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Defense Business Board Report on Cloud Computing

The Defense Business Board (DBB) is one of the highest-level committees advising the Secretary of Defense. [1]  Its report on “Data Center Consolidation and Cloud Computing” warrants attention to indicate what policy directions DoD should be following. [2]

The purpose of this note is to comment on DBB findings:
1. The Department’s FY12 budget for IT is reported as $38.5 billion, $24 billion of which is dedicated to infrastructure. Those numbers are incomplete since they do not include the payroll of 90,000 military and civilian employees, worth over $10 billion. It does not include the time expended by employees in administrative, support, training and idle time that is associated with over 3 million on-line users, amounting to at least $3,000 per capita/year, or $9 billion. [3] From the standpoint of potential DoD cost reduction targets the total direct IT should be considered to be at least $58 billion. In addition there are also collateral management costs such as excessive purchasing due to long procurement cycles, high user support costs to maintain separate systems and high labor costs due to inefficient staff deployment.
2. The report lists over 772 data centers in place, with a data center defined as having more than 500 sq. ft. Such count understates what is a data center since the footprint of modern computer facilities servers can be accommodated in less than 200 sq. ft. Therefore, the number if data centers eligible for consolidation is well over a thousand. Consolidating equipment represents the least expense. Most of the cost is in the re-alignment of files, communications and contract arrangements.
3. The DBB does not recognize that the cost of the infrastructure, or 62% of the total, is broken up into thousands of separate programs. Hardly any of the programs are interoperable from a logical or physical standpoint. The largest component of the infrastructure is $9.9 billion for telecommunications, largely managed by DISA. These costs are managed as an allocation of total costs rather than through transaction fees as is the generally accepted commercial practice and as was originally recommended as DoD policy in 1993 though DMRD 918.
4. What are the cost savings and benefits from the streamlining of DoD IT is not understood in the form of cost justifications. For instance, the re-wiring and software redesign costs for data center consolidation involve a major restructuring to fit enterprise-level standards for over 3,000 programs. Business cases that would support such effort have not been completed.
5. No recommendations have been made how to deal with loss of local operational control over applications. The re-assignment of dedicated staffs or contractors remains under local control.  The task of restructuring major programs does not account for a large number of sub-contractors in each instance as well as for up 30% of the value of each program distributed to a multitude of small business operators who have embedded into applications unique features and functions.
6. The DBB has not spelled out the migration process how to simplify operations through standards, interoperable software and telecommunications that are tightly coupled with applications.
7. The entire cloud software implementation will be determined by policies that dictate the migration process at the enterprise and not component levels. The speed of migration will determine the rate at which savings can be realized. If the migration takes too long, the conversion into the cloud environment will most likely never pay off.
8. There will be huge reductions in manpower if the most efficient cloud computing policy is chosen for DoD. The required skill levels, especially as employment shifts from operations to development, will make it more difficult to recruit replacements. If contractors and sub-contractors are included, the total manpower affected exceeds about 300,000. The DBB has not addressed how this issue can be resolved.
9. The report offers a table with potential cost savings. DoD cannot use such data as benchmarks in the absence of any details how such efficiencies can be realized. Projected savings of 70-90% call for radical re-architecting of the DoD approach how to manage. For instance, in the absence of any discussion how the reduction of application development to 4 days can place, there is no explanation how changes of existing acquisition policies would make such projections credible. Without an indication what type of up-front investments is necessary makes any ROI forecasts without support.
10. The statement that “properly designed cloud systems can be more secure” has no merit. How the DoD enterprise would protect 7 million connected devices against insider compromises or instances where there are violations of security policy is not clear.
11. The admonitions that DoD needs strong governance and leadership, a clear strategy, a well articulated “concept of operations” as well as the removal of policy barriers is self-evident. Such assertions are without merit in the absence of specific recommendations.
12. The four-step migration sequence, with cloud acceptance as the last phase after all other rationalizations have taken place, offers an unrealistic sequence. DoD must start with well-articulated cloud architecture before proceeding with incremental migration. Incremental progress, without an overall plan, will arrest progress to only partial local improvements in the status quo.
13. DoD progress toward cloud computing cannot be achieved through hundreds of separate pilot programs. The limits on future funding calls for a concentrated effort. It cannot be done through program-based short-term savings, but through a radical overhaul of the existing infrastructure where the largest inefficiencies exist at this time.
14. The recommendation that the DoD CIO has veto power over IT spending but engages component CIOs as chief implementers while leveraging DISA, runs into conflict with Title 10 responsibilities. Without addressing this issue, the DBB report is “toothless”.
15. Applying a sequenced approach to data center consolidation as the high priority action addresses the least profitable initiative, with dubious payoffs. It keeps the implementation of cloud computing in the hands of the components and not primarily with the DoD enterprise. The strategic direction of DoD should aim towards enterprise-level cloud computing that mandates application consolidation as well as the enterprise-wide adoption of virtual personal appliances.

The DBB report is incomplete. It does not offer actionable solutions. It only raises policy level questions, which is insufficient. As components are formulating FY13-FY18 budget requests they will find nothing in this report that will guide what re-alignments are needed to advance DoD towards cloud computing.

  3 Gartner Research Note G00208726, 11/2010

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