Budget cuts pushing some IT managers to the cloud

User acceptance may be an issue at first, but early users already find big savings

Budget cuts have reduced the city of Miami's IT staff from 102 to 80 positions, a significant contraction that could have lead to drastic services cuts and morale issues.

But instead of letting melancholy take over when many vacant positions were left unfilled, Miami's IT department is working to figure out how to use the cloud to cut costs and even generate revenue.

But before the company could act on such intriguing ideas, the city's IT personnel needed to have experience with a cloud platform.

That experience began this week with the launch of Miami's first cloud application, Miami 311. The online application, built internally using Microsoft's Azure , allows residents to monitor requests for services such as a list of reports of potholes, abandoned vehicles and code violations.

The potential of cloud services has also led city officials to consider revenue generating ideas such as creating custom data aggregation and mashup services that could be sold to businesses.

Budget cuts "have caused us to start evaluating everything," said James Osteen, Miami's assistant IT director, noting that more than half of the IT staff is now dedicated to maintaining the city's existing IT infrastructure.

Miami's situation represents the new world for IT managers -- looking closely at cloud services to offset tight to shrinking budgets.

But, say some IT managers, the cost savings of these services is easier to determine than user acceptance of them.

Jay Kenney, CIO of Lincoln Property Co. in Dallas, which for the past several months has been using the hosted Google Apps Gmail service, has measured both total cost of ownership (TCO) and the reaction of the 1,000 users of the cloud-based product. The company replaced its Novell Inc. GroupWise software with Google's hosted e-mail and collaboration system last September.

Kenney said the results of the TCO study roughly mirrored Forrester Research Inc.'s recent report showing the that cost of using Google's Gmail hosted e-mail at about $8.50 per user per month versus about $25 per user per month to support in-house systems like GroupWise.

Kenney's firm continues to use Microsoft's Office and SharePoint products.

Kenny said there was general dissatisfaction with GroupWise and when time came for the city to refresh its hardware systems led to an re-evaluation of its needs. "It was time to do a business case and get all the cost on the table," he said.

He calculated the TCO over five years and and the Google Apps product, from a financial perspective, came out as the best valure for the city.

For Kenney, the biggest issue was user acceptance of Gmail, including its calendar and chat features. The internal survey found that 65% of Lincoln Property users said Gmail is the same, better or much better than GroupWise, while 35% said it was worse or much worse.

"Change management is the biggest piece" of a migration, said Kenny. He plans to conduct his survey again and suspects support for Google Apps will improve as users gain experience with it.

Ted Schadler, an analyst at Forrester, said he would expect similar results if the company had migrated from GroupWise to Microsoft Exchange. "There's no guarantee they would have been any better," he said, citing embedded user resistance to change.

Google is drawing a lot of attention, but Schadler noted that a cloud-based version of Microsoft Exchange may be more attractive to sites now running Exchange software because the user transition would likely be easier. "I think the one to watch here really is Microsoft," he said.

Google set the floor for Gmail at $50 per user per year while Microsoft, in turn, set its price of Exchange Online at $5 per user per month, or $60 a year per user.

The city of Miami hasn't made any decision about cloud-based e-mail, but city sees it as a clear possibility. The city would likely retain Exchange because users wouldn't want to give up functionality they now have in a move to the cloud, said Osteen.

The city also sees the possibility that Microsoft's Azure platform could help it take many of its services into a cloud environment. For instance, the city is now moving some Unisys mainframe applications to Windows servers and taking the legacy code into a .Net environment. Some of those services may become cloud-based.

For its part, Google is relying on year-old Google Apps reseller channel to build in some of the cloud functionality sought by enterprises.

Google App reseller Cloud Sherpas helped Lincoln Property with the transition to Google.

The Atlanta-based firm is also a software development shop that has just released its own cloud-based administration tools.

Michael Cohn, CEO of Cloud Sherpas, says Google's strategy is to offer ISVs a robust set of APIs for developing new tools that extend and improve Google Apps management capabilities. The APIs can also be used to create workflow integrations for specific third party products

How Google will fare against Microsoft, IBM Lotus Notes, and other supplikers of cloud-based e-mail systems remains to be seen. But one thing is certain: IT managers are trying to learn all they learn all they can about the technology.

For example, several weeks ago Michael Fitchett, information technology system development coordinator for City of Chesapeake, Va., was on the phone with Los Angeles' IT department, which is moving some 30,000 users from GroupWise to Google Apps.

"We're constantly probing the TCO on every one of our systems," said Fitchett.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld . Follow Patrick on Twitter at @DCgov , send e-mail to pthibodeau@computerworld.com or subscribe to Patrick's RSS feed? .

Read more about cloud computing in Computerworld's Cloud Computing Knowledge Center.

Copyright © 2010 IDG Communications, Inc.

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