Fourth Estate Cloud Migration: How Much Cost Avoidance is Involved?

Published: September 05, 2018

Federal Market AnalysisBudgetCloud ComputingData CenterDEFENSEDISAInformation TechnologyPolicy and Legislation

Defense Agencies are seeking to shed $12B in annual IT budget via a contract with a $500M ceiling value.

The Defense Information Systems Agency (DISA) recently released a now-canceled request for information seeking industry input on how to efficiently migrate workloads from roughly 100 Fourth Estate data centers to the cloud. DISA’s RFI follows a memorandum that Essye Miller, then the acting CIO for the Department of Defense, issued in May 2018 ordering all Fourth Estate agencies to migrate 100% of their workloads to milCloud 2.0 by the end of fiscal 2020. Miller’s memo contained an addendum listing the 108 data centers and installation processing nodes Defense Agencies should close as a result of the initiative, but beyond this there has been little information on just how many workloads the Fourth Estate will be moving to cloud platforms. This post takes a look at Fourth Estate IT spending in an attempt to uncover  how much work Miller’s memo encompasses in terms of annual budget and what that might mean for Defense Agencies.

Fourth Estate IT Infrastructure Budgets, FY 2016-2018

The data below shows the total budgets for Fourth Estate IT infrastructure from fiscal year 2016 to 2018. I’ve used the numbers provided in the FY 2018 IT Budget Request because the FY 2019 request pulled about 50% of DOD’s IT investments behind the curtain of “National Security Systems.” FY 2018’s request, therefore, represents the last complete budget estimate available. These are major costs that the DOD would like to avoid by moving to cloud-based infrastructure. Most importantly, from a cost avoidance perspective, we can see that Fourth Estate IT infrastructure budgets, and by extension costs, have risen each year. This comes at a time when the DOD is supposed to be cutting the number of data centers it operates.

Broken out by the top 10 defense agencies the numbers look like this. IT infrastructure budgets for every agency on this list have risen over the last 2 years except the Defense Media Activity (DMACT).

Fourth Estate “Other IT” Workload Budgets, FY 2016-2018

The goal of Essye Miller’s May 2018 memo is to migrate all Fourth Estate workloads to milCloud 2.0 by the end of FY 2020. In addition to the IT infrastructure budget data reported above there are 16 other categories of IT functions listed in the FY 2018 DOD IT budget request. I’ve labeled these “Other IT.” The total budget requested for these areas is as follows.

Readers will notice that just like the funding for IT infrastructure, the budget required to operate these systems is growing. Keep in mind that these budgets are rising after years of DOD application rationalization intended to reduce redundancies and lower costs.

Lastly, here are the budgets for the top 10 IT business areas from the total “Other IT” category, meaning anything not listed as IT infrastructure. The Defense Health Agency’s costs to implement the new electronic health record are probably driving these up in the near-term.

Concluding Thoughts

What does all of this mean for cloud services providers? For General Dynamics and its Alliance Partners operating milCloud 2.0 it means a heck of a lot of work. One of the curious things to me is the sheer amount of IT budget Fourth Estate agencies are hoping to shed. The milCloud 2.0 contract awarded to GDIT’s CSRA acquisition has a ceiling value of $498M, but the total IT budget represented above equals approximately $12B in FY 2018. Does the DOD think it can reduce its IT spending by that significant a percentage? Miller’s memo and the abortive DISA RFI suggest they do, but will they end up using more than just the mandated milCloud 2.0 construct? Roughly $1B of the IT budget requested for FY 2018 is dedicated to Battlespace Networks and Command & Control. Those functions will probably go to the JEDI cloud, whenever it is awarded. The rest will either need to go to other commercial cloud providers, stay in DISA computing centers, or in a milCloud 2.0 with a significantly higher ceiling. Either way, it is worth keeping an eye on if your company provides cloud services to the DOD.