Demand for Cloud Services Should Weather the Budgetary Storm

In today’s era of hyperventilating media reports it is probably safe to say that the government contracting community is fearful for its future. President Trump is expected to propose massive cuts to domestic agency budgets, perhaps including even the elimination of entire institutions. At the same time he intends to ramp up spending on U.S. defense, homeland security, and law enforcement. In short, big changes appear to be coming and technology vendors providing goods and services to the federal government are grappling with how to accommodate the new situation.

My purpose in today’s writing is to communicate to cloud vendors my belief that demand for their services will remain robust regardless of how the fiscal 2018 budget shakes out. I believe this because the arguments for adopting cloud services are even more compelling in a challenging budgetary environment.

Consider the cloud market as it stands today. According to collected award data from the Federal Procurement Data System (FPDS), civilian agencies contracted for approximately $2.1B in cloud services in fiscal 2016. This represents a staggering 77% increase from the roughly $1.2B in cloud services that civilian agencies contracted for in fiscal 2015. Please keep in mind that these totals are not spending. They are awarded contract amounts.

In a word, civilian agencies appear to have largely dismissed concerns about the security and reliability of commercial cloud solutions (the recent AWS East outage notwithstanding), so they are now contracting for these solutions at a growing rate. Part of their motivation for adopting cloud is its reduced cost compared to traditional computing. Remember, agencies have been facing stagnant budgets for the last 5 years. President Trump’s fiscal 2018 budget may ratchet up that pressure even more, but the situation remains the same – agencies are being forced to do more with less. Adopting cloud enables them to do this.

On the defense side of the house, cloud adoption remains tepid at best. Whereas the Department of Defense contracted for $1.2B worth of cloud services in fiscal 2015, the available data shows a contracted total of only $201M in fiscal 2016 - a whopping 84% decrease! To say that the DoD has slow-rolled its move to the cloud is an understatement.

Multiple signs, however, point to this situation turning around.

For one thing military departments like the Air Force and Army, as well as Defense Agencies like DISA, have finally put contracting strategies into place that will allow them to make greater use of cloud capabilities. The Army Private Cloud Enterprise (APCE) effort is trail blazing the use of on-premise commercial IaaS solutions and its Army Cloud Computing Enterprise Transformation (ACCENT) contract will provide customers with commercial services they can consume with confidence. Similarly, the Air Force is piloting an approach like Army’s APCE in its Installation Services Node (ISN) / Installation Processing Node (IPN) Pathfinder, and DISA is readying awards for the new iteration of its milCloud 2.0 offering. All of these approaches will foster the adoption of cloud by defense customers.

Lastly, there is a comment recently made by former defense Chief Information Officer, Terry Halvorsen. The former CIO noted that the DoD’s enterprise move to Windows 10 is intended to provide the baseline for DoD’s adoption of cloud computing on an enterprise level. The military departments anticipate completing Win10 implementation by the end of January 2018, just under one year from now. The DoD can be expected to adopt cloud solutions rapidly from that point onward.

Summing up, here it the lay of the land. In the near-term, it will pay off to continue focusing development efforts in the civilian sector where budget-strapped agencies will seek to better utilize the few discretionary dollars they have. In the mid-term, though, all vendor eyes should focus on the DoD, which will finally have the technical baseline, budget, and acquisition avenues in place to make the most of the agile, efficient approach that cloud computing has to offer.