Making the Business Case for the Cloud

• By Rama Ramaswami, David Raths, Dian Schaffhauser
• 01/04/12

Illustration by Anthony Freda

Gregory Partch hardly knows where to begin when it comes to the subject of how cloud computing saves his district money. The director of education technology for Hudson Falls Central School District in upstate New York might start with how he drastically reduced the number of servers he has to maintain. He might mention the lower electrical usage for PCs--or maybe the money he's saved on software licensing costs. "We were able to eliminate $30,000 a year in software licensing costs for products that were not being used," Partch explains.

Cloud initiatives look better all the time to K-12 technology leaders because they offer the opportunity to off-load maintenance of services that are seen as commodities and free up IT staff to work on higher priority projects. They also may eventually allow districts to get out of the data center management business. But, as with any other application or infrastructure outsourcing, educational technology officers have to weigh potential risks and trade-offs and make a strong business case to their chief financial officers, superintendents, and school boards.

The business case will be different depending on whether you are moving infrastructure or just applications to the cloud. There may not be a huge cost savings if you are just moving from an upfront purchase to a rental model for software. Sometimes the assessment involves difficult apples-to-oranges comparisons, as in replacing a Microsoft Office suite with free Google Apps. "The free e-mail services are attractive options, but as the cloud matures you will have to keep reviewing the business decision and the types of control you are giving up," says Ben Marglin, a principal with Booz Allen Hamilton who specializes in IT strategy consulting for the public sector.

Many districts begin by adopting a hybrid little-by-little approach--maybe not zero servers to support, but fewer than today. "A school district may have a room with 150 servers in it," says Berj Akian, chief executive officer of ClassLink Technologies, a Clifton, NJ-based provider of K-12 cloud applications, including the instructional technology virtual desktop called LaunchPad. "But they say, 'We are not going to keep adding to that. From here on, we are going to augment that in the public cloud.'"

As an example of that approach, Hudson Falls' Partch says his first step--strictly speaking--was not cloud computing, but server virtualization with VMware and desktop virtualization with Citrix XenApp. That took the 2,400-student district from 70 physical servers down to 16 blade servers. It then replaced traditional PCs with 1,800 thin-client devices and created a private cloud environment.

Partch computed the annual cost savings in electrical usage alone at more than $47,000. "The thin clients cost much less, they have no operating system, and no moving parts," he says, and therefore much lower maintenance costs.

The cloud allows for use cases on a couple of fronts that look better when compared with traditional in-house technical infrastructure, says Akian. "Districts are realizing they can't afford to be data center builders and owners. That is an unsustainable cost. The big cost saver is that the capital acquisition costs of hardware go away. Maintenance, manpower, electricity, and HVAC costs can be carved out."

Another option for districts not yet in a position to move everything to the cloud: private cloud consortiums in conjunction with other school districts. The Bloomington Public School District (IL) provides data center services and host applications for smaller nearby districts in a pay-as-you-go model. Launched in 2009, the nonprofit IlliniCloud provides disaster recovery, infrastructure as a service (IaaS), and software as a service (SaaS) to more than 100 districts in Illinois.

For the small districts, it is an easy business case to make. "If a school district needs a new server for special education, they could buy one for $6,000 or they could pay us $200 per year--a fraction of the cost," says Jim Peterson, chief technology officer for IlliniCloud. "We have people who are both athletic director and IT director for their small district," he says. "They don't have the expertise or the budget, but they have the responsibility. With the economies of scale, this just gets cheaper as we get bigger."

In state departments of education that provide computing services to districts across the state, some officials have built strong business cases for using free and low-cost cloud offerings from Google and Microsoft. When the Kentucky Department of Education had trouble supporting e-mail across the state, Chuck Austin, product manager for Knowledge, Information, and Data Services, started talking to Microsoft about its Live@edu offering. "My CIO came to me and said, 'Get me out of the e-mail business.' It is high risk and low return," he recalls.

Microsoft's answer was Exchange 2010, hosted free with 10-gigabyte mailboxes for students and teachers. Kentucky had only been offering 5 MB for students, 50 MB for teachers, and 200 MB for administrators--not enough for some districts.

"We are providing Live@edu for 700,000 people, and we have full administrative control just as we do with an on-premise solution," Austin says. "We spent a lot of time kicking the tires before we moved to this platform. We were able to identify $6.4 million in cost avoidance with servers we don't have to replace and software licensing costs."

Encouraged by the e-mail situation, Kentucky is moving Tyler Technologies' Munis financial system, used in all of its 174 districts, to the cloud by the end of next year. "We won't have to do major software upgrades every three to five years anymore," Austin says. "We are out of that lifecycle management business. When Tyler upgrades Munis, we will just have it instantly." 

The state of Oregon has had a similar positive experience so far with free Google Apps for Education. Initially planning to provide e-mail boxes for all students statewide itself, the Oregon Department of Education instead signed a contract with Google last year and now has 50 districts participating fully.

When the state began looking at providing student e-mail, it recognized that user management and support were going to be difficult. The staffing costs were going to be considerable to bring up 1,200 schools on virtual e-mail servers, saysSteve Nelson, chief IT strategist at ODE. "Looking at peer organizations, I made a conservative estimate that it would cost us $1.5 million," he says. Now students not only get e-mail, but also calendaring, online documents, video conferencing, and website creation tools.