Virginia’s IT sector expects more agencies and businesses to access services through the InternetMarch 29, 2011 6:00 AM
by Garry Kranz
Illustration by Matt Brown
Forgive Virginia’s IT companies for having their heads in the clouds these days. That is, after all, where they soon expect to rack up huge profits. Cloud computing is the next frontier in information technology, driven especially by the Obama administration’s mandate that federal agencies transition to computing resources via the Internet.
Anyone who has used Google Docs, Dropbox, Box.net or similar services to store computer files online — rather than on a computer hard drive — has used the cloud. Although once considered a novelty, the cloud computing market appears ready to explode. And Virginia is uniquely positioned to benefit. Proximity to the nation’s capital, abundance of bandwidth, redundant supplies of electric power and nearly 150 established data centers give the state’s IT sector an edge in dominating the market.
Gartner Inc., a research firm in Stamford, Conn., says worldwide revenue from cloud services is projected to approach $149 billion by 2014. In 2010, Gartner projected cloud services revenue at $68.3 billion, up 17 percent from $58.6 billion in 2009.
So, what does it mean to go into the cloud? The concept dates to grid computing, or utility computing, back in the 1990s. The term refers to a series of underlying technologies that enable computer users to remotely access software, data files, servers, storage and other network services over the Internet, using only a Web browser. Rather than purchase and install new hardware and software, organizations instead buy their computing resources as needed from a cloud hosting provider, similar to how consumers purchase electricity.
The promise of cloud computing still requires bricks-and-mortar data centers to house servers and other infrastructure. But they will be “virtualized” servers capable of running multiple operating systems on a single machine. The implication for server consolidation and reduced IT management is huge.
Cloud computing also makes the location of servers irrelevant. A Virginia company’s data may be stored on a server housed in a data center in the Pacific Northwest run by hydroelectric power, or it may be stored nearby in a data center powered by the redundant electrical grid along the Dulles Corridor.
“That’s the real power of cloud technology. It doesn’t matter where the data is stored, as long as I can get it when I need it and presented in a manner I can use,” says Craig Parisot, chief operating officer of McLean-based Invertix Corp., which provides cloud services to the nation’s defense and intelligence communities.
Cloud computing also dovetails with the “green” revolution. It enables large data centers to serve more customers with fewer physical servers, thereby reducing consumption of fossil fuels and controlling cooling costs, says Kevin Jackson, director of cloud computing services at Vienna-based IT firm NJVC, whose primary customer is the U.S. Department of Defense.
Virginia’s cluster of federally focused cloud providers continues to expand and add IT staff. RightNow Technologies Inc., a Bozeman, Mont.-based company, recently moved from Herndon to larger offices in Reston and increased its staff by roughly 25 percent, to about 75 professionals. By hiring more sales, marketing and business development personnel, RightNow officials hope to snag a bigger share of government business.
Meanwhile, ScienceLogic Inc. relocated its Reston headquarters to the Parkridge Center Four office complex. The new 30,000-square-foot office is four times larger than its old space and can accommodate a growing staff expected to double to about 130 by year end.
Another player in the sector, Sterling-based IceWeb, plans to merge with Maryland-based Promark Technologies Inc. in a bid to provide a data storage powerhouse.
“The federal government is the tail wagging the dog in Northern Virginia. You can’t go to a single federal agency that doesn’t have a cloud initiative under way,” says Kevin Burke, a vice president at Virtacore Systems in Ashburn. Last year Virtacore invested $1 million to build cloud-computing facilities.
In February, U.S. Chief Information Officer Vivek Kundra unveiled a cloud-computing strategy that requires federal agencies “to evaluate safe, secure cloud computing options before making any new investments.” The objective, Kundra says, is to free federal agencies from the burden of owning and maintaining data centers and enable them to launch new capabilities that serve millions of users.
Under Kundra’s proposal, the government could save about $20 billion by migrating about one quarter of its IT services to cloud networks. By contrast, the government spends about $80 billion overall on IT services now. Kundra’s plan calls on each federal agency to transfer at least one software application to the cloud sometime this year. “The cloud is the government’s next-generation architecture,” says Parisot at Invertix.
Yet Virginia cloud providers aren’t focusing exclusively on the federal sector. Spurred by the government’s headlong rush, private-sector organizations also are looking to adopt cloud architecture, opening up a swath of new business opportunities for providers like Fairfax-based Evolve Technologies. The company has booked about $1.2 million in annual revenue thus far in 2011, with future contracts projected to boost it by 30 percent, says CEO Dave Sobel. From 2009 to 2010, revenue increased 17 percent.
The appeal of the cloud is strong for private businesses, particularly those with limited IT budgets. “Cloud computing is going to make it possible for small and midsized companies to buy the basic technology infrastructure they’ll need, when they need it. That wasn’t the case five years ago,” when they had to purchase costly hardware and software, install it and hire staff to manage and administer it, notes Sobel.
Future of data centers
On the surface, cloud computing might appear to spell doom for the construction of major data centers. However, the reverse is actually the case, according to state officials. As companies shift more data to a cloud-based format, demand for massive data centers is expected to rise, says Liz Povar, director of business development for the Virginia Economic Development Partnership, the state’s business-recruiting agency.
To help Virginia land its fair share of new projects, state lawmakers several years ago voted to exempt companies building data centers from sales-and-use taxes. The measure offers tax breaks on the purchase of computer equipment, chillers and backup generators used in such centers.
The legislation is a “difference maker and field leveler” when Virginia competes with other states, says Povar. Indeed, Virginia’s largesse was at least partially responsible for Microsoft Corp.’s decision last year to build a data center for cloud computing in Virginia. The Redmond, Wash.-based software giant is spending nearly $500 million on the data center in Boydton in Mecklenburg County. The deal was billed by Gov. Bob McDonnell as “the largest investment project in the history of Southern Virginia.”
Microsoft weighed other considerations as well, including affordable real estate with the necessary infrastructure, “but the sales-and-use tax exemption was represented to us as being fundamental” to the decision, Povar says.
The Microsoft news was the second data center announcement by a major cloud provider in Virginia in as many years. Amazon Web Services, a subsidiary of online retailer Amazon.com Inc., established a cloud-computing data center in Ashburn in 2009, just before the tax exemption took effect.
But cloud computing isn’t without drawbacks. Not all data is suited to the cloud, such as proprietary information or sensitive customer files. To avoid compromising this type of data, organizations should place a greater premium on classifying it, says Christopher Fountain, the president and CEO of SecureInfo Corp. in McLean. The government, for example, wants images from NASA’s Hubble telescope to be freely available. Not so with the terrorist watch list.
“The lower the sensitivity, the lower the stakes, and the more likely [it is] you can move it to the cloud and take advantage of the benefits, which include reduced cost of ownership and a higher degree of flexibility,” Fountain says.
Cloud computing also takes some time getting used to. The Virginia Information Technology Agency, or VITA, began using the cloud concept before the term was in general use. In 2005, VITA inked a contract with Northrop Grumman Corp. to build a “private cloud” environment. As part of the deal, Northrop Grumman invested $35 million to build a data center dedicated to serving nearly 90 state agencies.
Although its goals were laudable — to lower IT costs while boosting service levels — the project has been beset by delays, lower-than-expected performance levels and a contentious billing dispute. The problems prompted the McDonnell administration to rework the highly vaunted contract last year.
Those woes are finally behind the agency, says VITA’s Chief Information Officer Sam Nixon. Nearly all state agencies are using the cloud model for e-mail, messaging, data storage, security, helpdesk assistance and other items, benefiting from paying the same cost for services. Nonetheless, the episode serves as an object lesson for other organizations pondering a move to the cloud. “We’re constantly looking for ways to improve our operations around security and risk management,” says Nixon. “But you never stop asking, ‘What if it fails?’”