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Cloud computing services over the Internet have the potential to spur a significant increase in government efficiency and decrease technology costs, as well as to create incentives and online platforms for innovation. Adoption of cloud computing technologies could lead to new, efficient ways of governing.

On April 7, the Brookings Institution hosted a policy forum that examines the economic benefits of cloud computing for local, state, and federal government. Federal Chief Information Officer Vivek Kundra delivered a keynote address on the role of the government in developing and promoting cloud computing. Brookings Vice President Darrell West moderated a panel of experts and detailed the findings in his paper, "Saving Money through Cloud Computing," which analyzes its governmental cost-savings potential.

After the program, panelists took audience questions.

Video

• Cloud Computing a Fiscally Smart Move
• Cloud Computing Saves Money, Makes Government More Open
• Cloud Computing Will Fundamentally Change Government Operations
• Government on Cloud Will Yield Cost-Effective System

Audio

• The Economic Gains of Cloud Computing

Transcript

• Uncorrected Transcript (.pdf)

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• 0407_cloud_computing_kundra_remarks
• 0407_cloud_computing_kundra_presentation

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The U.S. government spends billions of dollars each year on computer hardware, software and file servers that may no longer be necessary. Currently, the public sector makes relatively little use of cloud computing, even though studies suggest substantial government savings from a migration to more Internet-based computing with shared resources.

On July 21, the Center for Technology Innovation at Brookings hosted a policy forum on steps to enhance public sector adoption of cloud computing innovations. Brookings Vice President Darrell West moderated a panel of experts, including David McClure of the General Services Administration, Dawn Leaf of the National Institute for Standards and Technology, and Katie Ratte of the Federal Trade Commission. West released a paper detailing the policy changes required to improve the efficiency and effectiveness of federal computing.

Audio

• Moving to the Cloud: How the Public Sector Can Leverage the Power of Cloud Computing

Transcript

• Uncorrected Transcript (.pdf)
• Download Dawn Leaf's PowerPoint Presentation (.pdf)
• Download David McClure's PowerPoint Presentation (.pdf)

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• 0721_cloud_computing_leaf
• 0721_cloud_computing_mcclure

Our former Brookings colleague Rebecca Blank, now at the Commerce Department, is today leading the first meeting of the Obama Administration’s Innovation Advisory Board, looking at the innovative capacity and economic competitiveness of the United States.

I applaud the effort.  Nothing is more important to America’s longterm competitiveness than emphasizing innovation.  As the council looks to the private sector and global markets, I urge it to examine how the U.S. government can lead innovation and contribute to economic growth.  The best place to look is new and emerging digital technologies that can make government more accessible, accountable, responsive and efficient for the people who use government services every day.

Here are some of the recommendations I made in a recent paper I wrote with colleagues here at Brookings as part of our “Growth Through Innovation” initiative:

• Save money and gain efficiency by moving federal IT functions “to the cloud,” i.e., using advances in cloud computing to put software, hardware, services and data storage through remote file servers.

• Continue to prioritize the Obama administration’s existing efforts to put unparalleled amounts of data online at Data.gov and other federal sites, making it easier and cheaper for citizens and businesses to access the information they need.

• Use social media networks to deliver information to the public and to solicit feedback to improve government performance.

• Integrate ideas and operations with state and local organizations, where much of government innovation is taking place today. 

• Apply the methods of private-sector business planning to the public sector to produce region-specific business plans that are low cost and high impact.

These improvements in government services innovations in the digital age can help spur innovation and support a robust business climate.  And, as a sorely needed side benefit, they can also serve to eliminate some of the current distrust and even contempt for government that has brought public approval of the performance of the federal government to near historic lows.  

The appointment of new federal chief information officer Steven VanRoekel comes at a challenging time for President Barack Obama. The national economy continues to be weak. Congress plans to cut trillions from the federal budget. And in the time leading up to the 2012 election, American voters remain cynical about the ability of the government to address important policy problems in an effective manner.

In an era of deficit reduction and public cynicism, the tasks facing federal officials are to determine how to do more with less and persuade voters the government can become smarter and more effective. There are going to be fewer dollars for virtually every federal program so it is important to figure how ways to innovate and perform more efficiently.

Former CIO Vivek Kundra sought to do this through encouraging agencies to move software applications to the cloud, consolidating federal data centers, improving transparency, and improving the information technology procurement process. It is important to continue this progress even as agencies are forced to downsize their operations.

As shown in the private sector, government administrators should use technology to cut costs, improve worker productivity, and streamline operations. This is not just a matter of using technology in more innovative ways, but changing the operations and culture of the public sector. Public officials must improve its data mining activities to identify fraud and abuse in Medicare, Medicaid, the Defense Department, and other domestic programs.

New software gives managers better tools to evaluate how money is being spent and whether it is fulfilling intended goals. If it is not, programs need to be modified or eliminated. The most important weapon in Mr. VanRoekel’s arsenal may be the scalpel as he goes through the federal government’s $80 billion IT budget.

Since 2009 the federal government started the process of replacing local computers with cloud platforms. A recent report from the Congressional Research Service (CRS) provides an interesting view into the progress of these investments. It reveals the benefits that public agencies gain when using cloud services and the barriers they face when making the transition.

Advantages of Cloud Computing

Cloud computers are superior to locally-run data centers for a variety of reasons. The CRS report identifies six specific cloud benefits:

• Cost- Cloud computer platforms use resources more efficiently than local servers. An organization that uses local Information Technology (IT) must invest in the infrastructure to support computer systems at times of peak demand. However, most times companies or government agencies require only a fraction of that computing power. Cloud computing allows organizations to pay for all of the resources they need and avoid costly investments in rarely used local IT systems.
• Energy Efficiency- Cloud computing data centers benefit from economies of scale to run more efficiently than local servers. In some cases this can result in huge energy savings. For a large cloud computing center it also makes economic sense to invest in green energy sources like wind or solar for power.
• Availability- Cloud computing systems make it easy for any device with an Internet connection to access files or software. However, if a facility temporarily loses Internet access the files on cloud system are inaccessible. Alternatively, a locally administered IT system could function without Internet connectivity.
• Agility- Cloud systems can make it easier to upgrade operating systems and applications. The available computing power also means that memory intensive software packages are cost effective.
• Security- Cloud providing companies also have the financial resources to purchase the tools necessary to ensure that networks remain safe.
• Reliability- Cloud systems can save data onto multiple servers. If a single server goes down due to a cyberattack or another issue, the data is available on another server.

Government Investments in the Cloud

Determining the exact size of government cloud computing expenditures is difficult. Government spending on IT has increased every year from 2001 to 2013 when it reached a peak of $81 billion. In the three subsequent years it has decreased. Cloud computing expenditures likely represent a tiny fraction of that total. Market research firms have estimated that the federal government spends between $1.4 billion and $7 billion on cloud computers annually.

Trends in Total Federal Investment in Information Technology

Source: Congressional Research Service

Challenges for Migrating to the Cloud

The federal government has encountered several barriers in its plan to shift more functions to cloud platforms:

• High Federal Security Requirements- The government faces new advanced persistent threats routinely. System-wide security updates are necessary more often than for private sector organizations. The short update cycle provides a unique challenge to cloud providers.
• Adopting New Technologies- Government agencies have ingrained cultures that are slow to change. This shift from locally-based servers to the cloud can be slow and tedious for this reason.
• Ancillary Technologies- Cloud technologies are known for their flexibility. However, government agencies may lack the necessary IT infrastructure or speedy Internet connections that leverage the maximum potential of the cloud.
• Technical Know How- Cloud platforms require specialized knowledge to administer. Many government agencies lack the necessary experts to oversee a migration to the cloud.
• IT Expenditure- Migration to the cloud can involve expensive initial costs. Additional funding is necessary to facilitate the shift to the cloud.

The Future of the Government Cloud

An analysis of the costs and benefits of cloud migration uncover a few specific barriers that the federal government must overcome to earn the full value from new technologies. First, lawmakers must be willing to spend more now to save money later. Cloud systems are cheaper to run than local administered servers but the initial transition costs are high. Current funding levels, which are trending down, are too low to finance such a change. Privacy and security are also major challenges. Government servers host troves of data that Americans expect to remain private. Converting these systems to the cloud will require the government’s full confidence that cloud systems are at least as secure. New legislation is likely necessary to achieve the complimentary goals of privacy and security.

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INTRODUCTION

A year after President Hosni Mubarak’s fall, U.S.-Egypt relations are at an all-time low. Not, as many expected, because of the rise of Islamist parties, but because America’s longtime allies in the Egyptian military have whipped up anti-American sentiment at a feverish pace. It may have started as a political ploy, a way to build support on the street and highlight the army’s nationalist credentials, but the generals soon lost control. In January, the Egyptian government announced that sixteen Americans—including the son of a top U.S. official— would be put on trial, facing up to five years in prison. Their apparent crime was working for American nongovernmental organizations (NGOs)—the National Democratic Institute, the International Republican Institute, and Freedom House—that offered support, funding, and election monitoring for Egypt’s uneven transition.

On March 1, the Egyptian government lifted the travel ban on seven Americans who were still in Egypt, allowing them to leave the country. A major diplomatic breach was avoided, giving the impression that the crisis had been resolved. This appears to be the interpretation of the Obama administration, which waived congressional conditions on military aid, citing the importance of maintaining a “strategic partnership” with Egypt.2 However, the charges against the Americans remain, and there is no sign that the American NGOs in question will be able to reopen anytime soon. More importantly, the vast majority of affected NGOs—which are Egyptian rather than American—still find themselves on trial and under attack.

The NGO episode, however worrying it is on its own, reflects something larger and more troubling: the slow descent from the national unity of the revolution to a fog of paranoia, distrust, and conspiracy theorizing. Who is with the revolution, and who isn’t? The roots of the problem lie in the uncertainly inherent in Egypt’s muddled transition. Unlike in Tunisia, where the Higher Committee for the Achievement of Revolutionary Objectives (HCARO)—accepted as legitimate by all of the country’s main political forces—was responsible for managing the transition, Egypt has featured various competing actors claiming their own distinct sources of power. The struggle for legitimacy between the Supreme Council of the Armed Forces (SCAF), the Muslim Brotherhood-dominated parliament, and the protest movement has created a fragmented political scene. Everyone wants to lead the transition, but no one wants to take full responsibility for the results.

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Government spending on the elderly continues to climb.  Fueled by rapid growth in the number of Americans over age 65 and increased spending on benefits per person, public expenditures devoted to the elderly continue to edge up. A crucial question for future policy making is whether rising outlays on programs for the aged will squeeze out spending on programs for children, especially investments in their schooling. Many pessimists think this outcome is inevitable, and they urge us to reduce government commitments to the elderly to make room for spending on the young.

Federal spending is especially concentrated on the elderly. The Urban Institute publishes annual estimates of federal outlays on children and adults over 65. The estimates inevitably show a huge imbalance in spending on the two groups. In 2011, federal spending for the elderly amounted to almost $28,000 per person over 65.  In the same year, per capita spending on Americans under 19 amounted to just $4,900 per person. This means aged Americans received $5.72 in federal spending for every $1.00 received by a child 18 or younger.

The Urban Institute’s latest estimates show that federal spending on youngsters has trended down in recent years.  After reaching a peak of about $500 billion in 2010, expenditures on children fell 7 percent by 2012, and they have remained unchanged since then.

Future prospects are not encouraging. Urban Institute analysts predict that from 2014 to 2025, only 2 percent of federal spending growth will go to children. Almost 60 percent will be swallowed up by additional outlays on Social Security, Medicare, and Medicaid. Spending on many federal programs that provide benefits to children are financed out of discretionary programs. In contrast, big public programs for the aged seem to run on automatic pilot, with spending linked to changes in the cost of living and the size of the population past 65. Spending on most domestic discretionary programs is expected to be severely constrained as a result of Congressionally imposed budget caps. This is bad news for many federal programs targeted on children.

Focusing solely on federal government spending gives a misleading picture, however. While federal spending is heavily concentrated on the elderly, state and local spending tilts toward programs that help children, notably, through public school budgets.  Whereas aged Americans receive $5.72 in federal spending for each $1.00 received by someone under 19, those under 19 receive $10.11 in state and local spending for each $1.00 received by someone who is 65 or older. To be sure, total federal spending is considerably greater than that of state and local governments, but the imbalance of public spending on the young and the old is less extreme than federal budget statistics suggest.

Government spending on the aged is high because legislators (and voters) decided to establish government-backed pensions—through Social Security—in the 1930s and government-guaranteed health insurance for the elderly—through Medicare—in the 1960s.  In view of the overwhelming and enduring popularity of these two programs, most voters appear to think this was a sensible choice.  One implication of the policies is that Americans past 65 derive a sizable percentage of their retirement income, and an even bigger share of their health care, from public budgets.

The nation has not made an equivalent commitment to support the incomes or guarantee the health insurance of Americans under 65, except in special circumstances.  Those circumstances include temporary unemployment, a permanent work disability, and low household income.  Families headed by someone under 65 are expected to derive their support mainly from their jobs and from their own savings.  If non-aged families prosper, government spending on them falls.  If instead breadwinners become disabled or lose their jobs, government spending will increase as a result of higher disability payments, unemployment and food stamp benefits, and public assistance rolls.

Nearly all children are raised in families headed by someone under 65.  The government benefits they receive, except for free public schooling, increase in bad times and should decline when the unemployment rate falls.  The Urban Institute’s numbers are instructive.  Between 2007 and 2011, real federal spending on children increased 27 percent, or more than 6 percent a year, as the unemployment rate soared in the Great Recession. Federal spending on children then fell as unemployment—and outlays on government transfer payments—shrank.  For many categories of public spending on children, we cannot assume that lower spending signals a weaker commitment to children’s well-being. Instead it may signal a healthier private economy, a lower unemployment rate, and faster improvement in breadwinner incomes.

Of course, some components of government spending on children do not automatically rise in a slumping economy or shrink when breadwinners’ earnings improve.  Public investments in children’s preschool and K-12 education should be adjusted to reflect the needs of children for compensatory instruction and the expected payoff of added investment in schooling.  Statistics on public school budgets show that spending per pupil has increased considerably faster than inflation and faster than GDP per person over the past seven decades (see Chart 1). Whether spending has increased as fast as warranted is debatable, but rising government spending on the aged has not caused per-pupil spending on K-12 schools to shrink.

Government spending on children’s health has also increased over time as public insurance for children has been expanded.  In 2014 just 6 percent of Americans under age 19 lacked health insurance for the entire year.  The only age group with higher health insurance coverage was the population past 65, which is covered by Medicare (see Chart 2).  The main explanation for rising insurance coverage among children is that federal and state health insurance programs have been expanded to cover most low-income children.  Insurance coverage of children can and should be improved, but a sizeable expansion of public insurance has occurred despite the increase in public spending on the elderly.

The presumption that rising outlays on programs for Americans past 65 must come at the expense of spending on children rests on the unstated assumption that voters will zealously defend programs for the aged while tolerating cuts in programs that fund education, income protection, and health coverage for the young.  The trend toward higher public spending on the elderly has been underway for at least five decades, but the predicted cuts in spending on the young have yet to materialize.

Editor's Note: this op-ed first appeared in Real Clear Markets.