As the IT departments will have different functionalities, the IT staff need to be trained for the new jobs and transferred to another department in the organization. Not sure if none of those two options failed what is the next step. Especially if it a government agency that the hiring and firing policies are very strict and rigid.
Usually, IT staff is trained to start as operators and some of them would be selected as a web designers. Of course, few of them will no longer be needed.
IT staff must be trained for using the new technologies... Adopting Cloud Computing by the organizations doesn't mean that it will reduce the manpower requirement. it claims more skilled man power and opens the gate for lot of good opportunities.
I think IT staff should be managed well as cloud computing will take some roles and responsibilities from them. I mean some of those talented will stay while some will not. However, still need them to manage the relation with cloud vendors, monitoring, evaluating, and testing the various solutions.
Normally during the deployment of cloud, IT organizations need to re-visit their ITIL / ITSM processes as well as some of the processes need to be adjusted e.g. release management, change management, service level management etc due to automated provision / de-provisioning, DevOps & other cloud features, Moreover, traditional incident and problem management also being affected as old problems getting less (due to predictable automated provisioning etc) but new problems due to cloud also increasing. All these have impact on the IT workforce in which some staff need to be re-trained, some need to be re-deployed and some might need to be retrenched depending the IT organization policy and planning.
Planning is vital because I also came across a semi-quasi government type of IT organization really planned ahead by re-deploying all their IT staff by forming a new IT subsidiary / entity to serve not only internal but also other government agencies as well as external private companies on cloud deployment and management.