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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.
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
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.
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.
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
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.
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.
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.
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.
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.
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)
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.
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.
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.
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
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.
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).
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.
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%
Government/Public sector
Source: KPMG International 2012, Government Cloud Survey KPMG International 2011, Clarity in the Cloud
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%
100%
Government/Public sector
Source: KPMG International 2012, Government Cloud Survey KPMG International 2011, Clarity in the Cloud
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.
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
Source: KPMG International 2012, Government Cloud Survey KPMG International 2011, Clarity in the Cloud
73% 75%
60%
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%
29%
30%
50%
Government/Public sector
Source: KPMG International 2012, Government Cloud Survey KPMG International 2011, Clarity in the Cloud
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.
27% 15% 14% 10% 6% 6% 5% 16% 5% 10% 15% 20% 25% 30%
0%
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.
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
Unimportant
Extremely unimportant
Government/Public sector
Source: KPMG International 2012, Government Cloud Survey KPMG International 2011, Clarity in the Cloud
1 Mr. McKerlies full title: Deputy Minister of Government Services, Associate Secretary, of the Cabinet and Secretary of Management Board of the Cabinet.
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.
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%
Government/Public sector
Source: KPMG International 2012, Government Cloud Survey KPMG International 2011, Clarity in the Cloud
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.
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
Source: KPMG International 2012, Government Cloud Survey
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%
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.
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.
30%
60%
Government/Public sector
Source: KPMG International 2012, Government Cloud Survey KPMG International 2011, Clarity in the Cloud
Private sector
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.
21% No
79% Yes
28% Yes
53% No
47% Yes
38% Yes
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.
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.
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.
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.
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.
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.
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.
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%
56%
17%
26%
36% 35%
Developing a strategy
13% 21%
40% 40%
35% 39%
14% 23%
7% 10%
Partial implementation
6%
12%
0%
10%
20%
30%
40%
50%
60%
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.
Full implementation
2%
14% 7% 13%
2%
17%
Don't know
0%
0% Canada Italy
10% US
20%
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.
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.
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
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%
0%
10%
20%
30%
40%
50%
60%
70%
80%
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.
5% 12% 13%
10% 0% 3% 10% 5% 6% 7% 6% 7% 0%
Measuring ROI
5%
8% 12% 3% 10% 5% 4% 7% 3% 7% 3% 2%
0% 0% 0% 3% 4% 0%
0%
5%
10%
15%
20%
25%
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.
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%
26%
44%
40% 41%
47%
60% 59%
31% 33% 29% 30% 44% 33% 28% 33% 29% 35% 37% 33% 41% 40% 40%
21%
23% 15%
20% 19%
8%
25%
Lack of funding
19% 18%
19% 21%
20% 21%
30% 27%
56%
16% 17%
0%
23%
46%
21%
Dont know
Note: Country-specific responses are not statistically significant and should be used for directional purposes only.
0%
20% US Netherlands
30%
50%
60% Singapore UK
70% Denmark
80%
South Africa
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.
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.
28%
26%
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.
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.
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.
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
Source: KPMG International 2012, Government Cloud Survey KPMG International 2011, Clarity in the Cloud
20 20% 2012
25 25%
30 30%
35 35%
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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