Part 3: Understanding what Infrastructure as a Service is meant to achieve

3.1
In this Part, we discuss:

• the benefits expected from Infrastructure as a Service; and
• whether organisations consistently understood the expected benefits.

Summary of our findings

3.2
Staff in organisations using Infrastructure as a Service could clearly explain why they used it, and most of them could give us documentation supporting their decision to do so.

3.3
The GCIO's staff understood what the expected benefits for individual organisations and the wider public sector were.

Benefits expected from Infrastructure as a Service

Consolidating demand

3.4
Infrastructure as a Service consolidates demand by having three ICT providers provide physical and virtual infrastructure for a potential pool of about 380 organisations. ICT providers also employ the staff needed to look after the infrastructure and provide services.

3.5
Consolidating demand leads to efficiencies, such as reduced operating overheads for data centre power, air conditioning, networking, property costs, and physical and cyber security. Fewer people should be needed to manage the ICT infrastructure,¹⁴ and responses to cyber-security incidents and natural disasters should be more efficient.

Reduced duplication and capital spending

3.6
Organisations that use Infrastructure as a Service do not need to buy as many ICT assets, so capital spending by organisations should reduce.

3.7
There should be less ICT infrastructure in total and less waste because there is less duplication of assets. When organisations own their ICT assets, it is common for them to own spare assets (which incurs costs), and they do not always make the best use of assets that are in use.

Better resource management, service levels, and risk management

3.8
Infrastructure as a Service allows organisations to use only the resources they need and pay only for what they use.

3.9
Organisations' business units are also expected to get faster service, because ICT providers are contractually obliged to be ready to respond to changing business needs, such as sudden increases in demand.

3.10
When organisations own their infrastructure, their business units often need to wait while their ICT teams buy, receive, and configure extra servers and put them into use, which could take weeks.

3.11
ICT providers are more easily able to provide a consistent and quality service because they can recruit specialist staff more easily than some organisations. They also have access to new technologies that can help the effectiveness and efficiency of services. ICT providers can also mitigate risks more effectively and efficiently than most organisations.

3.12
Infrastructure as a Service is expected to reduce risk at the organisation level by:

• improving cyber security – ICT providers have more consistent and rigorous processes for meeting government security requirements; and
• increasing resilience – ICT providers have the capacity, equipment, and expertise to prevent potential interruptions to services and can respond more effectively when interruptions happen.

Reduced total cost of owning ICT infrastructure

3.13
Organisations using Infrastructure as a Service should own less ICT infrastructure, which means their total cost of ownership should decrease. The total cost of ownership is an estimate of the total costs of goods, services, or construction works over the whole of the infrastructure asset's life.¹⁵ How much the total cost of ownership will decrease for organisations using Infrastructure as a Service will vary.

3.14
To understand whether Infrastructure as a Service would decrease their total cost of ownership, organisations need to calculate their current total cost of ownership. Examples of the costs that organisations should include in their analysis include:

• insurance;
• floor space;
• electricity to run the servers and cool the room the servers are kept in;
• network equipment;
• service contracts with the seller for three to five years;
• depreciation;
• upgrades and maintenance; and
• the cost of employing staff with the right expertise to look after the infrastructure to an acceptable standard.

3.15
Because ICT providers were to provide services to a potential pool of about 380 organisations for 10-15 years, the GCIO wanted better commercial terms than individual organisations could negotiate. The GCIO negotiated with ICT providers that prices for services would decrease as the quantity of services consumed through Infrastructure as a Service increases.

Procurement savings

3.16
Normally, once an organisation has decided to outsource its ICT services, procurement consists of two stages:

• an organisation puts together a shortlist of ICT providers; and
• an organisation chooses and negotiates a contract with its preferred provider from the shortlist.

3.17
Organisations using Infrastructure as a Service do not have to go through the entire procurement process when deciding which ICT provider to use. They can choose their preferred ICT provider from a panel and decide which services they want to buy. Organisations also save time and costs because the GCIO provides security certifications for services available through Infrastructure as a Service.

3.18
The GCIO has a standard set of procurement contracts. This saves the time and cost of preparing individual contracts. It also ensures that all organisations and ICT providers operate under the same terms and conditions. These standard contracts also mean that organisations do not need procurement and legal expertise or outside help. The contracts allow for new services to be introduced.¹⁶

3.19
Because the GCIO's contracts with ICT providers are for 10-15 years, organisations do not need to independently re-test the market during that period. One of the main reasons that organisations want to re-test the market is to get a better price on services.

Organisations' understanding of expected benefits

3.20
We expected the GCIO's staff and organisations to have a consistent understanding of Infrastructure as a Service's expected benefits.

3.21
The GCIO's staff could clearly explain the expected benefits from Infrastructure as a Service. Staff could also explain how Infrastructure as a Service contributes to the Government's strategic goals, such as achieving efficiencies for the wider public sector by consolidating demand and improving service delivery.

3.22
Staff from organisations using Infrastructure as a Service could clearly explain why they used it, and most of them could give us documentation supporting their decision to do so. The reasons people gave, which were consistent with the expected benefits, included:

• to reduce their infrastructure risk;
• to reduce the total cost of ownership and get greater transparency about costs;
• to improve service performance; and
• that they had ageing or deficient ICT infrastructure.

3.23
Some people also said that their organisation used Infrastructure as a Service because their organisation was required to use it.

14: For example, if an organisation needed two people to look after 100 servers, an ICT provider would need fewer than 20 people to look after 1000 servers.

15: For example, the initial purchase price of infrastructure assets plus installation costs, operating costs, and maintenance minus the residual value on disposal. See Ministry of Business, Innovation and Employment (2013), Total cost of ownership: An introduction to whole-of-life costing, page 1, www.procurement.govt.nz.

16: Any new services that an organisation or ICT provider wants to introduce through Infrastructure as a Service are automatically made available to other organisations after the GCIO has ensured that the change is within the scope of the original procurement and has approved the change. This provides an opportunity for improvements to be taken up quicker.