that systems will be up-and-running 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, there’s 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 there’s 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 overall risk-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 riskGovernments 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 don’t 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.”



Centralizedvs.regionalstrategiesWhile 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 UK’s Essex County CouncilDavid Wilde is the CIO for the Essex County Council in the To Wilde, fears about legislation like the US PATRIOT Act UK. This organization is responsible for many aspects of are misplaced. “Any government could step in and demand public sector service delivery, including schools, adult social access to information on its shores,” says Wilde. But care, environment and waste management, as well as the what’s refreshing about the PATRIOT Act is “that here’s a payment of certain types of benefits and the collection of government finally admitting what the rest of us already various revenues. According to Wilde, “Cloud is no longer know.” What government agencies should do, says Wilde, a promise – it’s a reality – and those in government can no is make certain their data resides in nations with sufficient longer afford to wait on the sidelines.” legal frameworks to ensure fair treatment, due process –

and damages when and if applicable. Such attributes will Wilde’s ideal IT environment consists of the following

tend to rule out any capricious data breaches. elements:

Of course, this rules out most of the developing world. “It begins with a model for service delivery that’s based

“I will allow data to reside in Poland; I will not put it out to on cost per user, per annum, and scales as needed.” From

some developing countries – not until they have suitable there, Wilde wants an infrastructure “that is available

legal frameworks, which is likely a long way off.” But whenever and wherever – office, home, or out and about;

that’s okay, says Wilde, “because owing to energy costs, interoperates across all of its subsystems rather than

you would want your data in more temperate climates being restricted within any silos; completely converges

anyway.” voice, data, and video on a single stack; and finally, enables integration with the full range of social media.” Wilde says that the Essex County Council is on track

to achieve his vision of the ideal IT platform by 2015. It sounds like a tall order. But according to Wilde, “its

Nonetheless, he insists, most of his group’s activities are by achievement is not as hard as people believe.” One of the

no means on the cutting edge. Rather, says Wilde, “all we’re biggest challenges is changing out legacy systems, both

really doing is following the private sector. Most of what we of the end-user and among providers. The migration can

want to achieve, they’re already doing by routine.” be expensive. But according to Wilde, the lower ongoing costs and superior flexibility of cloud-based models make Where Wilde’s group is breaking new ground is in its for an irresistible investment case. Operating in a cloud pursuit of government sector-specific solutions. As Wilde environment, says Wilde, is reducing his group’s operating explains, “you can’t buy a package to meet our needs in spending by 26 percent. In certain areas, the savings are social care, for example. So, we have to be the guinea pigs, even more compelling. For example, “You can save 40 driving the development.” But there can be advantages to percent or more by integrating voice, data, and video.” leading. “Because we’re the first to do something, we’re

in close collaboration with providers – and that means we Another challenge, says Wilde, “is sorting out the data

have a big say in how it will be designed and what it can security issues.” Here, many government groups say cloud

deliver.” isn’t yet secure enough for their needs. According to Wilde, however, with a little hard work and common sense, “the Are there dangers in moving so far and so fast? Wilde says he security issues can be reconciled.” In particular, says Wilde, acknowledges the risks, but finds them to be well understood “people should stop thinking of this as a technology issue and eminently manageable. “If we were to get it wrong – that – the technologies can deliver all the security you have now could be a problem.” The answer, according to Wilde: “We’ll and more.” The real challenge, says Wilde, is legal: “Which just have to make absolutely sure we don’t get it wrong.”nations will protect your data and which will not?”



UK Government G-Cloud StrategyIn March 2011, the UK Government published a Government Cloud (G-Cloud) Strategy, a sub-strategy of the UK government’s 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 to assess 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?

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Note: Country-specific responses are not statistically significant and should be used for directional purposes only.



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Figure 17: Country challenges with adoption

What do you believe are the top challenges or concerns your organization faces in adopting a cloud environment?



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Lack of customizationopportunities






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?



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Don’t know


Note: Country-specific responses are not statistically significant and should be used for directional purposes only.



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 nation’s roadmap for assuming and maintaining a leadership role in an increasingly digital global environment.

Where the investment is goingThirty-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?

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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 KPMG’s 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 OMB’s Chief Performance Officer, it was officially announced that as of budget year 2012, all new federal 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, isn’t 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, public-sector adoption rates are expected to continue to lag those of the private sector through 2012. But what about over the longer term? Government’s sheer size, says KPMG’s Cochrane, “means in the early stages of adoption, they will tend to plan carefully and move a little slower than the private sector.”

0 5 10 15 20 25 30 35

Adoption will come

Cloud adoption rates are poised to accelerate within government – in some cases dramatically. 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, “we’ve 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 SAP’s Welz explains, “the value of a solution is much greater if it’s 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.”

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“By some measures, government adoption could soon 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?




CASE 3: Australia’s pursuit of open governmentAccording to Ann Steward, Australian Government Chief Information Officer and Deputy Secretary, Department of Finance and Deregulation, for the past few years, “we’ve 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 Steward’s 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. We’re 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 they’re 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 Australia’s 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 everyone’s ability to move to a more service-based model. It’s getting to a ‘buy-on-demand for additional capacity as-needed model’ that will lead to the benefits and the innovations of cloud.”

Canada’s 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 we’re 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 there’s the broader public sector, the school boards, hospitals, universities, colleges, and children’s 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, Canada’s 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 nation’s 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. That’s 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 we’re 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 doesn’t make you invulnerable. You’re 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 organization’s 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 we’re 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 approachAs 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 KPMG’s 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 excellenceMany 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 cloudAbout a third of public-sector respondents say they hope to extend participation in their government’s 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.) planningto make a cloud environment available to all citizens?


41%

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5. Collaborate with providersAn 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 sectorAs 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 – SingaporeSingapore 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 Singapore’s 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 Singapore’s 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:

• Leveragecommerciallyavailablepubliccloudofferingswhere appropriate so as to benefit from the lower cost of computing resources

• Implementaprivategovernmentcloud(CentralG-Cloud)for whole-of-government use where security and governance requirements cannot be met by public clouds

• Enableinteroperabilitywithinthewhole-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 today’s 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 Singapore’s 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 forward-looking 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 isn’t 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 ’What’s 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 • Identifygapsinyourprocessesanddetermineifandhowcloudcanhelp

fill those gaps.

•Evaluatecollaborationandinformationexchangeneedswithproviders,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?

• Assesstheeconomicsandriskprofileofaprivateversuspubliccloud.Thedifferences can be significant, based on an organization’s requirements; the risks, such as security, need to be actively managed.

• Estimaterisksversuspotentialrewardsusingtoolslikecost-benefitandROIanalysis.

• Understandwherethecloudprovider–internalorexternal–willforceorganizational 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?

• Validatecloud-computingcost-savingsclaimsforyourorganization.Testtheseclaims against total cost of ownership, including the cost of compliance and related change management implications (vendor estimates can vary widely).

• Testthecustomizationneedsofyouragency.Ageneralruleofthumb:themorecustomization required, the less likelihood of cloud success. Is the desired customization critical? What are the trade-offs?

• Identifybusinessintegrationissuesinyourentity,withspecificemphasisondata that is now scattered across the enterprise. Understand how the data architecture must evolve to address cloud, inter-cloud and inter-enterprise operability.

• Assessinternalstaff,currentrolesandresponsibilities,changemanagementneeded, and how well current skills map to the cloud model being designed or implemented.

• Considerwhereacloudprogramfitswithintheexistingcapitalbudgetingand approval process. Will it exist outside existing governance models? What mechanisms are in place to ensure adequate or mandated governance?



• Determinehowoperatingcontinuityanddisasterrecoverywillfactorintoyourcloud migration strategy.

• Understandthecontractingprocess,thedegreeofflexibilitybothyourorganization and the provider require, including contract length, scope, and coverage, liabilities, indemnifications, contingencies, changes in external or internal circumstances, etc.

• Remembertoconsiderservicelevelagreementsandhowtheywillbemanaged.Are the right mechanisms in place with your current vendor management strategy to effectively manage cloud projects?

• Assessyourvendormanagementriskstrategyinthecontextofcurrentandfuture 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 vendor’s financial ability to restructure its business model and the impact that would have on your organization.

• Determineassurancereportingneedsyouwillrequirefromyourcloudvendor.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.

• Don’tforgetthenewrealityofacommingledworldofcloud:internalaudit,globalsecurity, 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• Workcloselywithagencyandprocessleaderstodevelopacomprehensivecloud

strategy and plan of action. Early in the process, create the enterprise vision and roadmap for cloud. Identify proof-of-concept opportunities to leverage.

• Assesswhetheryourtechnologyplatformsareanacceleratororinhibitortoyourcorporate strategy.

• Educaterelevantexecutivesoncloud’srealisticcapabilitiesandpotentialfromanIT perspective.

• Deploycompetentspecialiststostudythecloudmarket,itscapabilities,offerings, and providers.

• Evaluatetheinteroperabilityofcloudsolutionsagainstcurrentapplications,platforms, and infrastructure. Assess their readiness for cloud migration. Ensure the assessment is objective.



• RedefinetheroleoftheCIOasitevolvesfromITprovidertochiefintegrationofficer, who has the opportunity to drive process models and innovation.

• Developplanstoalignwithvariousscenariosforcloudadoptionanddeploymentacross each cloud layer and across different IT and business operating areas.

• Interpretcloudservicesandcapabilitiesplanninginthecontextofyourthird-partyprovider contracts. For example ramping capacity up and down – while technically feasible – may not be covered in the contract.

• Design,developanddeployoperatinggovernanceandriskmanagementprograms from the IT perspective of cloud-computing services.

For agency professionals and process owners• WorkcloselywithITleadershiptodevelopacomprehensivecloudstrategyand

plan of action to ensure critical integration points are managed and to help ensure all opportunities for efficiencies and effectiveness are leveraged.

• Focusontheprocessvalueandpotentialofcloudoveritstechnicalcapabilitiesor merits. At the same time, work with the IT organization to avoid pockets of capabilities that will create disparate data sets to manage.

• Developpoliciesandcheckstoensurethatallgroupsimplementcloud-basedprocesses in close collaboration with the IT group.

• Assesstheimplicationsofdeployingapplicationsthataremorestandardizedandless customizable: do the benefits of a standardized process outweigh the costs of customization?

• Developvariousscenariosforcloudadoptionanddeploymentacrossrelevantandaffected processes.

• Evaluatecloudcapabilities–benchmarkcloudusageamongotheragenciesand even private enterprise – to assess opportunities for improvement in core activities, provisioning or other processes.

For cloud service and technology providers • Avoidoverpromising;inthisfast-movingmarket,failureswillprovecostly.

• Wherepossible,over-deliver.Positiveword-of-mouth,anearlyadoptermarketand a high level of risk avoidance and tight budgets will channel opportunities to established, documented providers.

• Berealisticoncost-savingsclaims;provideexampleswithapplicabledocumentation, and ensure appropriate performance measures. Monitor results to increase likelihood of achieving anticipated savings.

• Developcontractsandpricingthatdelivertrueflexibilityandscalability.

• Educatecustomersandprospectsonthebenefitsofcloud.Relativelyintangiblebenefits 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.



• Assessandbeproactiveaboutcommunicatingwithclientsthechallengestheymay face from rapid and multiple cloud investments and deployments.

• Assistindevelopinganintegrationroadmapwithexistinginfrastructureandothercloud offers.

• Plantocontinuallyaddressongoing integrationcloud-to-cloud/cloud-to-enterpriserequirements.

• Addresssecurityanddataownershipconcerns.

• AssistclientsindevelopingnewKPIstomeasuretheirinvestment.Measurements may include increased efficiency, reduced cost, improved productivity and higher adoption rates.

• Optimizeyourbusinessmodelinkeyareassuchascustomermanagement,riskand 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

• Ensureadequatelyskilledprofessionalsareinplacetoassessandmonitortherisk and controls management aspects of cloud.

• Embedriskandcontrolsconsiderationincloudselectionprocesses.

• UnderstandthattraditionalITcontrolsprotocolsmaybenonexistentinacloudservice provider and that funding, development and the implementation lifecycle may require a new governance model.

• Understandthatusershaveaccesstopubliccloudservices.Policiesandsafeguards will be necessary to prevent commingling of data and applications.

• Involveriskandinternaladvisorygroupsincloudservicesplanningandvendorselection processes. Require regular reporting on risk and controls management monitoring in deployed cloud services.

• Evaluatehowinformationwillbesecuredandhowprivacyandconfidentialitywillbe maintained.

• Determinehowcloud-computingadoptionwillaffectregulatoryandcompliancerequirements.

• Establishaformalizedassuranceprogram,whetherthroughinternalauditorindependent assurance reporting (SOC reports).

• Understandtheglobal,regionalandlocalimplicationsofthecloudenvironment.Forgovernment 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 Ecosystemhttp://www.kpmg.com/IN/en/IssuesAndInsights/ThoughtLeadership/The_Cloud_Changing_the_Business_Ecosystem.pdf

The Cloud Transforms Businesshttp://www.kpmginstitutes.com/financial-reporting-network/insights/2010/business-implications-of-cloud-mark-goodburn-dec10.aspx

From Hype to Future: KPMG’s 2010 Cloud Computing Surveyhttp://www.kpmg.com/ES/es/ActualidadyNovedades/ArticulosyPublicaciones/Documents/2010-Cloud-Computing-Survey.pdf


http://www.kpmg.com/IN/en/IssuesAndInsights/ThoughtLeadership/The_Cloud_Changing_the_Business_Ecosystem.pdf

http://www.kpmg.com/IN/en/IssuesAndInsights/ThoughtLeadership/The_Cloud_Changing_the_Business_Ecosystem.pdf

http://www.kpmginstitutes.com/financial-reporting-network/insights/2010/business-implications-of-cloud-mark-goodburn-dec10.aspx

http://www.kpmginstitutes.com/financial-reporting-network/insights/2010/business-implications-of-cloud-mark-goodburn-dec10.aspx

http://www.kpmg.com/ES/es/ActualidadyNovedades/ArticulosyPublicaciones/Documents/2010-Cloud-Computing-Survey.pdf

http://www.kpmg.com/ES/es/ActualidadyNovedades/ArticulosyPublicaciones/Documents/2010-Cloud-Computing-Survey.pdf

Contacts

KPMG’s Government & Public Sector Practice is made up of a network of experienced professionals based in member firms around the world.

Global Chair Government and InfrastructureJohn HerhaltT: +1 416 777 8778E: [email protected]

AfricaTshidi MokgabudiT: +27 11 647 7075E: [email protected]

ArgentinaClaudio BouekeT: +54 1 14 316 5713E: [email protected]

AustraliaMichael HillerT: +61 7 3233 3299E: [email protected]

Brazil/LatinAmericaMauricio EndoT: +55 11 3245 8322E: [email protected]

CanadaArchie JohnstonT: +1 604 527 3757E: [email protected]

Ken CochraneT: +1 613 212 5764E: [email protected]

Central and Eastern EuropeMiroslaw ProppeT: +48 604 496 390E: [email protected]

FrancePierre-Mathieu DuhamelT: +33 1 55 68 86 50E: [email protected]

François CaubriereT: +33 1 5568 9006E: [email protected]

GermanyUlrich MaasT: +49 30 2068 4888E: [email protected]

IndiaNavin AgrawalT: +91 22 3090 1720E: [email protected]

IrelandPaul TonerT: +353 1 410 1277E: [email protected]

ItalyRoberto JannelliT: +39 06 8097 1419E: [email protected]

Franco PeroneT: +39 06 8097 1439E: [email protected]

MalaysiaWoon Tai HaiT: +603 7721 3388E: [email protected]

MexicoAlejandro VillarrealT: +52 55 5246 8371E: [email protected]

NetherlandsWouter BosT: +31 20 656 7428E: [email protected]

Wim Touw T: +31 70 338 2176 E: [email protected]

Panama/CentralAmericaHéctor CastilloT: +50 7 208 0700E: [email protected]

SpainCandidoPérezSerranoT: +349 1451 3091E: [email protected]

Singapore/AsiaPacificSatyanarayan RamamurthyT: +65 6213 2060E: [email protected]

United KingdomAlan DowneyT: +44 20 7311 6541E: [email protected]

United StatesNancy ValleyT: +1 518 427 4610E: [email protected]

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-à-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 Government’s Adoption of Cloud

Publication number: 120108

Publication date: February 2012

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