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Defense Spending on Cloud Computing in Q4 of Fiscal 2015

Published: February 03, 2016

USAFARMYCloud ComputingDEFENSEDISANAVY

Defense customers spent at least $26 million on commercial cloud services and products in the fourth quarter of fiscal 2015

With all of the attention focused on the Department of Defense’s allegedly slow march to the cloud it is easy to forget that the military departments already make extensive use of commercial cloud-based solutions. Contract spending data collected by Deltek toward the end of calendar year 2015 shows that DoD customers nearly doubled the amount they spent on cloud computing from fiscal 2012 to fiscal 2014, with total spending rising from $86 million to $160 million over that 3 year period. Keep in mind that these numbers are only what Deltek’s Federal Industry Analysis team has been able to identify as spending on cloud. The DoD is probably spending considerably more on cloud than what can be verified. Readers are also advised to remember that the identified spending is money the DoD has obligated for cloud without having its policy ducks in a row. Just last week, the Defense Information Systems Agency publicly issued a Cloud Connection Process Guide (CCPG) that details how commercial providers are to connect to defense networks to provide cloud services securely. The CCPG was issued internally before its public release, but the guidance in it is still relatively recent.

The point in mentioning this is to note that the DoD is spending on cloud despite the perception in the media and on Capitol Hill that it is dragging its feet. Defense spending on cloud at the end of fiscal 2015, illustrates this clearly. The chart below shows this spending for the last quarter of the fiscal year based solely on the data returned from a selection of cloud-related keywords fed into the Federal Procurement Data System.

As we can see, the military departments and DISA spent a minimum of $26 million on commercial cloud solutions in Q4 of FY 2015 alone. Noting that this data shows minimum spending is an important distinction. The totals shown are generally new contract actions. They do not include spending on dozens (if not hundreds!) of contracts already in place for cloud-related services that may have multiple years left on them. Pulling the data for such a large number of contracts requires weeks of effort that FIA compiles into its Federal Priorities: Cloud, Big Data, Mobility, and Data Centers report, published every October.

The data shown is therefore merely a snapshot of where a portion of defense spending on cloud stands right now. The totals are not large in the grand scheme of things, but it is interesting that the Air Force and Navy are leading the way. The data in recent years has shown Army spending on cloud to be well ahead of Air Force’s and Navy’s. It looks like that pattern reversed in Q4 of FY 2015.

Behind the Numbers

Spending on VMware’s cloud based solutions, including licensing and maintenance, appears to have driven the Air Force’s spending, while the Navy’s spending appears linked to a sizable contract settled with Smartronix for cloud hosting and computing resources provided by Amazon Web Services. AWS is of course one of the commercial Infrastructure-as-a-Service solutions approved for DoD use so far. Not surprisingly, the early approval is proving to be beneficial for AWS.

Thus we see a difference in the cloud strategies being employed by two of the military departments. Navy is dipping its toes into an approved public cloud solution while the Air Force is purchasing cloud software for its internal use. This brief snapshot hints at some of the nuances in the federal cloud market as Smartronix was awarded a contract to provide commercial cloud services offered by one of its partners. Conversely, the VMware products and services purchased by Air Force customers are being used to support/establish cloud environments. Such differences prove there are opportunities for a variety of different kinds of vendors in an area of the federal IT market that promises significant growth in the years to come.