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Research Synopsis

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Research Questions

  1. What are effective strategies to estimate the costs — and potential cost savings — related to cloud information storage and processing?
  2. What is the best way to identify, prioritize, and justify cloud resource needs?

Cloud computing has garnered the attention of the Department of Defense as data and computer processing needs grow and budgets shrink. Programs are interested in the potential of cloud computing to control growing data management costs, but reliable literature on the costs of cloud computing in the government is still limited. Researchers found that cloud provider costs can vary in value compared with traditional information system alternatives because of cost structure variations, and analyzed the cost drivers for several data management approaches for one acquisition program to develop structured cost considerations for analysts evaluating new cloud investments. These considerations can help analysts be comprehensive in their analysis until the DoD develops official guidance on cloud computing cost analysis.

Key Findings

Commercial Clouds Do Not Always Create Savings

  • Differences in cost can arise even when the overarching framework (such as utilizing a commercial cloud vendor) is the same.
  • Claims that moving to a cloud-based system is automatically cheaper cannot be taken at face value, as savings depend heavily on program requirements and the provider's pricing structure.

Costs Shift from Hardware to the Service-Level Agreement

  • Cost estimators may benefit from observing how individual cost elements change as a percentage of the total program cost across the alternatives.
  • The majority of the difference in software maintenance costs stems from licenses for software, rather than development.
  • Facilities, leases, and service-level agreement costs rise when using an outsourced data center provider. Hardware disposal costs decrease for the program when the data center is outsourced.


  • As the reliance on massive amounts of data increases in government functions, the need to consider cloud and in-house hardware solutions will only grow. Rigorous, defensible estimates require identifying the associated drivers and risks.
  • Further research on cloud-specific cost estimating structure elements would be valuable to support cloud cost analysis policy development and help ensure analysis is of sufficient rigor.

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This Perspective is was commissioned by RAND Arroyo Center's Force Development and Technology Program and is based on lessons learned from a U.S. Army sponsored analysis.

This commentary is part of the RAND expert insight series. RAND Expert Insights present perspectives on timely policy issues. All RAND Expert Insights undergo peer review to ensure high standards for quality and objectivity.

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