The next BriefingsDirect IT innovator interview examines how the City of Melrose, Massachusetts, plans to reduce the cost of supporting its applications to perhaps zero—and maybe even generate revenue—by embracing hybrid cloud computing to become a specialized managed-services provider.
Melrose transitioned from nearly 100 percent server virtualization to a novel cloud capability built on VMware vCloud Hybrid Service (vCHS). In doing so, they gained dependable disaster recovery (DR) capabilities. They also discovered that they could not only host their own applications, but also those of nearby communities for an on-going fee. The process sets up a win-win scenario for all the municipalities involved.
To learn how the hybrid cloud leads to new business models and lower total costs, BriefingsDirect recently sat down with Jorge Pazos, the Chief Information Officer, and Colby Cousens, IT System Administrator, both for the City of Melrose. The interview was conducted by Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: WMware is a sponsor of BriefingsDirect podcasts.]
Here are some excerpts:
Gardner: As you looked to extend the benefits of server virtualization, what were some of the top requirements for moving to cloud and hybrid-cloud infrastructure?
Pazos: We're an IT department for a mid-size town in Massachusetts. We offer services to all of our internal departments, and we're beginning to grow out into a managed-service provider.
What we're doing now is providing these services to other cities and towns. The way that municipalities are run, especially from an IT perspective, there isn’t a great deal of diversity. We could pretty much run IT for almost any city or town, because the apps are very similar and the business processes are all very similar.
And after the launch, actually one of the things that we are pretty excited about that we didn't see in the past was cost predictability, which we don't really see a whole lot from a lot of the other service providers.
It’s not that big of a stretch to get to that point where you say, "I can do this for another city or town." That was actually the thought process several years ago, as we started to do our own internal consolidation. The idea was that if we do it for ourselves, why can’t we do it for others. It’s not that much of a leap to get there.
Cousens: When you get some practice consolidating city and school networks and data centers you realize it's all the same thing. We could do it with other the municipalities as well.
Gardner: What was important for you to be able to do that in terms of the infrastructure solutions available?
Cousens: Compatibility was the biggest issue for me. I didn’t want to run into any roadblocks with software or hardware that wouldn't work with each other, so we would have had to drop the project just because two things wouldn't connect.
Pazos: Part of what we're looking to do internally is grow that managed-service provider part of the business, but then also take care of a lot of the day-to-day stuff, too.
Three or four years ago, there weren’t a whole lot of cloud-service providers that we felt could do what we were looking to do. So when we had this opportunity to participate in the beta for the VMware vCHS, we were really excited. There was quite a bit of promise in it for us in terms of things that we felt were important, like interoperability, security, performance, and things like that.
If you think about building a data center, which is what we did about three or four years ago, it was a top-to-bottom upgrade of our data center. One of the things that you immediately start to think about is your disaster recovery (DR). When you're a small municipality with five square miles, where do you put a DR site that gives you diverse power providers, and geographical diversity?
It doesn't make sense to invest heavily in a DR site that’s somewhere within the same town. So we were really looking to cloud-service providers to provide that for us. That was one of the big drivers for us, and we really didn't feel comfortable growing the business too much without having at least that capability somewhere, as part of our service offering.
Gardner: Tell me about Melrose, the applications, the number of users, and your infrastructure. What are we talking about in terms of the IT organization?
Pazos: It is a fairly modest deployment by service provider standards, but I think by municipal standards, we're decent size. Currently, we're at about 70 virtual machines (VMs) with 30 terabytes of storage. We connect our regional partners the way that we connect these communities, Essex is about 30 miles away, and Saugus is a direct neighbor. To connect these guys back to our data centers, we use an ENS circuit, which is basically a Layer 2 connection between the two sites that can be ramped up.
They come up in base of 10 Mbps and then they can go straight up to a 10 Gbps. We run several SQL databases, which includes our financial system. We run Microsoft Exchange, Public Safety Dispatch. There is a CAD, Computer Aided Dispatch/Records Management application, and database. We also have virtual desktops. Our entire emergency dispatch operations are all running on virtual desktops, as well as point of sale for virtual desktops.
So we run quite a few different apps, many of which are obviously pretty mission-critical, and the demand is growing. We are going to be on-boarding Saugus through the summer and into the fall. So we'll be experiencing some growth through that process as well.
Gardner: And Essex and Saugus are also municipalities in Massachusetts, and you have been experimenting and bringing them on, so that they become paying customers to you. Do you think it is possible at some point that you're going to cover your IT cost by doing this managed-service provider business?
Pazos: Early on, it got to a point where we couldn't do it, but it looks to me like now we're potentially going to be in a position where maybe five or six additional clients get us to the point where we are revenue-neutral to the city. That's looking a little bit more realistic for us in terms of both getting people to warm to the idea and also being able to support it.
Revenue-neutral would be absolutely fantastic. If you're taxpayer in the City of Melrose and you can have a department that offers all of its services internally and be completely revenue-neutral, I would be ecstatic about that.
Cousens: I also think that the services we offer to the city are better because of our equipment. Our refresh schedule is better. The stuff that we're using is more enterprise-grade, because we're using it in the hosting environment and providing to a number of partners.
Gardner: Let's look at the equation of how the economics of this work from the perspective of your client municipalities, for lack of a better word. When Essex and Saugus evaluate this, are they going to be able to get their IT services from you cheaper and with a higher performance than they would have been able to do it themselves?
Pazos: There are two ways to look at that. Town of Essex has reduced their IT expenditures by 33 percent year over year. So they're immediately seeing savings every year. The story in the Town of Saugus was a little bit different. They had an IT department that had inherited infrastructure that was getting old and needed to be refreshed. They were able to buy into the service and not have to incur a large upfront cost of doing a forklift upgrade of their entire IT infrastructure.
They're saving, year one, somewhere in the vicinity of about $80,000 or just north of $75,000. Then, there's the year-over-year savings that they're seeing. So for this three-year agreement, they feel like they're saving quite a bit of money.
Gardner: Colby, given that you had a very strong set of requirements around compatibility of being able to move from your on-premises infrastructure into a hybrid cloud model, what about Essex and Saugus? Were they also highly virtualized in their servers and workloads, and how did the compatibility from them work, moving toward your vCloud Hybrid Service set up?
Cousens: That wasn’t as much of an issue for us, because they weren't really virtualized yet at all. So part of the on-boarding process for them is virtualizing all of their servers and doing some virtual-desktop offerings, too. We got to start fresh with virtualization onsite for their services.
Gardner: I suppose you could look at that as another added value. You're actually modernizing them—or guiding them into a more optimized IT infrastructure with a higher utilization. You're also helping them decide which of their services to get from the source, in this case the one that you are managing, versus perhaps a cloud provider that would not have the expertise in the customization that they're looking for.
Pazos: Absolutely. Not only are we saving them money, but we're able to provide them services that they weren’t providing for themselves. A lot of these guys didn’t have offsite data replication.
They didn't have DR site capability. It was a pretty traditional small data center, a server room type set up in a building. Everything was a single point of failure. We're not only saving them money, but we're providing a higher level of service than they would have ordinarily been able to achieve.
Cousens: Again, in the case of Essex, the town manager is doing the IT work too. So besides the financial piece, he was having a hard time focusing on his IT stuff as well.
Pazos: A lot of these are small governments scattered around the state. The $75,000 that Saugus is saving this year is very big money in small town government.
In the case of Essex, quite often, people are doing double duty. They're the town accountant and the IT person, or the town administrator and the IT person. So they are also gaining from freeing themselves up to focus on their primary roles. In the town of Essex, he's able to focus on being the town administrator. That’s life in small town government in Massachusetts.
Gardner: Do you have any advice for those who might be also considering adopting a hybrid cloud or maybe even pursuing the notion of being either a consumer or provider of these managed services?
Pazos: Whatever you've been waiting for, don’t wait. It's to the point where you just want to move ahead, and for some of this, you're going to have to adapt and sort of figure out as you go and as things evolve.
There were times early on, where we were frankly a little hesitant to do some things, because, to be honest with you, we spoke to a lot of folks in other cities and towns who just sort of cocked their heads a little bit and looked at us and said, "Really? Why are you doing this? Why would you want to do this? This seems sort of crazy." So there was a little bit of hesitation at times as we moved forward.
But the idea seemed solid, and we went ahead with it. That's the advice for folks—don't really wait. Do your research, do your homework, understand what it is that you're getting yourself into, but certainly move ahead, because I really feel like this is the way we're going to be doing business. I know we are doing businesses right now, but I think a lot of folks are going to be doing business this way at some point in the near future.
Cousens: Experimentation is key. A lot of the technologies are complicated to just look at or read about. Get in there and do an evaluation or download trial versions of different products, like we did with the Beta, with vCHS. You just have to try it out and play with it. Then you start to realize the true value as you apply it to actual use cases.