Defense Sector Cloud Contracting in Fiscal Year 2018

This post is part 2 of a 2 part series on federal cloud contracting in fiscal year 2018. Part 1 can be found here.

For the second year in a row the total value of contracts awarded (TCV) by the Department of Defense for cloud-based solutions rose above $2B. All of the military departments and 4th Estate defense agencies contributed to this total with two parts of the DOD in particular – the Navy and Defense Agencies – accelerating their acquisition of cloud-based capabilities.

Top Defense Organizations by Cloud TCV

In FY 2018, the military departments and defense agencies awarded contracts for cloud goods and services valued at $2.2B, $300M less than the $2.5B total awarded in fiscal 2017. The breakout of cloud contracting at DOD is show in the chart below.

TCV at the Defense Agencies rose significantly thanks to big awards at three organizations, none of which, surprisingly enough, was the Defense Information Systems Agency (DISA). The Defense Advanced Research Projects Agency (DARPA) awarded the largest of these contracts, an almost $300M deal to Agile Defense, for an ITD IT Systems Support Cloud. Coming after DARPA was the Defense Logistics Agency (DLA), which awarded a $287M contract to Lockheed Martin for HCM Cloud Migration services. Lastly, among the top 3, the Office of the Under Secretary for Defense for Intelligence (OUSD(I)) awarded a $144M contract to General Dynamics IT for U.S. Battlefield Information Collection and Exploitation Systems (BICES) Extended.

The U.S. Navy proved to be the only other defense organization with rising TCV in FY 2018. Most of this growth came at Navy Space and Naval Warfare Systems Command (SPAWAR), which awarded 2 contracts worth $100M apiece for cloud services. Advanced Solutions received the first award, a deal for Cloud Hosting services. The second, and more publicized award, was a $96M agreement with CSRA, a subsidiary of GD IT, for Navy Commercial Cloud Services.

Army and the Air Force both saw their TCV drop in FY 2018 compared with 2017. In the Army’s case this decline is attributable to its network modernization pause taken as leadership reviewed the force’s strategic priorities. In the Air Force’s case work focused on two high-profile awards for Enterprise IT-as-a Service made the previous year rather than on new awards.

Defense Sector TCV by Service Delivery

Service delivery trends in the defense sector show some interesting divergences from those in the civilian sector.

To begin with, the TCV for Infrastructure-as-a-Service fell compared to FY 2017, but it remained higher than what we saw in FY 2016. The TCV for Software-as-a-Service, meanwhile, also declined in FY 2018 compared to FY 2017, although it remained significantly higher than FY 2016. Lastly, the TCV for Platform-as-a-Service fell below either of the two previous years. Defense entities have as a whole been more reluctant than civilian departments to leverage commercial cloud-based production environments.

Defense Sector TCV by Deployment Model

Examining the data for deployment model use shows massive growth in the TCV of community cloud solutions and strong TCV growth in public cloud solutions. Private cloud TCV also rose, albeit at a more modest rate, and hybrid cloud awards remain well behind all other models.

Like agencies in the civlian sector, defense entities have been adopting the hybrid environment approach that combines on-premise clouds with off-premise commercial capabilities. Meanwhile, certifications for hosting defense data at higher security levels have helped drive the use of community clouds like Amazon Web Services and Microsoft Azure.