Budget requests for technology investments hold the promise of running government more efficiently at a reduced cost by improving resource management, processes and decision-making, according to the report, “Transforming Government Through Technology,” developed in 2018 to counsel federal operations in digital modernization.
In the report, the Technology CEO Council (TCC) recommended cost-reduction estimates over a 10-year period be used to justify investments in federal workforce, processes and technology tools.
Likewise, civic technology applications that do not have a clear revenue stream often require creative thinking, and potentially a reform of local procurement processes. But budgets can be used to tackle the issue, according to “The Civic Technology Landscape,” a 2015 report by the Urban Sustainability Directors Network.
When targeting investment in new capabilities -- such as migrating government services and operations to the cloud -- consider simultaneously developing cost-reduction plans for outdated technologies and wasted resources as you shift costs from capital expenses to operating expenses.
Decomplicating Technology Costs
The most strategic cost-reduction plans target resources that deliver best returns.
As an example, the roadmap for investing in cloud-based applications includes the challenge of factoring in long-term expenses for a municipality. However, those can be balanced by retiring legacy storage systems and reducing data storage costs, computing infrastructure, licensing costs and other line items.
When cloud computing reduces the need for government IT resources to maintain infrastructure, costs decrease. However, there are a number of cost factors to consider when transitioning to cloud, according to Mike Chan, CMO of Thorn Technologies, in Network World. Chan wrote that there are four steps to calculating the true costs of migrating to the cloud:
- Auditing the direct and indirect costs of current IT infrastructure
- Calculating estimated cloud infrastructure costs
- Estimating the costs of executing the transition
- Considering post-migration costs
Once cloud infrastructure costs are forecasted, they can be compared to the costs a municipality or agency is currently paying for on-premise infrastructure -- with a roadmap to phase out those costs.
For some states, data storage costs alone have been reduced by millions with cloud migration, according to National Association of State Chief Information Officers’ (NASCIO), while cities, counties and individual government agencies have also experienced significant long-term cost savings.
Shifting Tech Costs to Operating Expenses
Back in 2013, New York State Assembly members convened a roundtable on cloud migration that invited numerous technology vendors as well as consultants to better understand government procurement of cloud services. The lawmakers wanted to know, “Does cloud computing create a new budgeting challenge because it shifts technology purchasing from capital budgets, which are based on borrowing and don’t impact agency budgets, to immediate operating budgets?,” according to ReinventAlbany.org.
While the state government could experience significant savings with cloud tools, operating costs could increase over the short term.
Fast forward to 2018, and technology consultants argued that using operating expenses (OpEx) to procure major IT services is easier than ever -- even for public sector organizations. Procuring cloud capabilities under a hosting contract can include all the infrastructure items in one regular payment. Software-as-a-Service models, according to “CapEx vs OpEx” on The Business of IT Blog, can help streamline cash flow over time. But rolling IT funding to operational expenses is difficult if an organization is in a cost-reduction mode to reduce IT budgets.
Consider how the following cloud migrations have ultimately streamlined and reduced the costs of public operations:
- In New York state, a government data consolidation initiative that began in 2012 led ultimately to the development of the New York State Excelsior Cloud in 2017. As one of the largest private cloud implementations for state government in the United States, the infrastructure powers 46 of the state’s agencies, according to NASCIO.
- The New York Public Library, the largest city library system in the country, shrunk on-premise servers by 40 percent at a cost savings of 95 percent, according to Computer World.
- The Chicago Department of Transportation reported $24 million in savings by eliminating duplicative work with dotMaps – an interactive map system built on Google Maps and Google Cloud platforms.
Forecasting & Scaling Technology Upgrades
Budget roadmaps should forecast how eliminating the need to purchase, maintain and operate hardware and software as well as data storage reduces capital expenses (and related operating expenses) over time. Likewise, municipalities can minimize barriers in shifting technology upgrades to operating expenses by pilot testing new tech solutions with a group of users, so the monthly operating expenses start smaller and then scale up over time.
Cost modeling is going to depend on the cloud service provider and the municipality’s capacity requirements.
Budgeting municipal cloud-based technology requests could require forecasting costs up to one year for all the services needed, including looking at seasonal fluctuations on service-level agreements, storage and more. Track operating budgets for these services monthly or bi-monthly by comparing planned usage versus actual spend, data which could prove advantageous in testing cloud migration with one agency or group of users before funding a full roll out.
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