The Grid of the Future: Cloud Computing

For what must have been a frustrating moment in the Venn diagram of history, Americans could buy light bulbs but not the electricity to power them.

As early as 1878, Americans could order bulbs from the Edison Electrical Company, but it wasn’t until 1882 when Thomas Edison built his Pearl Street Station in lower Manhattan they could actually toss their private generators at the curb and connect to a shared power grid. With the innovation of a grid, the per-unit cost of electricity dropped from the combined effects of comparative advantage, pooling and economies of scale.

If we were to peel away our cities’ concrete shells today, we would uncover the pipes and wires of four utility grids, including electricity but also natural gas, water and sewage. We are now in the process of adding a fifth grid. Like the electrical grid in its time, a ubiquitous cloud will permit customers -- including federal agencies -- to take advantage of pooling, economies of scale and comparative advantage to realize cost savings.

A shared cloud achieves classic economies of scale. The more servers are aggregated, the more the fixed costs of individual data centers (e.g. real estate, security, lighting and cleaning) can be spread across all who have bought into the cloud. The more those fixed costs are spread around, the more an agency will see the cost-per-unit of server space decrease.

Further, pooling server resources in a cloud gives individual customers the agility for individual use spikes without dedicating resources to 24-7-365 peak capacity. For the Internal Revenue Service, to cite a prominent example, server traffic peaks around Tax Day by as much as 63 percent above average. It’s not an uncommon phenomenon; agencies across government experience peaks. Many are less annually predictable than April 15 -- see FEMA during Hurricane Sandy. Instead of maintaining peak server capacity year-round in anticipation of a day’s use, agencies can purchase agility by buying into a cloud.

Moreover, by transferring specialized IT talent from the customer agency to the providing company, both organizations benefit from comparative advantages. For the agency, the shift allows a cut in business costs and a refocus on core competencies. For the providing company, the shift allows a larger and more talented stable of IT talent.

When these forces push in the same direction, they continue to make cloud more and more economically feasible. Just as agencies pay for power, heating, water and sewage on a monthly basis today, they will soon pay on a monthly basis for server space.

The old grid is under our feet -- the new grid is all around us.

On Jan. 27, Nextgov will host an event to discuss where cloud technology is going in the government space, featuring the Department of Health and Human Services’ head cloud strategist, Jennifer Gray, and many more experts.

For more information about the event, register here.

(Image via 3dreams/Shutterstock.com)