Washington’s Datacenter Debate: Build vs. Lease

The state of Washington has tentative plans to build a $300 million state-of-the-art datacenter in the capital city of Olympia, but some legislators are questioning the decision to spend so much money when it could save money by using cloud computing services.

Last week, the State Finance Committee approved the sale of $300 million in bonds to fund the construction of a new datacenter for the Department of Information Services. The new center would bring together numerous other smaller datacenters from around the state under one roof. The datacenter itself would be 160,000 square feet, with an equal amount set aside for office space.

Two state legislators sent a letter to Governor Christine Gregoire, asking her to consider other options, namely, outsourcing.

“We are deeply troubled by the weakness of the technical and financial support behind this decision, and fear the state is potentially making a $300 million mistake that will haunt us for decades to come,” wrote Rep. Reuven Carlyle (D-Seattle) and Rep. Hans Dunshee (D-Everett).

“Washington is home to many of the leading providers of this rapidly evolving commodity service where improved security, disaster recovery and lower costs are being driven by almost universal adoption by both the public and private sectors. Still, our own state government has yet to move in this direction in any material way,” they went on to say.

One of those providers is Amazon (NASDAQ: AMZN) which offers its fast-growing EC2 cloud computing service.

Dunshee said he objected to the decision before it was approved.

“There were a whole bunch of people who thought it was necessary. We in the legislature, among the techno wonks and some others, had a pretty big discussion on it,” he told InternetNews.com

The argument for outsourcing is you have cloud technology available out there, so contract out some of those services and let someone else manage the systems. The argument against it is this stuff is not the same as e-mail.

“There’s a bunch of proprietary stuff and confidential stuff. These records are not shopping lists. They are people’s medical records and disability records and personnel stuff. Even Microsoft does that stuff on their Redmond campus as opposed to a remote site,” said Dunshee.

The pro argument wanted the data on machines where they can get them. But Dunshee said it’s very expensive.

“These datacenters are just killing us on cost. Every time the state of Washington builds one of these big datacenters, they change and grow in cost. I would think we could find a contractor who could give us a level of security we wanted,” he said.

Carlyle added that the deal right now is being viewed as all or nothing, that there’s no partway view of outsourcing a few pieces but not all of it. “I’m not arguing we should … head to the opposite end of where we are, from the state controls everything to outsource it all and walk away,” he said.

Next page: An inadequate business plan?

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Privacy and security are completely legitimate policies, he continued.

“My argument is the state’s business plan is completely inadequate from a technical, strategic point of view and a financial strategic point of view with respect to some of those other options of moving away from what we have to ‘What data could you outsource in a way that is much more cost effective?’,” he said.

Washington’s Department of Information Services is what’s called a full recovery agency, meaning it has to make back its costs. It does this by charging other government agencies for using its services.

Carlyle fears that by locking into the DIS systems, the state will have a monopoly within government, basically, and a cheaper outside agency could not compete to offer similar services.

Efforts by the states have been mixed. John Kost, a research vice president with Gartner and the former CIO for the state of Michigan, understands their point of view, but said Washington has few options because cloud computing is in its early stages, and government has lagged compared to business.

“It’s a perfectly valid argument, but in the public sector there’s just so few opportunities to use the cloud,” he told InternetNews.com. “It’s the maturity of the industry because the propensity of public sector organizations to build their own and not to share, even with other states, is very poor.”

Specialized software

Since each state makes its own in-house apps, and every state is different, that means the states can share or sell their work to each other, and it’s really not much of an incentive for a business software company, whether its on-premises vendors like Oracle or on-demand vendors like Salesforce.com to come up with 50 different sets of apps.

E-mail and ERP might work for government, but that’s about it.

“Once you get past those two, that’s pretty much it. There aren’t that many things and they are designed for commercial use. State government general ledger systems are just too different to use them the way Oracle writes them to operate out of the box,” said Kost.

In the end, Kost feels that there are too few options for the state to weigh a build vs. lease decision. “It’s too pioneering. It’s worth it to do the due diligence but, unfortunately, they will find little opportunity beyond e-mail,” he said.

There are other reasons for this massive datacenter, noted Dunshee. “One of the goals is to consolidate all of our government systems into one place. That should save a huge amount of money. It would seem to me that going to cloud technology might delay that,” he said.

The datacenter still has several years ahead of it, if only for the construction part. So, Dunshee said, there are lots of possible combinations left.

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