One of the questions Deltek’s Federal Market Analysis team receives most often is how to understand the reporting of proposed agency cloud budgets in the annual IT Budget Request documentation published by the Office of Management and Budget. Confusion about agency reporting is understandable because every year for the last three years the OMB has changed the reporting requirements. These changes make it almost impossible to gauge the pace of federal cloud adoption or to clarify what agencies will actually spend. Think of continually comparing apples to oranges and you get some idea of the challenge.

In Fiscal Year 2018, for example, OMB required agencies to report cloud spending by deployment model only. That provided a good idea of proposed spending on private, public, hybrid, and community cloud, but it offered nothing for those who might want to understand spending by service delivery (i.e., _aaS) type. Then, for the FY 2019 budget cycle, agencies were given the option of reporting FY 2018 (yes, FY 2018, not FY 2019) cloud spending by service delivery type, but no updated numbers were provided for deployment model spending. For FY 2019, agencies provided no cloud spending totals whatsoever, leaving industry completely in the dark.

The result of this chaos is shown below.

Note how the FY 2018-2019 data lines up for some agencies (those that decided to report in FY 2019 every investment they listed in FY 2018) versus those that chose to report only some of their investments. OMB made reporting this data optional, hence the big discrepancies in some agency totals.

Focus on the FY 2019 numbers reported by the Department of Veterans Affairs. These remained consistent with the totals reported in FY 2018. By contrast, the numbers reported by Health and Human Services dropped from an estimated total of $531M reported in the FY 2018 budget request to $151M in the FY 2019 budget request. Note how this skews perception of the market. Did HHS cloud spending rise by 42% from FY 2016 to FY 2018 or did it fall 24% over that period?

Then we have the agencies that reported much higher FY 2018 spending totals in FY 2019 than they estimated in the FY 2018 request. The State Department falls into this category with its spending rising from an estimated $69M to $90M. If you are a cloud vendor, a change like this has a big impact on the market potential for an agency because it takes State’s 3-year growth percentage from 6% to 16%, which makes the agency look like a more attractive business opportunity. Do sales managers feel enough confidence in the reported 16% growth to pursue work at State or is growth actually at the lower 6%, making it a much less attractive environment? Decisions like these cost money.

Overall understanding of the market suffers, too, because it looks like agency cloud investment dropped from around $2B per year to $1.56B. Growth projections turn negative as well, falling from +6% over FY 2016 to FY 2019 to -3%.

OMB’s constantly changing reporting standards muddy estimates of the direction that federal cloud investment is heading. Vendors relying on these numbers to develop market strategies should be very careful and leverage other resources to validate what OMB is reporting. Deltek provides resources like this as part of its annual Federal Cloud Market Outlook report. The next iteration it will be out at the end of October 2018.