Governments cut computing costs in the cloud

— -- With no end in sight to shrinking budgets, state and local governments are shoring up aging tech systems and relying more on delivering crucial public services over the Internet cloud.

The trend is in an early stage.

Computer maker Dell recently helped Gaston County, N.C., consolidate its data storage for a $500,000 savings. Dell also helped the city of St. Petersburg, Fla., realize a $150,000 savings by equipping office workers with virtualized PCs that run on a central server instead of issuing specific desktop machines to each one.

"We're seeing private-sector best practices migrating into the public sector and helping governments realize many of the same savings and efficiencies," says Dell spokesman Scott Radcliffe.

Texas, California and several other states now permit driver's license renewals online. Delivering such cloud services — which means accessing data and software remotely from a computing device via the Internet — can be cheaper for local governments. And it allows citizens to skip long lines.

"The primary driver is money," says IDC analyst Thom Rubel. "Governments are facing flat budgets for at least the next three years, if not longer."

Local officials are taking cues from the federal government. States, counties and cities are paying closer attention to sales pitches for technology that streamlines aging systems and relies more on cloud services.

"Technology allows them to become more productive and effective serving citizens with scarcer resources," says Andrew Bartels, analyst at Forrester Research.

Privacy remains a big concern. Privacy advocates and elected officials worry about data theft — and about insurers, banks and employers using sensitive information to discriminate against applicants.

Still, White House chief information officer Vivek Kundra last February announced an initiative to consolidate hundreds of redundant federal government databases. Kundra also called for stepping up the federal government's reliance on cloud-based systems to deliver public services.

Dell, IBM, Xerox, Intel, Applied Materials and EMC endorsed Kundra's call for a "cloud-first" approach to government procurement.

Forrester estimates that federal spending on information technology will total $71.3 billion this year, up from $68.6 billion in 2010, a 5% bump. And research firm IDC says that the percentage Uncle Sam spends for IT services, as compared to purchases of hardware and software, continues to rise.

Tech suppliers, of course, are hungry for the fresh revenue that could come from increased government spending on cutting-edge tech systems. But with budgets squeezed tight, they must work hard for every sale.

"The longer-term effect is that this will help spur economic activity by creating governments that better facilitate commerce," says Rubel. He says tech-savvy government services "create better public policy outcomes for citizens."