"Cash-Starved Governments Look to Cut IT Maintenance Fees"

Interesting article at Government Technology about government organizations trying to cut costs by reducing maintenance fees. Not that this is real news since many "cash-starved" organizations are trying to cut costs. It makes you wonder how this will play out. Maintenance fees can range anywhere from 18% to 24% of net costs with the typical rate set at 20%. If vendors give in, their revenue streams suffer and they have to make up the difference elsewhere by increasing services costs or product pricing to satisfy shareholders.

On the other hand, cloud based services do not have maintenance surcharges (they're built in to the pricing model). The States of Oregon and Arizona have adopted Google Apps in their education system and the City of Los Angeles was actively debating it last year as well. But does SaaS serve government as well as on premise hardware and software?

Well, it all depends on your governance model. Cloud providers are feverishly working on securing their offerings in order to attract customers. However, it begs the question: can clouds be as secure as your own network? I suppose it is possible, but your network is secured according to your own governance and security policies. Unless the provider agrees to secure the environment according to your policies, it may not be sufficient. Add to that the fact that availability and SLAs suffer with multiple providers (99.99% telco uptime, 99.5% cloud provider uptime = 99.49% effective uptime guarantee) and we see why governance is a major issue facing cloud adopters, not the least of which is governments.

That said, it would be surprising if security and governance concerns would not be resolved. It seems to me that those organizations that would benefit most from cloud will modify their governance policies accordingly and cloud providers will improve their offerings so that the two will meet at some compromising middle ground. Is this the beginning of the end for maintenance contracts? I don't think so, but I bet they're going to change as cloud gains traction...