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Contracting Trends in the Federal Cloud Market

Published: November 07, 2018

Federal Market AnalysisCloud ComputingDEFENSEForecasts and SpendingInformation Technology

Federal spending on cloud continues rising, with Civilian agencies leading the way.

Deltek’s new Federal Priorities Spotlight: Cloud Computing report identifies several major trends in the federal cloud market that are of interest to industry. These include the direction of spending on cloud, the total value of contracts (TCV) awarded for cloud work, and the distribution of cloud investment across the Defense and Civilian sectors of the federal market. The data for each of these trends points show a market that is growing despite some sticky technical and governance roadblocks.

Spending and Total Awarded Contract Value

Deltek found that total federal obligations (i.e., spending) on cloud rose 11% from FY 2015 to FY 2017. Growth at the Department of Defense came in higher than in the Civilian sector, rising by 13% from $343M in FY 2015 to $492M in FY 2017. Civilian agencies spent more overall than the DOD, but growth in the sector came in a little slower at 10%. Total cloud spending for Civilian agencies in FY 2015 was $1.2B, rising to $1.7B in FY 2017. Deltek believes that rising spending reflects growing agency comfort with cloud, a greater variety of solution choices, and a larger available number of FedRAMP-approved solutions.

Deltek found similar results in terms of total awarded contract value (TCV). Federal cloud TCV rose 31% from FY 2015 to FY 2017, a trend that Deltek interprets as a potential indicator of higher spending to come. The DOD led Civilian agencies once again with TCV growth of 34% while Civilian sector TCV came in at 28%.

Deployment Model Data

When it comes to spending by cloud deployment model, the DOD obligated $437M for private cloud solutions, $436M for community/public cloud solutions, and $120M for hybrid cloud. Deltek groups community and public cloud solutions together because they are often provided by the same large industry partners and many public solutions are also listed as “community” by the FedRAMP Program. For the first time since Deltek began tracking the cloud market in FY 2012 Defense spending on community/public solutions reached the same level as spending on private cloud solutions.

A different picture emerges from the Civilian sector data. Those agencies collectively spent $1.6B on community/public clouds while spending $833M on private clouds. Spending on hybrid cloud also came in last in the Civilian sector with a total of $148M obligated.

TCV data revealed some stark differences in both sectors of the market. DOD awarded cloud contracts for community/public solutions totaling $2.6B, suggesting that future Defense cloud spending will shift farther in that direction vs. private and hybrid clouds. Civilian agencies, by contrast, have already made the transition, awarding contracts for community/public solutions that totaled $2.9B.

Lastly, contractors providing hybrid cloud solutions can look forward to growing acceptance by all government customers. The Defense TCV for hybrid cloud totaled $513M from FY 2015 to FY 2017. Civilian agencies, meanwhile, awarded contracts valued at $492M for hybrid cloud solutions. These TCV totals were the highest for hybrid cloud that Deltek has yet seen, indicating that increased spending on hybrid cloud by federal agencies should only grow from here.